TPS
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The tax cuts did NOT increase the deficit. They led to increased government revenues. The deficit increased because spending increased more than the increase in revenues. Had the tax cuts not been enacted, the deficits would have increased even more as revenues would have been lower, assuming as you do that all else remains constant - i.e. that the increase in spending would have occured regardless of revenue.
Had spending remained constant, the tax cuts would have REDUCED the deficit as they increased revenues. Deficit = Spending - Revenue when Spending > Revenue. If spending < revenue, you get a surplus. By the way, the '90's "surpluses" were not true surpluses as they were created using SS money that has been earmarked for future outlays.
Cripes! And I thought you were taking the Keynesian side...
You supply-siders keep making that argument, but none of you have ever provided evidence. And to simply show that dollar revenues went up, is not evidence, because revenues will increase as national income increases. What you have to show is that revenues as a % of income increased, and that's just not the case. When you break down the deficits, they have increased because of the combination of increased spending plus lower tax rates.
year Rev Exp personal inc rev
2001 19.8% 18.5% 9.9%
2002 17.8% 19.4% 8.3%
2003 16.4 19.9 7.3
2004 16.3 19.8 7.0
For the first 4 years of Bush, revenues fell as a % of GDP and exp. increased--his deficits were a combination. I've included the personal income tax revenue % as well, since that was the major source of tax cuts.
And i agree with you about the surpluses; only problem with that argument is that the SS revenues have also made Bush's deficits look better because of your same reasoning. So, Bush's "true deficits" are even worse.
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sorry to chip in here, but "Keynesians believe that personal tax cuts for individuals fuel the economy by expansionary deficit spending--witness the deficits under Reagan and Bush2" is wrong. in essence, keynes advocated a much larger role for the state in generating demand, which was a persistent problem in what were essentially laissez-faire capitalist economies (excluding trade tariffs) earlier in the century. in recessions, cutting taxes and increasing government spending are the tools to use; in times of growth, increasing taxes to curb excessive demand are ok. moreover, fostering greater income equality through taxation and fiscal policy was a fundamental goal of keynes and his followers. in the oecd, this in fact occurred up through the early-mid 70s. notwithstanding the justice or injustice of capital gains taxes (or the degree to which clinton cut such taxes after 95), clinton's policies were by and large keynesian. the eitc was intended to increase income and demand among poorer earners, for instance, and it did just that. what clinton did not do is decrease inequality, one of his stated goals, either with regard to income or wealth. for a variety of reasons, mostly related to increasing neoliberal dominance across the globe, inequality has been trending upward for a couple of decades after decades of decline in the oecd.
I was specifically addressing the question of the impact tax cuts have as viewed by Keynesians vs. SSs. For Keynesians, all else constant, a cut in taxes is expansionary because it increases deficits. For SS, tax cuts are supposed to change behavior--increasing work effort and productivity, so that the tax cut leads to higher growth, and therefore lower deficits, eventually...
Otherwise I agree with your description of "functional finance." By the way, every policy is really "by and large Keynesian." The evidence from the impact from both Reagan and Bush2 tax cuts is that they caused higher deficits. As Reagan's former budget director wrote in his "tell all" book, Supply-Side theory was really a ruse to re-direct income from the bottom to the top.
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It's the foundation of supply side economics of keeping capital with the people who are better at creating new capital. It flies in the face of a progressive tax policy that penalizes the high income earners.
After the economy started bouncing back in Clinton's second term, spurred by Al Gore's invention & Telecom Act of 1996, Clinton listened to Greenspan, Rubin & Dick Morris and cut the capital gains taxes. This helped the speculative buying of stocks, thus fueling the bubble. TPS does not believe that the cut in capital gains was fuel for the fire, I do. TPS said that in 2000, individuals contributed over 10% of the Treasury's revenues, and that number dropped significantly in Bush's term. My point was that the 10% is artificial, since it includes the capital gains taxes from the peak of the bubble.
The main point TPS is making against supply side is that the share of personal income tax contribution to the overall Treasury revenues declined in the Bush era. The problem I have with that logic is that supply side is a growth oriented policy, such that while personal income tax revenues will fall, the overall growth in the economy will pick up much more, and the government will have plenty of other sources of revenues (ie corp taxes, excise taxes, gasoline, etc) So, to simply say that supply side doesn't work because personal tax revenues went down misses the point of trying to maximize total revenue.
As I said before, sound fiscal policy is the enemy of political policy, and leftist economics usually play to a highly populist bent that's rooted in Robin Hood economics, while the "voodoo" supply-side economics are being proven to work in a real life setting.
I guess Supply-siders and Keynesians need interpreters when they debate. Two things you've left out of my argument:
1. I said that taxes under Clinton were still 9% of GDP before the cap gains tax. The cut in the tax may have fueled stock bubble it my not have. Capital gains taxes went up because stock prices went up so much.
2. That's why I've been arguing that long term GDP growth is determined by labor force growth and productivity growth, and that it's averaged around 3% for the past 60 years. You want to argue that supply-side tax cuts create faster growth; the numbers aren't there unless you play with the starting period.
The difference for those sitting on the sidelines: Keynesians believe that personal tax cuts for individuals fuel the economy by expansionary deficit spending--witness the deficits under Reagan and Bush2; GG, a SS, believes tax cuts on individuals create incentives that must either increase participation in the labor force or increase productivity. Unless there's another way to increase long-run growth?
Bib: you're an idiot! Come on 999 (or turn that upside down...)!
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I completley agree. I was going to post this yesterday. According to Adams, their role is to tie up blockers. So why not have that big Mf pushing into the O-line? Big mike tyingup 2 blockers. he doesnt' have to be tough, he just has to disrupt the O-line and force them to blcok him with two O-linemen.
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Wouldn't we be assured to have a home playoff game? We're certainly not gettiing in as a wild card, so we would have to win the AFC east. Even if we had an 8-8 or 9-7 record, wouldnt the division winner automatcally play at home regardless of the record of the wild card team? We could be facing a 11-5 or 10-6 warm weather team like Jacksonville or San Diego playing here in a January snow bowl game.
I think perhaps we have about a 10% chance of actually making the playoffs, and ONLY if the Patsies totally tank and not because we are good. But the idea that we will automatically get killed in the playoffs by a far superior team may not be true. They may be far superior but we would be at home.
Next you'll tell us that Mike W will be practicing at DT. Playoffs, ha hah hah...
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What is this a Monty Python sketch? How many times do I have to say the same thing?
Of course revenues will be lower next year, because this year's receipts are an abberation based on accumulated profits. What you should be comparing is the probable receipts of the foreign income tax in a normalized year if the tax rate is 10% vs 35%. You know that when the rate was 35%, tax receipts were virtually zero. I'm guessing that the receipts would be higher than zero if the rate drops to 10%.
It's not really a difficult concept.
Well, there YOU go again. Please tell me why you introduced Greenspan's comments to support your thread? Don't you think that I would immediately respond with:
In testimony before Congress this year, Greenspan has said that "the appropriate capital gains tax rate is zero."
Again, talking about the deficit as if it's a creature of its own making, rather than being the difference between revenues & expenses won't work with me. Greenspan's warning about the deficit was as much a caution to reduce spending as increase revenue. If you look at his economic pedigree, my guess is that his message was for the spenders' ears.
It's good to see continuation of the Fed dynasty that started with Volcker. The markets reacted positively to Bernanke's testimony, and they're the ones that determine the cost of our deficit. So far, they believe that US bonds are a much better bet, and the outlook isn't likely to change soon.
Can't separate out quotes on my apple,so here goes;
1. I completely agree: i thought it was a monty skit: I said exactly what you said, and i couldnt believe you misinterpreted it. So you agree, it's obvious, tax revenues will decline next year.
I brought Greenspan into this because he said exactly what I've been saying about the dollar. I tought it was obvious. I didn't think it was that difficult to see? You bring in a quote from how long ago? I quoted AG to support my ideas on the dollar. Sorry, next time I'll make it easier to understand...
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couple of quick responses--kind of busy today:
Please tell me how revenues will decline from previous levels, when tax revenue from foreign sourced income was virtually zero? There was absolutely no incentive for companies with continuing operations overseas to repatriate the profits back to the States, and be nailed with a 35% tax rate. But if you drop that rate to 10%, you give a lot of incentive to send the cash back home. In my book, 10% of something is better than 35% of nothing.Revenues next year will be less than this year's (windfall), even if the rate stays the same.
Can't you lefties follow a thread? I was referring to Mickey's hinted reference, which started this whole thing on the economy. Perhaps, it's just me, but tell me to which economy does the left usually compare Bush #2?mickey's reference didn't look "hinted." Looked pretty clear to me, so I thought you were referring to one of my posts.
I've been hearing your paranioa about the low dollar and the heavy Asian investment in the grenback. What all the fear-mongerers miss is that given all our issues, there's still no better currency investment. Would you rather stick your long term savings in the Eurozone, with 1% growth, 10% unemployment and continuing instability, or place a bet on the US? The Asians are voting with their wallets for now, and they have a lot more at stake than idle chatter on an internet bulletin board.Idle chatter like the following.....
For those who don't have a WSJ subscription, a blurb from Mr. Greenspan:
"Mr. Greenspan suggested that constraints on financing of the U.S. trade deficit are likely to come from "foreign investors' fears" of holding too large a share of their investment portfolios in U.S. stocks and bonds. He suggested that this change could already be under way. He noted that of the more than $30 trillion in foreign investment tracked by the Bank for International Settlements in the first three months of 2005, 42.5% were in dollars and 39.3% were in euros.
The dollar's share was down by 4 percentage points from around three years earlier, while the euro's share was up by 5 percentage points, Mr. Greenspan said."
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By the way, while your at the site, check the link to FAQ, specifically the second-to-last question.
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Apparently I have to be simple with you....
Any economist, left or right, will tell you the long run growth potential is a function of the gowth in productivity plus the growth in the labor force. For the US, that sum has averaged around 3% since WWII (that is an average; it doesn't imply the same value every year). Given that market economies are subject to business cycles, GDP "cycles" around that trend.
Greenspan thought that there was a "shift in the trend gowth of productivity" in the 1990s, which is why he did not put the brakes on when UP fell below 5% in 1997.
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Actually Clinton decreased the capital gains taxes, which had a large role in fueling the tech bubble. If you normalize the capital gains impact from the bubble, the individual share is about 9%.
Are you saying that dot-com companies would not have been created without the cut in K-gains? The tech bubble needed no fuel. The creation of the internet was one of those significant moments in economic history that helps create and sustain growth for significant periods, not unlike the auto in the 1960s or mass production of consumer goods in the 1920s. Speculative bubbles are fuelel by irrational expectations of continued price increases, not tax cuts.
Individual revenues declined, but there's a good chance the economy would not have rebounded as quickly as it did, and we may still be stuck given all the macroeconomic issues I described, above.i assume you mean the first couple of years under Bush? If so, that's what I said, expansionary fiscal policy--i.e. large deficits, prevented a worse outcome.
This change had been advocated for years by supply siders, and they were only able to get the one year window.If you know of any articles off hand, let me know. Otherwise I'll try and do a search for this debate.
BTW, thanks for helping my point again by admitting that the repatriation taxes would drastically go down when the old rates come back. Would you also be willing to bet that US would collect more repatriated profits' taxes if the rate was reduced to 10% permanently? Isn't that the real goal of tax policy - to maximize revenue, not maximize tax rates to make people feel better that someone is paying a high tax rate?Hey, I'm willing to admit when something works--I'm not a complete demagogue..
Yes, if the tax stays at 10% permanently, revenues will decline, but not completely to the previous level. It should be obvious that the significant increase this year represents years of accumulated profits, not just the past year's profits.
The reason I brought up Clinton is that he's the best example to use, and it was a hinted reference in the initial post that this economy sucks. It sucks compared to what? I could have easily used the comparison to the Carter economy, and would even be more right. Should we run the GDP growth of Bush's first 5 years w/ GDP growth for first 5 years following any recession?there you go again, your paranoia, "a hinted reference?" Can't you righties read? You probably won't recall, but I did state that when the economy initially turned on Bush in his first year, it was the natural outcome of the business cycle, and I did not blame him. Once again, I expect that after his 8 years are up, GDP will have averaged about 3%/year. No hinted reference there.
Thanks for highlighting a $500 bn deficit, although that level was projected, but never reached, since the economy did better than expected. Since you like using measures of % of GDP, why didn't you include the tidbit that the deficit as % of GDP is not out of whack with previous post-recesionary times. In fact it's pretty darn good when put in that context.i guess we're looking at two different animals: On-budget deficits were over $500 billion in 2003 and 2004, thanks to the SS revenues, the total deficit was $417 bil in 2004 (I'll focus on total instead of on-budget so we're consistent).
Ok I'll play your little game. The correct change to look at is from Clinton's last year. There was a budget surplus of $236 billion in 2000. The deficit in 2004 was $412 billion. That's almost a change of $650 billion! And it represents a 6% change as a percent of GDP.
The deficit is not out of whack only if you're a republican. Deficits under Reagan averaged 4.2% of GDP, Bush1 averaged 4%; under Carter deficits averaged 2.4%, and 0.8% under Clinton. So yes, BushII's deficits that are currently 3-3.5% of GDP are all right for a republican--those paragons of fiscal responsibility. Or could it be that tax cuts do after all cause deficits?
The other thing that's ignored is the cost of that debt. Not only is the debt reasonable for post-recession, the interest on it is very low. I wouldn't expect you to admit that nugget.Gee, you got me again. I didn't realize that "nugget" was related to the supply-side argument that tax cuts reduce deficits....
By the way, how long do you thinkl interest rates will stay low? My guess is until China decides to float its currency....
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Yes, some things never change--you not comprehending my post...
Did you miss the part where I said GDP has grown at about the same rate for every president regardless of the policies enacted? Growth under Clinton averaged 3.3%; for Bush it's currently 2.7%, but as I said the more recent hgher growth should bring his average about to the historical 3%.
Yes, raise taxes and GDP still grows at 3%; Cut taxes and GDP still grows at 3%--the only difference between the two is the structural budget change.
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Nice to pick the year where capital gains taxes were at their all-time peak to try to prove your point. Shouldn't you at least have noted that a big reason for the spike in capital gains receipts was Clinton lowering capital gains taxes in his 2nd term? You know those evil capital gains that only benefit the rich.
Individual income tax revenues as a % of GDP went up every year under clinton, beginning with 7.7% in 1993. His tax increase generated MORE revenue every year. The cut in K-gains AND the tech boom caused the increase to over 10%. The point I was trying to make is that Bush's tax cuts caused the individual revenues to decline, not increase.
Note to the right: this is an argument against the S-S argument, not in support of Clinton.
Your argument AGAINST supply side is to bring up a case where tax receipts go up by 42% by lowering the tax rate from 35% to 5.25% ?Creating an extreme one-year exemption is hardly a testimonial to S-S theory. If that's their argument, that you can increase revenues in one-year by implementing a radical change, then I'm in your camp.
On the other hand, i will make a friendly wager with you that corporate taxes will be significantly lower next year.Consider that Clinton came in just as the 1990 recession was ending, and left just in time for the 2001 recession to start. Fortuitous timing, if you ask me.Still, if you hail Clinton for generating a pretty healthy period of economic history, and consider that Bush got whacked by the recession, 9/11, and the war, but the economy under his watch is only 0.6% below Clinton's, that's impressive under any definition.
And if compare the economic growth rate of Bush's first 4 years, vs any other 4-yr term following a recession, you wouldn't call it below average. He's actually running ahead of Clinton's first 4 years, following the 1990 recession (who had the benefit of Bush 1 greasing the skids)
There you go again, Bush is better than Clinton. I'll say it again, the historical trend growth rate in GDP since the end of WWII is about 3%. Every administration since then has averaged close to that. I even said Bush might end up there. You want to make it a Bush good, Clinton bad argument; fine. However, if you are going to try and make bush sound better by saying he's done well despite blah, blah, blah, then include the fact that he had to run $500 billion deficits to keep the economy from sinking. Good sound Keynesian fiscal policy if you ask me...
Those deficits were a consequence of the tax cuts and slower growth. Now that growth has resumed its long run path, we still have $300 billion dollar deficits because of the tax cuts--tax cuts change the structural deficit.
What a travesty. Giving the tax money back to the people that earned the income. Preposterous.Yes, I suppose you think it's sound fiscal policy to cut taxes and borrow to pay for your Iraq war.
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Just going to focus on the above points:
Budget madness - federal tax revenues have increased well above the growth in GDP since the tax cuts became effective, and have been a big reason for the economic turnaround. Double-talk won't work with some in this crowd, as we understand that a budget deficit is formed by subtracting expenses from revenues. GDP growth has far outpaced industrialized nations. US continues to prop up the global economy.
Hmmm...good old supply-side policy is finally working? What took so long?
In 2000 individual taxes as a % of GDP were 10.3%, that fell to a low of 7% in 2004. Projections for 2005 at about 7.5%. Nominal GDP increaesed by 7% over the past year, with inflation (GDP deflator) up by 4%. This also caused a tax increase on hundreds of thousands of families because they had to pay the AMT.
The big move in revenues over the year came from corporate income taxes--42% increase over last year. Much of that is attributed to the one-time reduction in taxes on foreign earnings this year (from 35% to 5.25%). Estimates of repatriation of profits range from $500 billion to $900 bil.
Real GDP growth over Bush's 5 years (assuming this year comes in about 4%) has averaged 2.7%, compared to a 3.3% average under Clinton.
So far, real GDP is running below historical standards for Bush. As long as the economy continues to grow throughout his remaining term, it'll probably end up about the same as it has for every other president--close to 3%. So, either every president has had equally successful policies, or maybe the economy tends to grow over time at about the same rate, and the real impact from polices is on how that 3% got distributed among the population? As Reagan's budget director David Stockman said, the real idea behind S-S economics was justification to shift income toward their base...
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Seems some people are now questioning the UK's evidence as well.
Could it be same strategy that Cheney used with Judy Miller--Feed her false or trumped information for an article, then go on the Sunday talk shows and quote the articles from the NYTimes....?
http://news.independent.co.uk/world/politi...ticle325155.ece
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Nope, not saying that. In the case of Plame, it could be a criminal offense to leak her name; in the case of the gulags, the leak concerns a "policy" that breaks international law (Geneva Convention). Maybe some of those people at the CIA have a conscience...
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You're comparing apples and oranges. In the case of Plame, senior administration officials leaked her name to the press to discredit her husband; in the current case, apparently senior CIA officials leaked the "gulag story" because of their disagreement with the policy--which was also established by the Cheney-Rumsfeld "cabal."
The right wants to make this a liberal media/democrats vs. Bush story, but it's not.
At least two years ago I speculated that there was a "spy vs. spy" conflict between the Cheney-Rumsfeld Pentagon and the CIA over disagreements about US foreign policy and the war on terror, specifically the need to invade Iraq. This continues to play out today in the form of leaks and criticism from former national security personnel, especially now that Bush's man Goss is trying to purge the CIA of elements that do not support the beliefs of the neocons.
Like Wilkerson said, Cheney's cabal has hijacked US foreign policy, and there are a lot of long time foriegn policy/security personnel who are opposed to their plans. I think they see a good chance to sink the ship with the Libby indictment, so they'll continue to "leak" information that further damages the neocons.
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There is some history between Powell's state department, and the rest of the PC that met several times on the Iraq issue. The Powell contingent was the one who "went north". Very rarely is there ever a true consesus on anything, and this kind of thing happens a lot. But, it makes for good PPP fodder.
apparently I'm not alone is thinking the leak came from within...
"Senior intelligence sources blamed the leak on CIA officers unhappy at having to maintain what one former counter-terrorism official described as “secret gulags”. "
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Depends on exactly what got leaked. The National Security problems can be peripheral when the press starts up. People should sometimes mind their own business, but that is neither the nature nor the purpose of the press.
There are "leaks" in Washington, all the time. Almost without exception, they are done to further an agenda of one sort or another, most normally for someone whose ideas got shot down. Often, they get carried in the press as a "whistle blower". More than likely, there was a PC (policy committee) or a sub PC that worked and argued an issue, took a consesus within the group and settled onto a course of action. Someone in that group wanted to "go north" when the agreement was to "go west". Well, before long "go north" shows up in the Times or what not so it gets attention and dialogue. Lots of angles after that.
from the article is sounds like you've nailed it. Many of the sources are "former intelligence officers." In addition, it states that there is a debate within the CIA about the usefulness of this policy. Could it be another attempt to discredit what GG called the "cabal in the White House?"
"The black site program was approved by a small circle of White House and Justice Department lawyers and officials, according to several former and current U.S. government and intelligence officials."
In a recent interview, Powell's former aide Wilkerson (who also said "US foreign policy was hijacked by a cabal in the White House) suggests the abuse of prisoners at Abu Graib goes back to the Veep's office as well....
The way that Goss is politicizing the CIA now, it would not surprise me that those liberal CIA folk are behind the leaks...
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You're right, all those North African immigrants are likely Buddhists.
The main point still stands, Europe is reaping the harvest of its history of inter-tribal intolerance. Sure was easier for them to be appalled at America's racial disharmony, while their skeletons were neatly organized in the closet.
I thought the main point made was that it's muslim fanaticals causing the riots, which is part of a larger conspiracy to take over the western world....
Seems to me it parallels something like Rodney King and LA riots--as the article I read said it was sparked by two teens being electrocuted while fleeing police.
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as i said, the article I read didn't mention anything about religious background; it mentioned "poor neighborhoods," and Africans frustrated with not finding jobs.
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Is there a link? I figured I could find something on Drudge given the initial post, but the article I read this morning didn't say anything about muslims.
Boy, I sure am afraid now that I've read the posts here about the insidious invasion of those muslims into western cultures....
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Just thinking out loud here but isn't it possible that part of the reason they had some success on the ground was because of the way they mixed up passing and running in the play calling? Besides, we ran the ball 39 times which seems like plenty to me. We also scored our only TD on a 55 yard pass play. You can't have plays like that if you never, ever, ever throw which seems to be the only strategy immune to criticism around here that we aren't running enough.
I think the criticism is more about when they elect to throw. I get the feeling that Clements doesn't have faith in the run game in crucial situations. Rarely did the Bills run two consecutive plays in a row--their last drive was one of the few exceptions I can recall. Given their play call mix, I don't think their play-fake is very effective. I'm also a big fan of the draw play, and I don't think they use it nearly enough as well.
Between Clements and Gilbride, I almost miss Joe Pendry....
I wonder if I made the list?
in Politics, Polls, and Pundits
Posted
Well then look at the aggregate data:
Personal tax revenues
2000 $1 tril
2001 $994 bil
2002 $858
2003 $794
2004 $809
Obviously part of the decline was attributable to the slowdown in 2001-02, but much of it was due to the cut in personal tax rates. The Laffer curve is nice in theory, but no one has ever shown any evidence of it--please show me if you have any.
Let me try and explain the mathematics:
Your income is $50,000 and personal tax rate is 10%, so you are paying $5,000 in taxes. If your income grows by 3% next year, you are now making $51,500. If the tax rate remains constant, you are paying $5,150 in taxes. If you reduce the tax rate by 3% (a decrease from 10% to 9.7% is a 3% decrease) to 9.7%, then you are paying the same absolute tax value as before: $51,500x0.097=$5,000, but your tax rate is now the lower 9.7%. The 3% increase in your income is offset by a 3% decrease in your tax rate.
Now, if taxes are decreased by more than 3%, say a 10% decrease (going from from 10% to 9% would be a 10% decrease), then tax revenues will fall. Taxes paid=$51,500x0.09=$4635. The only way tax revenues can increase is if your income increases by more than the 10% cut in your taxes. That is the crux of the SS argument--the only way that revenues can increase is if taxable income increases by more than the decrease in the tax rates. Their argument is that the cut in taxes either increases the growth of income faster than it would've been, OR people were hiding income in tax shelters, so the lower tax rate will induce them to shelter less income.
As i recall, Bush had a 3-year phase in on his tax cuts, which is consistent with the data above--personal income tax revenues fell every year.