Bush explains his approach to deficit reduction — sort of

May 23, 2006

In his speech to the National Restaurant Association yesterday, the [tag]president[/tag] almost addressed the inherent contradiction between balancing the budget and making his irresponsible tax cuts permanent.

“We’re absolutely committed to making the tax cuts permanent. The argument you’ll hear is, well, how can you possibly balance the budget if you make the [tag]tax cuts[/tag] [tag]permanent[/tag]? I guess the reverse of that is, we want to raise your taxes to [tag]balance[/tag] the [tag]budget[/tag]. Unfortunately, that’s not the way [tag]Washington[/tag] works. The way Washington works is they will raise your taxes and figure out new ways to spend the money and not balance the budget.”

Poor [tag]Bush[/tag], he started off well and asked a pretty good rhetorical question. Too bad he didn’t — or couldn’t — answer it.

For what it’s worth, Bush is confused about “the way Washington works.” Cutting taxes does not reduce spending.

Niskanen recently analyzed data from 1981 to 2005 and found….”no sign that deficits have ever acted as a constraint on spending.” To the contrary: judging by the last twenty-five years (plenty of time for a fair test), a tax cut of 1 percent of the GDP increases the rate of spending growth by about 0.15 percent of the GDP a year. A comparable tax hike reduces spending growth by the same amount. […]

“I would like to be proven wrong,” says Niskanen. No wonder: for the modern conservative coalition, the implications of his findings are discomfiting, and in a sense tragic.

Or, as Kevin Drum put it, “‘[tag]starve the beast[/tag]’ doesn’t work. If you cut [tag]taxes[/tag], all you do is encourage additional [tag]spending[/tag].”

It’s almost as if Bush is thinking, “It doesn’t work in practice, but maybe it’ll work in theory….”

May 23, 2006 at 1:44 pm

Sort of like his war planning, his education bill, his view on global warming, his “compassionate conservatism,” his “outreach” to minorities, the energy policy. . .

Given his audience, I am surprised he didn’t postulate that tax cuts for those who eat out was the way to balance the budget.

Please correct me if I am wrong, but in the mid to late 1990s weren’t taxes slightly increased and didn’t a balanced budget come about within a few years?

We need to boil this down to something Joe sixpack can understand. Bush and Cheney got X,000 dollars more (their tax cuts) and each one of your children got Y,000 dollars more national debt on their backs.

All the financial gobbledegoop needs to be simplified and personalized, or people will forget what it really means. We need Joe to think “Bush/Cheney made money pushing tax cuts”. So far I have yet to see this pushed much as a talking point.

So given these numbers the Republican plan to stimulate the economy by cutting taxes produces 0.15% increase in spending (stimulation) for each 1% of GDP taxes are reduced. Now what I want to know is, by what % do tax revenues increase for each % increase in spending?

In order for the tax cuts to pay for themselves as Republicans say the formula would have to work in reverse as well. A 6.66% [1.00/.15] (hmmmm 666) of GDP tax cut would create a 1% increase in spending. Does a 1% increase in spending result in 6.66% or more in increased tax revenue?

I wonder what the difference in spending is if you cut taxed on the super-rich or on the middle class?

Who here is an economist?

Another way to simplify this, while risky, could end this tax cut nonsense once and for all.

Two sets of simple line charts in color with big numbers and titles, so any idiot can understand.

First: “President Clinton – Raised Taxes in First Term”
Under this is a chart showing the trend line for employment, the stock market, wages and any other good numbers (and there were plenty) — all of which went up from the passage of the Clinton economic package until the 2000 election.

Second: “President Bush – Repeatedly Cut Taxes for the Wealthy”
Under this is a chart showing the trend line for employment, the stock market, real wages, etc. — all of which have gone down from their Clinton-era highs.

Have a footnote under Chart 1 (“Clinton also maintained peace to go with this prosperity and under Clinton the United States was highly regarded around the world.”)

Have a footnote under Chart 2 (“Bush also has given you an endless, ill-planned war based on misrepresented intelligence, high gas prices, a culture of corruption in Washington, a deeply divided nation, international scorn, a deteriorating environment, and a radical fundamentalist agenda.”)

Poor Boy George II is so confused.

There is a bell curve of revenue received over time against the marginal rate of taxation.

If the tax rate is 0%, the revenue is zero.
If the tax rate is 100%, the revenue approaches zero (nobody wants to work).
Somewhere in between, you get the greatest revenue. When Clinton increased the tax rate, the revenue grew, that means at the time, the marginal rate was set to the left (towards the 0%) side of the bell curve.

Boy George II’s tax cuts pushed the marginal rate further to left on the bell curve and revenue may have grown, but it is not optimal.

Of course, he doesn’t want optimal.

The Democrats need to focus more on informing the public on who is getting the tax cuts rather than fighting the tax cuts. No American is going to be angry if you offer to cut his/her taxes, but if you tell the majority of this country, the lower and middle classes, that the tax cut is only benefiting the upper class, I’m guessing they wouldn’t be too happy with that. If the Democrats manage to confuse the issue and only fight the concept of tax cuts, then you lose the uninformed voters that don’t understand that these proposed cuts won’t benefit 99% of the population.

“The Democrats need to focus more on informing the public on who is getting the tax cuts…” – TL

Not necessarily a persausive argument. Many Americans believe in issues and vote for policies diametrically opposed to their own self-interest. No where is that more true than the general belief that taxes are too high on everybody and that reducing taxes for everybody is a good idea.

Far too many Americans want and demand the benefits of a invasive government without being willing to pay for it. And they buy into the notion that tax cuts that benefit 1% of Americans somehow help them.

So, in the end, telling some lower middle class Federal Policeman with a three bedroom house and two daughters in college that eliminating taxes on estates over $2,000,000 is not really ‘good’ for him is pointless, as long as he doesn’t understand that we are borrowing money from China to pay his salary (just another Nascar brother of mine).

Re #8, actually there was a study done during the 2004 elections on why the attacks on Bush “only helping the top 1%” weren’t more effective. The survey found that something like 20% of Americans thought they were in the top 1% and around 50% thought they might be at some point in their lifetimes. The culture of upward-mobility and the “anyone can succeed” optimism in the American Dream make even the most legitimate “class warfare” a difficult and risky exercise.

I used to love class warfare, and in my heart and my emotions I still do. But I’ve come to believe intellectually we are actually better off attacking tax cuts (a) as bad for the economy using Clinton’s success to play to people’s pocketbook selfishness and desire for what works to make them more wealthy and (b) by showing what we forego in services (or add in other costs) when taxes are cut — i.e. health care and education – – issues that hurt families in the pocketbook.

Zeitgeist: According to Tony Snow, you only have to acknowledge polls when they agree with your opinion…

“So, in the end, telling some lower middle class Federal Policeman with a three bedroom house and two daughters in college that eliminating taxes on estates over $2,000,000 is not really ‘good’ for him is pointless, as long as he doesn’t understand that we are borrowing money from China to pay his salary (just another Nascar brother of mine).” – Lance

I hope the majority of Americans aren’t that ignorant. I realize that not everyone has a Ph.D. in Economics, but the old adage “Nothing in life is free” should be familiar to most people. If we make tax cuts for the richest 1%, then the rest of the population is paying for that somehow, if in no other way than by not receiving the tax cut themselves.

GREAT LEADERS OF FUTURE WON’T BE FROM AMERICA — Weak, Mediocre Men Lead the USA”
And our mediocre dissolute leaders will act like all bankrupt aristocrats. They’ll start selling state assets for private gain.

“A friend of mine once told a college class that nobody ever woke up in 476 A.D. (the date historians define as the fall of the Roman Empire) and said, “Gosh, I’m in the Dark Ages.” His point is plain enough. Transitions happen gradually, and the people who live through them never realize what is happening.
So it is with Americans. We are living in the ruins of a once-great republic. Now an empire utterly devoid of moral authority, the United States has nothing left but its military power and its capacity to consume on credit.”
Nor do I agree the people living “through them never realize what is happening.” Oswald Spengler realized what was happening. Adolf Hitler could see “what is happening” in 1919. Plenty of others in all western countries have recognized what is happening all through the 20th Century. It’s the people who don’t realize what is happening who both mock the foresighted and resist changes necessary to stop or alter “what is happening”. They serve as a ready pool of useful idiots for evil minded folks who not only realize what is happening but profit from it, assist it, and speed it along.

Zeitgeist,
I’m so cynical about people in general that I’m not sure telling them that their kids would be saddled with crushing debt would dent their complacency.

Why not directly show how their self-interest gets affected. Tell the NASCAR dad and security mom that they will be eating cat food in their old age and living in a cardboard box atop a trash heap, just like in Brazil, when the government goes belly-up. Tell them stories of hyperinflation when people lost confidence in their currency because government debased its money to pay off debt–stories of fixed pensions for retirees being unable to buy a pencil, and of return to a barter economy just to keep food on the table.

It could happen. All it takes is a loss of world confidence in the dollar.

We’re AT WAR, Republicans, enough with the rhetoric and start acting like it!!

This war is costing billions to fight each week, money that will be straddled on the backs of our children and grandchildren, just so you can buy your trophy wife a new fur.

We’re AT WAR, Republicans, start acting like it!!

How about more pay for our brave men and women overseas instead of a beachfront condo for you?
How about scholarships for those same patriotic Americans’ children when they pay the ultimate sacrifice for our freedom, instead of spoiling your brat with a brand new car?

We’re AT WAR, Republicans, start acting like it!!

One of our greatest presidents, Franklin Delano Roosevelt, said during World War II:
“I don’t want to see a single war millionaire created in the United States as a result of this world disaster.”

What words of wisdom has George W. Bush given us during this time of crisis?:
“Now watch this drive.”

Enjoy your tax cut, Republicans. Bin Laden will be proud.

I might add, 2Manchu, a war that at the moment looks very much to me like we are not winning. Can anyone enlighten me in what specific areas we have made measurable and lasting progress to compensate for the intrustions into our own civil liberties and the 450 billion spent? Afganistan is no bastion of democracy. Iraq is a mess. OBL is still on the loose making tapes . Our standing as a moral leader in the world is in the crapper. Our ports are not secure. The Army is stretched to the breaking point.

It reminds me of the reason he gave for opposing Democratic plans to raise taxes on (only) the Rich: Bush said, that the Rich never paid increased taxes, they just hired lawyers and accountants, and ordinary people ended up paying the increased taxes.

It did not make any literal sense, but in some sublimnal way, it was accepted by a certain class of Bush voter.

I think it would be good to gather up several of these kinds of irrational/non-sensical arguments, and present them to people in a kind of test. Identify to whom these arguments appeal. Then, quietly, systematically spirit these individuals off to the mountains of Bolivia or a preserve deep in the Ozarks, where they can no longer harm themselves or others.

Does anyone who listens to Bush these days actually expect him to
start making any sense? This is a man who has perfected the art
of making statements that are beyond comprehension and logic.
Whenever I hear Bush speak on economics I hear the sound of an ax
steadily chopping down a tree in the background. Unfortunately for us
that “tree” is the American economy. At some point we are all going to
be hearing a loud crack and the sound of a giant crash. Except the
thing crashing down will be our econmic independence and stability.

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