Thread: Finally, Help for the Economy!!

lol!!!...!!

Originally Posted by Rubicon

I think you are confused. The CBPP did not make any deficit projections that I saw. They used the CBO's projections, and according to the CBO(from the link you provided) the projected deficit for FY2004 was $477 billion. The actual deficit for FY2004, according to the treasure department(again, from the link you provided) was $413 billion. So how is the actual deficit "much worse" than the projected deficit?

Do you even read the stuff you post links to?

Here is the second paragraph of the document in your link:

Let me paraphrase this for you, 'what you have asked us to do is nearly impossible and any results we derive from this kind of analysis will be virtually meaningless'.

You really want to hang your hat on those numbers after the disclaimer the CBO included in their report? Really?

The original number quoted was $276 billion in 2004 which I amended to $413 billion based on the treasury information, so yes $413 billion is much worse than the $276 billion, originally quoted.

Next, if you've ever read financial documents then you know that a disclaimer of that sort is standard boilerplate text. So the analysis is not virtually meaningless at all. Just the opposite. The substance of the memo is found in the paragraph immediately following the one you quoted, the one that you failed to quote:

JCT estimated the revenue effects of EGTRRA and JGTRRA at the time the acts were considered in 2001 and 2003, respectively. Taken together, those estimates imply a loss of revenues totaling $165 billion in 2007. As you requested, CBO has calculated the debt-service costs that would result in 2007 from the legislation under an assumption that they were financed in full by additional debt rather than offset elsewhere in the budget. On that basis, CBO estimates that the revenue loss in JCT’s projections would lead to additional debt-service costs of $46 billion in 2007, for a total budgetary cost of $211 billion.

Getting back to my original premise that people are going to be paying for the Bush tax cuts—with interest—long after they expire:

Tax cuts that are "financed by deficits" don't do much good for the economy because large, persistent deficits can gradually eat away at the nation’s economic foundation. The reduction in domestic investment and increased borrowing from abroad associated with budget deficits lowers the nation’s future standard of living from what it would otherwise have been.

Then note how the CBO estimates an additional debt-service costs of $46 billion to service the costs of the 2007 debt alone.

And consider the current revenue data (as of 2010) based on historically accurate information (not projections, this time) showing that revenue fell as a percentage of GDP:

The spike for 2007 is the result of the housing bubble. But even if you include the spike, you can plainly see that revenue dropped as a percentage of GDP (based on the area under the curve) in comparison to the 90s and contrary to the idea that the tax cuts were funded. Again, this not a "virtually meaningless" assessment but instead, historical fact.

Originally Posted by Rubicon

... inequality aversion ...

you are/must be proud of this gem as I have seen it a couple of times around here already! Do tell, did you make it up yourself or is it borrowed?

Originally Posted by Rubicon

...
We have deficits because the government spent money it didn't have when it should have been cutting back, ...

the bulk of which you&friends are in constant unabashed support of... can you guess the sector?

Originally Posted by Rubicon

You seem to be implying that the more rapid increase in the incomes of the super rich somehow kept the middle class from thriving. But you don't offer any insight(or data to back it up) into how the middle class would have fared without the economic activity that allowed the super rich to enjoy this kind of growth in their income. All you have done is show a correlation without saying anything significant about causation. You seem to be playing to class envy and inequality aversion in an attempt to buttress your argument against the Bush tax cuts. If I am wrong about this, please tell me how.

You are putting words in my mouth and you are wrong. Stop it. What I am saying is that policies like unfunded tax cuts, unfunded wars in Iraq, unfunded entitlement benefits, as well as other policies led to massive imbalances in the economy i.e. things like the trade deficit etc., plus all of the above, being funded with national debt—creating a false economy.

As a result, the lower, middle, and upper classes will face an ever increasing tax burden (and a lower standard of living) in the decades to come thereby obliterating the already limited gains from the 2001—2003 Bush tax cuts.

Here's a quick graphic summary of how it happened. In January 2001, as President Bill Clinton was leaving office, The Congressional Budget Office estimated that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years, heres how it happened based on Congressional Budget Office reports going back almost a decade:

As you can see, the 2001 recession and the aftermath of 9/11 resulting in the 2002-2003 jobless recovery have an estimated costs of $291 billion, the vast majority is attributed to Bush era policy.

Originally Posted by Triage

Fail. Total Fail. At no point did I write that receipts went down in absolute terms. Because, to use an anolgy, the tax cuts did not come close to covering the spread. Here it is again, this time with the relevant information in bold:

[INDENT]Second, the Bush tax cuts were approximatively 2 percent of GDP but the fall in revenue as a share of GDP was larger than that. Think about it. The economy did grow in spite of the dot-com bubble bursting, it's just that the growth was tepid. In other words, the growth in the economy did not come close to paying for the tax cuts in spite of the fact that revenues increased overall.

Help me understand this argument. When discussing revenues as a percentage of GDP, I don't see how the tax cuts have to "cover the spread" to be effective. Nor do I see how these statistics support your argument--particularly considering the fact that an integral component of GDP is government spending. This statistic seems to more aptly represent the overall burden of taxation as compared to total productivity. And your "spread" could be a result of increased consumption, investment, government spending, or a combination of all the above.

If anything, your statistics seem to contradict your argument. Assuming an increase in total revenue, and all else equal (e.g., ignoring deficit levels), decreasing revenues as a percentage of GDP would seem to indicate the effectiveness of a precursor tax cut. That is, despite the tax cut, revenues have increased; presumably due to stimulated economic activity represented by an increase in GDP.

In fact, and unless I'm missing something, assuming constant government spending and an increase in revenues, a tax cut will, logically, always result in lower revenues as a percentage of GDP.

That being said, and given current tax levels, I do not believe a tax cut (particularly for low and middle income earners) would result in increased revenues. But prior to a tax increase, I would prefer to see cuts to spending. Yeah, I know thats not likely, but at least we could stop increasing spending.

b bb b butub bbubb butb bbuttbbbbutubuttubbbt but 9/11!!!!

"never let a crisis go to waste"

-Dick "Alinsky" Cheney, 9/12/2001

Originally Posted by Triage

The original number quoted was $276 billion in 2004 which I amended to $413 billion based on the treasury information, so yes $413 billion is much worse than the $276 billion, originally quoted.

Yes, you are confused. The $276 billion was the amount the tax cuts were projected to reduce revenues, not the projected deficit, which was $477 billion. The actual deficit turned out to be $413 billion, which is $64 billion less than what was projected.

# The tax cuts would reduce revenues by $276 billion in 2004, according to Joint Committee on Taxation estimates.

# Using these estimates, the cost of the tax cuts account for more than half of the 2004 deficit, which CBO estimates to be $477 billion

Originally Posted by Triage

after they expire:

Next, if you've ever read financial documents then you know that a disclaimer of that sort is standard boilerplate text. So the analysis is not virtually meaningless at all. Just the opposite.

Keep telling yourself that. It's the only way you can continue feeding your fetish for attacking the Bush tax cuts. I have read plenty of reports from the CBO and none of them started out this way.

The substance of the memo is found in the paragraph immediately following the one you quoted, the one that you failed to quote:

The CBO is required to analyze whatever congress asks it to analyze, regardless of how feasible it is to come up with meaningful analysis. When they start a report by saying 'we don't have what you asked for and the only way to get it is to do a kind of analysis that is nearly impossible', anything that follows is not worth quoting.


You have your numbers confused, are dismissing statements that are inconvenient, and have lapsed back into repeating things you have already said.

Unless you have something new, I'm done. Thanks for the conversation.

Originally Posted by jfost

you are/must be proud of this gem as I have seen it a couple of times around here already! Do tell, did you make it up yourself or is it borrowed?

You have seen it more frequently of late because there is now credible research to back up it's existence and it applies to the situation.

Why don't you try something novel, spend some time with google and, educate yourself.

Originally Posted by Obama Nate

In fact, and unless I'm missing something, assuming constant government spending and an increase in revenues, a tax cut will, logically, always result in lower revenues as a percentage of GDP.

Excellent question(s). Supply side economics postulated that tax cuts spur growth (which they do depending on the circumstances) and that, "maximum benefits from taxation policy are achieved by optimizing the marginal tax rates to spur growth."

A lot of economics is counterintuitive and, "In fact, and unless I'm missing something, assuming constant government spending and an increase in revenues, a tax cut will, logically, always result in lower revenues as a percentage of GDP" under the right circumstances, a tax cut can actually generate revenue instead of lowering revenue (google: Laffer Curve)

Now, supply side economics is now part of mainstream economic thought. People were clueless about taxes and economics during the Carter years. Bringing the top marginal income tax rate down from 70% to 50% and even lower now, was and is the right thing to do. Reagan was right. Supply side economics won.

The significance of increasing the money supply is not lost on either Democrats or Republicans. The arguments taking place today are whether or not every economic problem can be solved through tax cuts, that every tax cut is equally good, and that every tax cut yields revenue.

The problem with supply side economics is that the tax rate cannot be brought down to zero because tax cuts on top of tax cuts have diminishing marginal return when it comes to stimulating economic growth just as tax increases on top of tax increase yield diminishing incremental revenue.

It is this diminishing incremental revenue and diminishing marginal return that I am referring to when I write that the tax cuts have [failed] to "cover the spread." In other words, they cost much more in terms of adding to the deficit than was gained in terms of economic activity attributable to the tax cuts. This born out, in part, by the fact that revenue dropped as a percentage of GDP. I.e. the economy grew and tax revenue increased as a result, but not nearly enough to generate enough revenue to cover the tax cuts. On top of which, spending also increased considerably too.

Originally Posted by Rubicon

Yes, you are confused. The $276 billion was the amount the tax cuts were projected to reduce revenues, not the projected deficit, which was $477 billion. The actual deficit turned out to be $413 billion, which is $64 billion less than what was projected.


You have your numbers confused, are dismissing statements that are inconvenient, and have lapsed back into repeating things you have already said.

Unless you have something new, I'm done. Thanks for the conversation.

All of your arguments amount to little more than typical Rubi pedantry and you've failed to address the substance of the arguments. Also, Go back and read my posts, I followed up with the currect amount of $413 billion According to the Treasury department, and then ignored [without carefully checking the amounts] the CBPP projections since you disputed their veracity. Either way, the CBPP projections can be ignored since historical data is now available.

Originally Posted by Triage

You are putting words in my mouth and you are wrong. Stop it. What I am saying is that policies like unfunded tax cuts, unfunded wars in Iraq, unfunded entitlement benefits, as well as other policies led to massive imbalances in the economy i.e. things like the trade deficit etc., plus all of the above, being funded with national debt—creating a false economy.

I didn't put words in your mouth. I said 'you seemed to be implying' then asked you to tell me how I was wrong if you thought I was. You still haven't.

You posted a study chronicling the disparity between the income growth of the middle class and the income growth of the super rich. Your concluding statement, posted immediately after the study, spoke to the need for a thriving middle class.

I'll ask you as plainly as I know how, what connection do you see between the conclusions of that study and the health of the middle class? Do you believe there is any connection between the rate at which the super rich increase their wealth and the health of the middle class? If so, what is it and why do you believe that? If you don't believe there is any connection, then why include that particular study in your post?

Originally Posted by Triage

All of your arguments amount to little more than typical Rubi pedantry and you've failed to address the substance of the arguments.

Heh, if you haven't even taken the time to read and understand what you linked to, what reason is there to think that there is any substance in your arguments to begin with?

I read your post this morning and decided to give you the day to catch your mistakes before responding to it, thinking it might have been a simple oversight. You edited your post but left the glaring errors in it! Then stood by them when I mentioned them the first time. All you had to do was read the articles you linked to and the errors would have been plain to see. It's a simple matter of basic reading comprehension, no complex thought processes necessary. But you didn't even do that.

Now you accuse me of pedantry and not addressing the substance of your post when the source material you cited to back up your arguments contradicts those same arguments?

Also, Go back and read my posts, I followed up with the currect amount of $413 billion [URL="http://www.treas.gov/press/releases/js2032.htm"]

Which was far better than what was projected, not far worse as you had claimed. I wonder how your argument would have been different if your numbers had been correct in the first place?

Originally Posted by Rubicon

...
Unless you have something new, I'm done. Thanks for the conversation.

Originally Posted by Triage

...All of your arguments amount to little more than typical Rubi pedantry ...

Triage, unless you unfailingly support the enormous cost of the military-industrial complex, and admit that Bush/Cheney meant good things for the economy, Rubi is done...

Don't let it happen again!

Originally Posted by Triage

. . . .

It is this diminishing incremental revenue and diminishing marginal return that I am referring to when I write that the tax cuts have [failed] to "cover the spread." In other words, they cost much more in terms of adding to the deficit than was gained in terms of economic activity attributable to the tax cuts. This born out, in part, by the fact that revenue dropped as a percentage of GDP. I.e. the economy grew and tax revenue increased as a result, but not nearly enough to generate enough revenue to cover the tax cuts. On top of which, spending also increased considerably too.

. . . .

Yes, I'm quite familiar with the concept of "supply-side economics" and the Laffer curve. I think you missed the point of my post. I agree with some of what you say, but I don't see how your statistic of revenues as a percentage of GDP supports your argument.

First, and as I previously noted, government spending is a major component of GDP. Thus, an increase in government spending may be as or more responsible for fluctuations in the statistic as the level of revenues or the effect of a tax cut on economic activity.

Moreover, if government spending is held constant (as a percentage of GDP) after a tax cut, and total revenues increase, then revenues as a percentage of GDP will likely go down relative to pre tax-cut levels. This would be a positive indicator that we were, prior to the cut, to the right of the optimal marginal rate on the Laffer curve. All this would show is that the overall burden of taxation was lowered while, at the same time, increasing revenues.

Simply put, (and I know I'm oversimplifying, but the point stands, I believe), say there is a twenty percent marginal tax and 100 dollars of taxable, economic activity. Further say there is a one percent tax cut which results in a twenty percent increase in taxable, economic activity. Revenue is now up to 22.80 dollars, but that revenue as expressed as a percentage of economic activity is, of course, down from twenty percent to nineteen percent.

Again, the statistic of revenue as a percentage of GDP, while indicative of the overall burden of taxation, doesn't seem to support your argument.

According to Triage, revenues as pct of GDP is how we should measure tax cuts.

Here are the reagan tax cuts that he says "worked"



Here are the Bush cuts he says failed



anyone else confused?

^^^ Regarding the previous two posts. First, If you go back and read what I've written you'll see that I said bringing the top marginal income tax rate down from 70% to 50% and even lower, was and is the right thing to do. Then consider that I've placed revenue as a percentage of GDP in the following context (in other words revenue as a percentage of GDP was never intended as an isolated metric):

The Bush tax cuts were approximatively 2 percent of GDP but the fall in revenue as a share of GDP was larger than that:

In contrast, the Bush White House predicted higher growth—spurred by the tax cuts—than what actually occurred. Compare the fall in revenue as a share of GDP with the tepid rise in Real GDP of around ~2.5% percent.

And, of course, take into account increased spending relative to GDP:

Then look at the cumulative overall rise in public debt:

Now, pull it all together. Revenues plunged as a percentage of GDP. But the tax cuts were supposed to make GDP larger. Instead, GDP grew slower than expected, part of which involved increased spending as a component of GDP and part of which meant that revenue had failed to match pace with spending. This is the opposite of what was expected to happen as a result of the tax cuts:

And you know what else happens? It increases revenues for the treasury. You know, there's been a lot of talk about the deficits, and there should be. We're concerned about the deficit. As a matter of fact, I said to the Congress, join us in being fiscally responsible about how we spend the people's money, and we can cut that deficit. The deficit is going to be cut in half, not by 2009, but by 2008, because pro-growth economic policies work.

-- George W. Bush, 2006

Obviously, a person could create alternative scenarios for the various ratios in order to create a revisionist history but that's where the individual accounting details come into play. For that you can see the [ame="http://www.tetongravity.com/forums/showpost.php?p=2911315&postcount=79"]earlier post here[/ame] or take a look at this study by the Tax Policy Center on the combined impact of JGTRRA and EGTRRA and how they increased the deficit — by $1.8 trillion (through 2010):

Originally Posted by Rubicon

You edited your post but left the glaring errors in it! Then stood by them when I mentioned them the first time. All you had to do was read the articles you linked to and the errors would have been plain to see. It's a simple matter of basic reading comprehension, no complex thought processes necessary. But you didn't even do that.

Now you accuse me of pedantry and not addressing the substance of your post when the source material you cited to back up your arguments contradicts those same arguments?

You've completely misrepresented both the intent and the substance of the post. Here it is again with the admitted error (singular) highlighted in red:

To recap, according to the CBO/Treasury Numbers the 2006 deficit was $248 billion which had closed from a high of $413 billion registered in 2004 but the National Debt has continued to increase an average of $3.90 billion per day since FY 2007, September 28, 2007. The 2001 tax cut itself cost more than expected: ~$1.35 trillion up through FY 2009.

As far as your so called "implication," I stated it plainly (see the last bullet point in bold). Here it is again with the correct number showing the revised [higher] historically accurate number for 2004:

1. Revenue fell as a percentage of GDP resulting in a deficit of $413 billion in 2004*
   
   
2. As a result of the tax cuts, Federal revenues fell to their lowest level as a share of GDP since the 1950s, a major reason for the current deficits.
   
   
3. Despite the 2001, 2002, and 2003 tax cuts, overall economic growth was below par during the Bush Administration (unless the peak of the housing bubble in 2007 is somehow considered a win). They did very little to stimulate growth.
   
   
4. Studies by both the CBO and the Joint Committee on Taxation (both run by Republican appointees) found that the effects of the tax cuts on growth are likely to be small and could be either mildly negative or mildly positive.
   
   
5. Tax cuts that are "financed by deficits" don't do much good for the economy because large, persistent deficits can gradually eat away at the nation’s economic foundation. The reduction in domestic investment and increased borrowing from abroad associated with budget deficits lowers the nation’s future standard of living from what it would otherwise have been.

Edit to add: *The cuts were approximatively 2 percent of GDP but the fall in revenue as a share of GDP was larger than that. For example, CBO data show that changes in tax law enacted since January 2001 increased the deficit by $539 billion in 2005. The annual deficit reached record levels of $374 billion in 2003 and $413 billion in 2004. National debt, the cumulative total of yearly deficits, rose from $5.7 trillion (58% of GDP) to $8.3 trillion (67% of GDP) under Bush , according to BEA Data.

Originally Posted by Rubicon

I wonder how your argument would have been different if your numbers had been correct in the first place?

As you can see, including the actual Treasury number versus the CBPP estimate does not change the substance of the argument, at all.


If you are interested in learning more, specifically on the CBO estimates showing the budgetary effects of a 10% percent cut in income tax rates circa 2005, you can read the following report or just quickly glance at the table on page 3.

Why are you talking about spending, or even what bush promised/expected to happen? neither has anything to do with how much the tax cuts themselves added or subtracted from the deficit.

Now concerning the one part of your post that even attempts to support your numbers, could you explain the last two sentences of footnote 1, and footnote 2?

1) Because, anyone familiar with the definition of GDP knows that, "government spending is a major component of GDP." So spending in the context of Obama Nate's post relates to GDP as part of the following equation:

GDP = private consumption + gross investment + government spending + (exports − imports)

2) The tax cuts were opposed by many American economists, including the Bush administration's own Economic Advisement Council. For a rundown on the debate at the time and a breakdown of the numbers by the Joint Committee on Taxation see: THE BOOM THAT WASN’T The economy has little to show for $860 billion in tax cuts. Another part of this story—which the discussion in this thread has ignored up to this point—is the fact that the tax cuts were poorly implemented, thereby diminishing their supply side impact.

3) If you're dissatisfied with static analysis and want to read about any possible supply side effects, see the article linked in this post or the CBO report in the post directly above yours.

And that's the problem Triage, when "government spending" becomes too big a percentage of GDP you have a country that is essentially feeding on itself. And that is not sustainable.

The people have figured out that they can vote themselves money and no one is willing to give up their entitlements.

You can come up with all the charts, graphs and #'s you want but the fact remains that until we create jobs in the private sector, end these 2 wars and get a handle on ss/medicrap, and our national debt, we're all broke.

Democrats will say that the way to solve these problems is to raise taxes or end tax cuts, same difference. We can't tax our way out of this crisis. We have to cut spending, and we have to reassure people that we aren't going to tax them to death, we need rich people more than ever. Average Americans can't buy chit right now. All this rich people bashing is silly, any of you could be rich one day and I'm sure you'd want to pass your wealth, businesses, and property along to your family, there is nothing wrong with that, it's the American way.

Originally Posted by danimal's dead

And that's the problem Triage, when "government spending" becomes too big a percentage of GDP you have a country that is essentially feeding on itself. And that is not sustainable.

The people have figured out that they can vote themselves money and no one is willing to give up their entitlements.

You can come up with all the charts, graphs and #'s you want but the fact remains that until we create jobs in the private sector, end these 2 wars and get a handle on ss/medicrap, and our national debt, we're all broke.

Democrats will say that the way to solve these problems is to raise taxes or end tax cuts, same difference. We can't tax our way out of this crisis. We have to cut spending, and we have to reassure people that we aren't going to tax them to death, we need rich people more than ever. Average Americans can't buy chit right now. All this rich people bashing is silly, any of you could be rich one day and I'm sure you'd want to pass your wealth, businesses, and property along to your family, there is nothing wrong with that, it's the American way.

Wait; what? I think we are almost saying the same thing:

Tax cuts that are "financed by deficits" don't do much good for the economy because large, persistent deficits can gradually eat away at the nation’s economic foundation. The reduction in domestic investment and increased borrowing from abroad associated with budget deficits lowers the nation’s future standard of living from what it would otherwise have been.

Because:

What I am saying is that policies like unfunded tax cuts, unfunded wars in Iraq, unfunded entitlement benefits, as well as other policies led to massive imbalances in the economy i.e. things like the trade deficit etc., plus all of the above, being funded with national debt—creating a false economy.

As a result, the lower, middle, and upper classes will face an ever increasing tax burden (and a lower standard of living) in the decades to come thereby obliterating the already limited gains from the 2001—2003 Bush tax cuts.

Therefore:

I said bringing the top marginal income tax rate down from 70% to 50% and even lower, was and is the right thing to do.

The problem with supply side economics is that the tax rate cannot be brought down to zero because tax cuts on top of tax cuts have diminishing marginal return when it comes to stimulating economic growth just as tax increases on top of tax increase yield diminishing incremental revenue.

In a nutshell, overall everyone is better off in the long run with a fiscally conservative government. Meaning, not every economic problem can be solved through tax cuts, that every tax cut is equally good, and that every tax cut yields revenue unless it is modest enough to fall within reasonable expectations of future growth and/or met with a corresponding reduction in spending.