Tax cuts should end. (Did that get your attention?)

[nathanm]

The Walton family of WalMart would receive an estimated tax break of more than $30 billion by repealing the estate tax."

I find that highly difficult to believe. They have some good estate planners at their disposal.

I agree in principle, but have to quibble with that detail.

Tax cuts right now are a dumb idea. There's no evidence whatsoever that the Bush tax cuts had any economic effect. They certainly won't "pay for themselves." I think at this point the plan of the Republicans is to do what they can to screw the country up and blame it all on Obama. I'm not quite sure why Obama seems to be playing into their hands, what with the backtracking on the Bush extensions.

I think a good compromise would be to extend the middle class cuts starting now and make the tax cuts for higher earners contingent on an improved federal budget outlook and economic numbers. Pay for performance, just like the private sector.

Why? Because allowing the tax cuts to expire on the lower income families will depress spending nearly dollar for dollar. The higher-income folks don't give us the same bang for the buck. If we're going to be frugal, we should be frugal, not complain about the deficit while working to make it worse.

Gaspar, is there a reason why you continue to insist on making inapt comparisons? When JFK made that speech, the top marginal tax rate was 92%. There is simply no evidence that the Laffer Curve applies when the top marginal rates are where they are today. In fact, the Bush cuts provide a great counterexample. Even the much ballyhooed Reagan cuts didn't have any real effect on GDP growth.

When the top marginal rate is over 50%, there is evidence that tax cuts spur economic growth and thus end up enhancing revenue. It's not terribly clear that it's the tax cuts, but there was an apparent causal relationship. Below that, such results haven't been forthcoming. Protestation to the contrary stems from the trickle-down theory's adherents ignoring the order of events. So you're either promoting insanity (using the "doing the same thing over and over again and expecting a different result" definition) or you're not being honest about your position.

You'll note that the economy did just fine in the 90s with a top marginal rate of 39.6%, while it was stagnant during Bush the elder's term with a top marginal rate of 28% (with a "hump" at 33%). There is no there there.

[Gaspar]

It all comes back to spending.  Yes, tax cuts stimulate GDP growth and employment, and yes they also increase initial debt.  Tax cuts work, but they are not a panacea.  Bush's problem was that for every dollar in revenue generated by increased GDP he, and congress, were spending about $1.20.  Our spending outpaced our income. 

         GDP          Revenue
2002   10642.3   1853.40   
2003   11142.1   1782.53   
2004   11867.8   1880.28   
2005   12638.4   2153.86   
2006   13398.9   2407.25   
2007   14077.6   2568.00   
2008   14441.4   2524.00   
2009   14258.2   2105.00   


         GDP         Spending
2002   10642.3   2011.15   
2003   11142.1   2160.12   
2004   11867.8   2293.01   
2005   12638.4   2472.20   
2006   13398.9   2655.44   
2007   14077.6   2728.94   
2008   14441.4   2931.22   
2009   14258.2   3107.36   

Unfortunately this administration choose not take action on the economy.  Instead they opted to use it as a platform for the passage of programs they had long drempt of passing.  The problem was prolonged, and now it passes to the monetary regulation phase.  We took a big hit.  A big unnecessary hit.  We can claw our way back, but I doubt we will be stupid enough to place our faith in Hopey Changy rhetoric again.  The choices we should have made a year ago, we have to go back and make again.

At least we can say we tried it the Keynesian way. 

[Conan71]

Former President Bush proposed tax cuts in 2001 and 2003 that would expire in 2010 saying that they would stimulate the economy. They didn't.

Stop calling it a tax increase. It was a coupon for the very rich. Now when they pay the same as before doesn't mean the price went up.

Citing complete leftist sites: employment grew by 5.3 million jobs and the GDP by 41% until the cataclysm in 2008.  What is even more laughable is the liberal blogs were highly critical of 308,000 jobs being created in a month.  Beats the Hell out of the attaboys they give Obama for maintaining unemployment at 9.5%, now that's something to crow about.  That cataclysm had far more to do with the malfeasance of banks, not tax cuts, not general economic policies of the Bush Admin.  It had to do with a lack of oversight and fully understanding what the folks on Wall Street were up to.

"Under President Bush, unemployment has generally remained at a little bit under 5 percent, starting at 4.7 percent in 2001 and finishing 2007 at 4.6 percent, though it did rise to 6.0 percent in 2003. Under President Hoover, employment fell by 8 million jobs, while under President Bush employment fell by 1.8 million jobs between 2001 and 2003, then rebounded through the end of 2007, and created a total of 5.3 million jobs."

"The Bureau of Labor Statistics reported today that the economy gained 308,000 jobs in March 2004, a gain of 0.24 percent."

http://www.americanprogress.org/issues/2004/04/b43958.html

"Well, looks like Bushie has led us into a recession. That is pretty tough to do - just doing nothing usually will result in 1-2 percent growth.

By comparison, let's look at the real growth of GDP under Clinton and Bush. This is the best measure of the growth of the U.S. economy.

The actual figures are available at the U.S. Bureau of Economic Analysis. Here are the GDP figures in current dollars:

End of 1992 - $6.5 trillion
End of 2000 - $10.0 trillion
End of 2007 - $14.1 trillion

So under Clinton, GDP grew by $3.5 trillion and under Bush in 6 years it has grown by $4.1 trillion.

However, the percentage growth shows that GDP growth was much faster under Clinton. The economy grew by 53.8 percent [(10.0-6.5)/6.5] under Clinton versus 41 percent [(14.1-10/0)/10.0] under Bush.

http://robsobs.blogspot.com/2008/03/us-gdp-growth.html

I guess 5.3 mm new jobs and GDP growth of 41% doesn't fit your paradigm.

[Conan71]

I think at this point the plan of the Republicans is to do what they can to screw the country up and blame it all on Obama. I'm not quite sure why Obama seems to be playing into their hands, what with the backtracking on the Bush extensions.

Isn't that pretty much what President Obama and the Democrats did the last two years and blame it all on Bush?  Honestly it's the ruling class plundering the country for it's own benefit and using the two party system to pass blame back and forth publicly while they share in enjoying the spoils of power.

I think you and I pretty much agree on the tax cut issues up to the point that you don't see direct evidence of tax cuts having a causal relationship to economic growth.  We know historically there has been growth simultaneous to tax cuts.  You can either draw the conclusion the growth was the result of cuts or simply a coincidence.  I happen to believe the cuts made a difference.  In light of the credit crisis, the fiscal policy of the Fed, and the perception of an Administration and Congress passing many new initiatives considered anti-business, there's been no other real incentive to create jobs the last two years.

[nathanm]

"Under President Bush, unemployment has generally remained at a little bit under 5 percent, starting at 4.7 percent in 2001 and finishing 2007 at 4.6 percent, though it did rise to 6.0 percent in 2003. Under President Hoover, employment fell by 8 million jobs, while under President Bush employment fell by 1.8 million jobs between 2001 and 2003, then rebounded through the end of 2007, and created a total of 5.3 million jobs."

It rebounded due to a debt bubble, not due to anything of the Government's doing. Similar to Reagan, and the latter part of the Clinton administration, actually. Compare commercial paper outstanding to the unemployment rate. As the amount of commercial debt was declining in the early '00s, the unemployment rate rose. When commercial borrowing turned around in 2004, the unemployment rate fell.

In essence, the numbers show that the business cycle itself is what matters and tax policy is useless in our current tax rate environment.

FRED produces nice graphs that make this stuff easy to understand:

http://research.stlouisfed.org/fred2/

Real GDP growth fell beginning in the 2004. The facts are that the Bush tax cuts did nothing for the economy. Period.

[Conan71]

Real GDP growth fell beginning in the 2004. The facts are that the Bush tax cuts did nothing for the economy. Period.

From a consumption-based standpoint, you can't say that the tax cuts have done nothing for the economy.  If anything, it gave some of the largest consumers more money to pump back into the economy by buying a larger house, luxury car, spending it on travel, home furnishings, electronics, etc. ad nauseum.  They also saved, made passive investments, and direct investments in business.  As far as a relationship to direct job growth, the amount of difference they made is simply debatable.  How much worse shape could the economy be in if the wealthier segment had had less money ($100,000 per year based on the worst of meme's) to spend?

It's pretty hard to track what ifs like how many jobs have been saved.  The only real stats you can compile on how many are created or lost.  With GDP you can only track loss or gain, you can't really track how much more could have been lost without certain tax breaks.

[nathanm]

From a consumption-based standpoint, you can't say that the tax cuts have done nothing for the economy. 

We can what if all day long. Intuitively, I would expect that tax cuts in an environment where people are spending rather than saving would tend to increase consumption somewhat. That gut feeling is unsupported by facts, unfortunately.

[heironymouspasparagus]

Conan, we now have 10 years of proof showing that is a crock of crap spewed by the Murdochian Warping Machine.

Nathan,
Kind of wrong - Bush tax cuts did plenty for the economy.  Took us from a $250 billion surplus per year to a $250 billion deficit.

And gave the rich an even bigger break compared to us than they enjoyed before.

I would just like to see some of those rich get back up to at least 1/2 of the tax rate as a percentage that I am stuck with.  Yeah, that's "class warfare" and I want the class warfare they have been waging on us to stop, or at least slow down some.

Just like Buffet has been saying for YEARS!

[we vs us]

I'm always interested in the "class warfare" argument, in that when conservatives use it, it usually assumes a very specific direction of said warfare; ie. of the poor against the rich.  I'm not sure why conservatives can't conceive of it running the other direction.

There's incontrovertible evidence that the richest Americans control an increasing amount of the economic pie.  Here's an excellent chart from an excellent series in Slate on wealth inequality in the US:



If the trickle down theory actually functioned, you'd see a much gentler upslope, as the resources given back to the top 10% were plowed back into the economy and trickled down to the lower 90% of the economy.  Alas, that's not what has happened. 

Instead, "from 1980 to 2005, more than 80 percent of total increase in Americans' income went to the top 1 percent. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20 percent. Yet virtually none of the increase translated into wage growth at middle and lower incomes . . ."

So: the rich got waaaaay richer and the rest of us have stagnated (and FYI I appreciate your individual stories of success over the last decade or so; sadly you're running against the statistical norm). While it's taken the Great Recession to uncover that fact, it's a dynamic that's been in effect for nearly a quarter century.  In essence, if this information proves anything it's that there is no such thing as trickle down.  There is no compelling economic reason to "give" the top tier of earners more resources in the hopes that they will help (through employment) the rest of us.  They already control a quarter of it and the rest of us are no richer for it. We are actually arguably poorer. 

I'm not particularly "jealous," of that kind of unimaginable wealth (I don't have a good concept of how rich most of these folks actually are), though I am fearful that, as in any lopsided system, as they come to monopolize more and more of our wealth 1) they will continue to be untouchable, as their advocates in the GOP firewall them off from criticism/further taxation and 2) the government will begin a gradual but massive drawdown of our social services because they won't be able to fund them. 

[RecycleMichael]

I think trickle down means tinkle on.

[heironymouspasparagus]

My response to trickle down has always been;
"Don't piss down my back and try to tell me it's raining!"

[heironymouspasparagus]

Why is there never a reasoned, thought out response to the facts of the tax disparity in this country?  The RWRE has none.  It knows the situation is grotesquely unfair, and talking about the reality is always dodged, and the extremely worn out tired old hack of "cut taxes" is the only phrase that is ever heard from that quarter.

And now it takes dozens of the richest of the rich, who finally have become embarrassed by the situation, to come forward and speak the reality.  So sad it took so long for them to get on board with the very richest - Buffet and Gates.

[Hometown]

I believe that what has happened in the U.S. can be traced to the decline and fall of Communism.  During the rein of Communism, competing economic models found it in their self interest to offer their citizens similar social benefits.  In the face of diminished Communist power Capitalism has less competition and less obvious and immediate need to improve the lives of its citizens. 

It took a force as mighty as the Great Depression to give Roosevelt the context he needed to create a belief in "the common good."  He shamed the Rich into being team players and in the process he saved the U.S. from the threat of world Communism.  In the process he also saved the upper class by raising their taxes and forcing them to moderate their course.

Today, the weak link in the coalition of working people is the White lower class which has been convinced that its self interest is one and the same as the upper classes'.  This has been accomplished by appealing to their racism and a desire for privilege and linking their taxes with those of the upper class.

Now, once again we find ourselves with a catawampus economy where the bullying upper class has used its advantage to degrade the lives of its fellow citizens.  The future be damned, just feed my hideous greed.  The lower classes' wages have been falling since Reagan.  And if you haven't noticed, as a result, the White lower class is bitter, in ill health, without education, filled with hate and largely dysfunctional:  Welcome to Oklahoma.

[heironymouspasparagus]

Not just Oklahoma - this is nationwide phenomenon.


Another 800 lb gorilla in the room;
Notice how the Murdochian Lie and Warp Machine chants about the failures of Communism, controlled economies, etc.  Well, in great part, that is true.  In fact, for the MOST part that is true.

And yet, at the same time we have the largest single group of people in the world living under what is claimed to be Communism outstripping every other economy in the world.  Does that mean that China is God's new favorite?  Would have to be if we are to believe the propaganda MLWM puts out.

Or does it mean we have been incredibly lucky for the last 70 years - more than any other country in the world.  Until now.

[Gaspar]

Not just Oklahoma - this is nationwide phenomenon.


Another 800 lb gorilla in the room;
Notice how the Murdochian Lie and Warp Machine chants about the failures of Communism, controlled economies, etc.  Well, in great part, that is true.  In fact, for the MOST part that is true.

And yet, at the same time we have the largest single group of people in the world living under what is claimed to be Communism outstripping every other economy in the world.  Does that mean that China is God's new favorite?  Would have to be if we are to believe the propaganda MLWM puts out.

Or does it mean we have been incredibly lucky for the last 70 years - more than any other country in the world.  Until now.

LOL!  Fueled by our desire for cheap crap!   

Delivered on the backs of over a billion people who live on less than $84 a week.

Depends on what HuffKosian definition of success is.

If we had 1.3 billion Americans, we would have about 7x the economy of China.

If you look at GDP per capita, according to the World Bank, the US is #5 and China is #83.

US GDP per person is $46.5K international dollars

China GDP per person is $6.8K international dollars

I'm sure that if we were to embrace a more Communist platform we could bring ourselves down to a GDP PPP of 6.8K too!