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GATTIGAP already talked about this. So now you have admitted not knowing anything about economics but have decided to post someone you think does. Well, they don't. But of course, you couldn't know that.


quote:
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Alan D. Viard, a former Bush White House economist currently at the conservative American Enterprise Institute, recently told The Washington Post: "Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that."

THAT MAY BE TRUE BUT THAT DOESN'T MEAN THE TAX CUTS WON'T EVENTUALLY PAY FOR THEMSEVLES.

He's right. There's no dispute among economists. Conservative, moderate, or liberal, every credentialed economist agrees that the Bush tax cuts caused revenues to drop. There is, however, a dispute between economists and pseudo-economists. Supply-siders may be laughed at by real economists,

THIS IS BULL SHIT.

but they still enjoy a strong following among politicians, including, alas, the president of the United States. Here is what President Bush said a week and a half ago:


They said that we had to choose between cutting the deficit and keeping taxes low--or another way to put it, that in order to solve the deficit we had to raise taxes. I strongly disagree with those choices. Those are false choices.

THAT IS TRUE IF YOU AGREE WITH SUPPLY SIDER THEORY.

Tax relief fuels economic growth, and growth--when the economy grows, more tax revenues come to Washington. And that's what's happened. It makes sense, doesn't it?"

YES IT DOES


Well, no, it doesn't make any sense at all. Bush, of course, is correct that tax revenues have risen over the last few years. This is normal.

Except in certain extreme theoretical conditions, tax cuts cause revenues to fall, and tax hikes cause them to rise.

THIS IS TRUE.

The economy also can affect revenues. During an expansion, revenues can rise unusually fast, and during a recession, they can drop unusually fast.

YES. BUT THE POINT IS, DID THE TAX CUTS FULE THE EXPANSION? IF THEY DID THEN THEY ARE RESPONSIBLE FOR THE INCREASED REVENUE. IF THEY DIDN'T, THEN THE TAX CUTS DID NOT. IN OTHER WORDS IF THE TAX CUTS LED TO GROWTH, THEN THEY HELPED, BUT IF THEY DID NOT LEAD TO GROWTH THEN THEY DIDN'T. WHAT THIS GUY IS IMPLYING IS THAT THEY DID NOT LEAD TO GROWTH (HE IS IMPLYING THAT BECAUSE HE IS IMPLYING THAT THE RECOVERY IS NOT CONNECTED TO THE TAX CUT).

The latter is what happened following the first Bush tax cut. When Bush took office, tax revenues accounted for 19.8 percent of gross domestic product. After the tax cut, they collapsed to a low point of 16.3 percent--far lower than even the most pessimistic projection.

BUT IF THE ECONOMY CONTINUES TO GROW EVENTUALLY THE TAX RATES WILL ACCOUNT FOR MORE THAN 19.8 PERCENT OF GROSS DOMESTIC PRODUCT. BUT THESE ARE ALSO RIGGED NUMBERS BECAUSE AS THE ECONOMY GROWS YOU NEED MORE MONEY TO GET TO 19.8 PERCENT OF GDP. SO WHEN WE GET TO THE POINT WHEN OUR REVENUES EQUAL 19.8 PERCENT OF GDP WE WILL BE BRINGING IN A LOT MORE REVENUE THAN 19.8 OF THE GDP EQUALED IN 2002. TO BE FAIR HE SHOULD JUST BE DISCUSSING REVENUE IN DOLLAR TERMS.

Yes, revenues have risen from that low level, but they still haven't recovered.

BUT IF THE GROWTH CONTINUES, AND THE TAX CUT FUELED THAT GROWTH THEN THE THEORY WILL PROVE CORRECT.

The Center on Budget and Policy Priorities found that revenues currently lag $200 billion behind the revenue growth you would normally find during a recovery.

THIS CLAIM MAKES NO SENSE AT ALL. THERE IS NO SUCH THING AS A NORMAL RECOVERY. WHAT HE IS ALSO CLAIMING HERE IS THAT WITHOUT THE TAX CUTS THERE WOULD HAVE BEEN MORE GROWTH.

Now, Bush's reply to that is to say that if it weren't for his tax cuts, we would still be in a recession. Indeed, in the same October 11 speech, he asserted, "I'm convinced that if we had raised taxes, it would cause there to be an economic decline, which would make it harder to balance the budget over the years."

IF THE TAX CUTS DID NOT BRING ABOUT GROWTH HE WOULD BE WRONG. IF THE TAX CUT BROUGHT GROWTH HE IS RIGHT.

Because Bush can veto any tax hike, we can't know for sure whether he's right. But there's another pretty good way to check that claim: Go back to the last time there was a major tax hike. That was in 1993. Just about every major elected Republican predicted the 1993 tax hike would slow down the economy, probably cause a recession and cause revenues to decline. Instead, they boomed, rising from 17.5 percent of GDP when Bill Clinton took office to 19.8 percent when he left.

SO HERE THE GUY IS ARGUING THAT A TAX INCREASE WOULD HAVE BROUGHT MORE GROWTH. SO HE IS ARGUING THAT BUSH'S TAX CUTS ACTUALLY HAMPERED GROWTH. BUT THIS IS A B.S. COMPARISON. CLINTON INHERITED A GROWING ECONOMY WHERE BUSH INHERITED A RECESSION. WITH CLINTON THE QUESTION SHOULD BE, WOULD THE GROWTH BEEN EVEN STRONGER IF HE HAD NOT RAISED TAXES? AND CLINTON EVEN ADMITTED THAT HE RAISED TAXES TOO MUCH.

Republicans say Clinton just benefited from a good economy. Of course he did. That's the point. Raising taxes on the rich, within reason, did nothing to slow down the economy. Moreover, that same logic applies to Bush. Clinton did not invent the business cycle, and neither did the current president. Both benefited from a growing economy.

THERE IS A LEGITIMATE DISPUTE OVER WHETHER IT WAS CLINTON'S TAX INCREASE, OR REAGANS TAX CUT THAT PRODUCED THE GROWTH. BUT THERE IS NOTQUESTION THAT THE GROWTH LEAD TO BALANCING THE BUDGET. THE TAX INCREASE WITHOUT THE ADDED GROWTH WOULD NOT HAVE COME CLOSE TO BALANCING THE BUDGET. HOWEVER, THE GROWTH WITHOUT THE TAX INCREASE WOULD HAVE EVENTUALLY BALANCED THE BUDGET.

But here's the difference. Clinton inherited a large deficit and, with the economy going full-tilt, turned it into a sizable surplus. Bush inherited a sizable surplus and, with the economy going full-tilt,

WRONG. BUSH INHERITED AN ECONOMY IN RECESSION

he's still running a deficit north of $200 billion. If Bush had a responsible fiscal policy, we'd be paying off our debt right now, not adding to it.

NOT TRUE.

In the same speech in which he claimed that his tax cuts have caused revenues to rise, Bush bragged that he's "restraining spending." So why do we still have a deficit? I mean, he says he's kept spending down, he's caused revenues to skyrocket, and the economy is going great guns. Why are we still in the red?

WE ARE STILL IN THE RED BECAUSE BUSH ALSO RAISED SPENDING.

And if Bush's own economists say his tax cuts caused revenue to drop--and Viard isn't the only one--then how can he continually get away with insisting the opposite?

HIS OWN ECONOMISTS ARE SAYING THAT THE TAX CUTS WORKED AND THAT IN A FEW YEARS THEY WILL HAVE BROUGHT IN MORE REVENUE THROUGH GROWTH THAN WAS LOST THROUGH TAX CUTS. WE JUST HAVEN'T HIT THAT POINT YET.