# It turns out the federal budget and the economy are doing great because of tax cuts **URL:** \ **Category:** The BBQ Pit\ **Created:** [October 12, 2006, 6:33pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225 "2006-10-12T18:33:34Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Uzi](https://avatars.discourse-cdn.com/v4/letter/u/91b2a8/32.png) [@Uzi](https://boards.straightdope.com/u/Uzi)\ **Post date:** [October 14, 2006, 5:20pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/21 "2006-10-14T17:20:13Z")
[QUOTE=Weirddave] I mean, this is just basic common fucking sense, does nobody else see it? _pulls out hair_ [/QUOTE] You mean live within a reasonable budget? Noooo! That’s why we have credit cards to avoid such a fate, ain’t it? ---
**Author:** ![BobLibDem](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/boblibdem/32/3149_2.png) [@BobLibDem](https://boards.straightdope.com/u/BobLibDem)\ **Post date:** [October 14, 2006, 5:27pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/22 "2006-10-14T17:27:07Z")
[QUOTE=Weirddave] The PROBLEM is that this administration, and every other administration, spends money like a drunken sailor with a hard on in a whorehouse. You wanna solve the deficit problem? It’s very easy. **CUT SPENDING**. [/QUOTE] OK- tell us where all the fat is in the budget. If you look at it, discretionary spending is a small part of the budget. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [October 14, 2006, 5:31pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/23 "2006-10-14T17:31:34Z")
[QUOTE=Weirddave] …If you don’t believe me, take a basic fucking economics course… [/quote] Presumes facts not in evidence: that “basic economics” is of a single mind on the issue, a universal agreement. Clearly not true, at least not without some “true Scotsman/true economist” weaselthink. Mr. Paul Krugman, who disagrees with you frequently and eloquently, is reputed to have some academic background in economics. It also buggers the question: of what value is any action that makes a system healthier and more robust if that system is, by its very nature, corrupt and unjust. Paris Hilton has done nothing to deserve her advanced life expectancy and access to superlative health care. Nor is she likely to, anytime soon. > [@](#): > > …It’s very easy. **CUT SPENDING**. Jesus fucks a cow people, it’s just that simple… The overly simple solution is the 2am bar slut of the mind. The wealth of a nation…its purple mountain majesties, amber waves of ethanol…belongs to its people, the man who takes more of that wealth than is his due is a thief, however legally sanctioned. And, of course, its _not_ that simple, but makes a pretty decent rough draft. ---
**Author:** ![BJMoose](https://avatars.discourse-cdn.com/v4/letter/b/5fc32e/32.png) [@BJMoose](https://boards.straightdope.com/u/BJMoose)\ **Post date:** [October 14, 2006, 5:31pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/24 "2006-10-14T17:31:49Z")
This moronic moose cannot get past the fact that, since Witless Leader cut taxes, the total national debt has doubled. That being the case, one must say that Bush’s tax cuts didn’t work. [Actually they did work, since the _real_ goal was to soak the rich, the federal budget be damned.] ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [October 14, 2006, 5:38pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/25 "2006-10-14T17:38:26Z")
[QUOTE=BJMoose] … [Actually they did work, since the _real_ goal was to soak the rich, the federal budget be damned.] [/QUOTE] An astonishingly Marxist foundation for Bush policies is revealed. As you might expect, its an “October surprise”. ---
**Author:** ![1010011010](https://avatars.discourse-cdn.com/v4/letter/1/ea666f/32.png) [@1010011010](https://boards.straightdope.com/u/1010011010)\ **Post date:** [October 14, 2006, 5:43pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/26 "2006-10-14T17:43:28Z")
I wish I could use government style accounting. Just keep getting bigger and bigger payday loans to pay off the last payday loan and chirp merrily about how much I’m getting out of debt. ---
**Author:** ![BJMoose](https://avatars.discourse-cdn.com/v4/letter/b/5fc32e/32.png) [@BJMoose](https://boards.straightdope.com/u/BJMoose)\ **Post date:** [October 14, 2006, 6:15pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/27 "2006-10-14T18:15:07Z")
[QUOTE=1010011010] I wish I could use government style accounting. Just keep getting bigger and bigger payday loans to pay off the last payday loan and chirp merrily about how much I’m getting out of debt. [/QUOTE] Bingo. Instead of taxing the rich, we’re borrowing from them (which means they make out like bandits twice - not only does the gummint not take money from them, it also pays them for the privilege; dammit, this Ponzi scheme _must_ bust someday). **'luci** - your ever-sparkling wit has finally jetted over my wee noggin. Huh? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [October 14, 2006, 6:23pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/28 "2006-10-14T18:23:12Z")
Bush is, of course, talking out of his ass on this. It’s certainly true that changes in the tax code don’t map linearly to changes in receipts, but we simply have no way of knowing what the effects of his particular tax cuts were. And the idea that the only way to reduce the deficit is to cut spending is laughable, **Weirdave**. One might argue that that is the most desirable way to reduce the deficit, but that’s an entirely different debate. Then we have the war in Iraq. How much that is costing us is mind numbing, although I almost feel guilty mentioning the monetary loss when the loss of human life is so great. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [October 14, 2006, 6:26pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/29 "2006-10-14T18:26:26Z")
[QUOTE=BJMoose] … **'luci** - your ever-sparkling wit has finally jetted over my wee noggin. Huh? [/QUOTE] Soak the rich? Why stop there, let’s _eat_ them! (A simple blunder, unkindly noted). ---
**Author:** ![Chefguy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chefguy/32/138_2.png) [@Chefguy](https://boards.straightdope.com/u/Chefguy)\ **Post date:** [October 14, 2006, 7:45pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/30 "2006-10-14T19:45:22Z")
Jebus, people: it’s October of an election year, which makes anything coming out of a politician’s mouth just so much utter horseshit. The numbers will magically change come December. ---
**Author:** ![Crafter\_Man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crafter_man/32/458_2.png) [@Crafter\_Man](https://boards.straightdope.com/u/Crafter_Man)\ **Post date:** [October 14, 2006, 8:06pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/31 "2006-10-14T20:06:55Z")
[QUOTE=BobLibDem] OK- tell us where all the fat is in the budget. If you look at it, discretionary spending is a small part of the budget. [/QUOTE] Well, we can start by closing many unconstitutional government organizations and departments, such as the Department of Education, Department of Commerce, BATFE, and the Department of Labor. Just to name a few. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [October 14, 2006, 8:41pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/32 "2006-10-14T20:41:18Z")
[QUOTE=John Mace] Bush is, of course, talking out of his ass on this. It’s certainly true that changes in the tax code don’t map linearly to changes in receipts, but we simply have no way of knowing what the effects of his particular tax cuts were. [/quote] This whole issue is so full of crap from both sides that it’s annoying. And the problem is that whether the effects are positive or negative, they are small enough to be swamped by other macro effects, especially in the short run. Let’s say you cut taxes, and the next year the economy grows by 3.5%. Would it have only grown at 2% without the cut? Or maybe the cut had no effect at all. How do you tell? In theory, it’s obvious that there are at least two minima on the tax/revenue curve - one at 100% and one at 0%. That means there are some areas of the curve where cutting taxes will increase revenue. But it gets more complicated than that, because of compounding growth. Let’s say your tax cut increases economic growth by 1% per year. But you lose 10% in revenue. You now have two curves over time - a curve of lost revenue, which is a linear graph, and a curve of increased GDP, which is exponential. At some point down the road, the compounding increase in growth will result in revenues that equal, and then exceed, the revenue lost to the tax cut. At some point further down the road, you will have gained so much new revenue that you’ll have made up for all the revenue lost during the period when net revenue was still negative. Because one curve is linear and the other exponential, that suggests that so long as the growth effect of the tax cut is permanent, at some point any tax cut will pay for itself - you just have to wait long enough. The more powerful the effect of the cut, the quicker you regain the revenue lost when the tax cut was first implemented. On the other hand, if the growth effect tapers off over time, you may never reach the point where you earn back the money lost. And there are many other issues that come into play, such as extra interest on debt incured in the interim, economic effects caused by dislocation whenever government regulations are changed, etc. It’s a very nuanced issue, yet the arguments around it are always simplistic. > [@](#): > > And the idea that the only way to reduce the deficit is to cut spending is laughable, **Weirdave**. Really? What if I argued that government debt always tends to rise to the level of political acceptance, no matter how much revenue the government has? Increase revenue, and you just get more spending pressure. If you graphed the growth of U.S. government revenue, and overlaid it with a graph of deficits, do you think they’d track particularly closely? The biggest deficits the government ever carried came in the early 1990’s, after a decade of major increases in government revenue. It seems to me that the way it typically goes is that when the U.S. goes through a long economic expansion, deficits come down somewhat while revenue goes up. Then deficits cease to be a political issue, and government starts to use the revenue for new spending. Then the next recession comes along, but spending doesn’t go down. Instead, the deficit balloons until it becomes a political issue, at which time Democrats start arguing for tax increases to reduce the deficit. Eventually, whether there are tax cuts or not, the economy eventually turns around, revenues start to increase, and then if there was a tax increase, the Democrats claim that they saved the economy and the tax increase was responsible for lowering the deficit. If the Republicans managed to cut taxes, they’ll claim the tax cuts caused all the revenue growth and fixed the deficit. Then the cycle starts all over again, with government revenue even higher at the start of the cycle. Deficits are a spending problem. Just like a person who runs their credit card up to 30K. Do you think a raise at work will suddenly cause this person to become financially responsible? Would you describe such a person’s problem as one of not enough income, or of poor spending discipline? ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [October 14, 2006, 8:47pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/33 "2006-10-14T20:47:11Z")
[QUOTE=John Mace] Bush is, of course, talking out of his ass on this. It’s certainly true that changes in the tax code don’t map linearly to changes in receipts, but we simply have no way of knowing what the effects of his particular tax cuts were. [/quote] Well, you could look at the budget ([link](http://www.whitehouse.gov/omb/budget/fy2007/pdf/07msr.pdf) warning: pdf. Look for chart 2, it’s on page 13). Revenues are up 15% last year, the largest increase in over 20 years. Revenues also increased dramatically after tax cuts by Reagan, Kennedy and Coolidge. ( [cite](http://www.cato.org/pubs/handbook/hb105-10.html)) > [@](#): > > It is instructive to note that America has experienced three periods of very strong economic growth in modern times: the 1920s, the 1960s, and the 1980s. Each of those growth spurts coincided with reductions in marginal tax rates. In 1923, after the end of World War I, President Calvin Coolidge cut income tax rates. In 1964 the Kennedy tax cut lowered the top income tax rate from 91 percent to 70 percent. In 1981 Ronald Reagan cut tax rates 25 percent across the board, chopping the top tax rate from 70 to 50 percent (which was then lowered to 28 percent in 1986). What was the result? > > ``` > * In the six years after the 1923 tax cuts, the American economy grew by 5 percent per year, and tax revenues nearly doubled. > * In the seven years after the Kennedy tax cuts, the economy grew by 5 percent per year, and income tax revenues climbed by 80 percent. > * In the seven years after the 1981 Reagan tax cuts, the economy grew by 4 percent per year, and federal revenues grew by 75 percent. The percentage of households with incomes above $50,000 rose from 18 percent to 23.5 percent. > > ``` > > After both the Kennedy and the Reagan tax rate cuts, federal revenues paid by the wealthiest Americans actually increased. After the Kennedy tax cuts in 1963, which lowered the top income tax rate from 90 to 70 percent, taxable income reported by the richest Americans rose by 40 percent. Between 1980 and 1990, the top income tax rate was chopped from 70 percent to 28 percent. Over that same period, the share of income taxes paid by the wealthy increased from 18 percent of the total in 1980 to 26 percent in 1990. In fact, real federal revenues increased by 24 percent in the seven years after the Reagan tax cuts (1982-89). They will have increased by only 20 percent in the seven years after the Bush and Clinton tax hikes (1990-97). That suggests that tax rates today are too high to expand the economy and to balance the budget. [QUOTE=John Mace] And the idea that the only way to reduce the deficit is to cut spending is laughable, **Weirdave**. One might argue that that is the most desirable way to reduce the deficit, but that’s an entirely different debate. [/QUOTE] If you are going to cut taxes to stimulate the economy it’s the only way. Spending more than you take in will not reduce the deficit. You could raise taxes and put all the new money raised towards the deficit, but that would have a negative effect on revenue and also on the economy, to quote JFK: > [@John F Kennedy](#): > > An economy hampered with restrictive tax rates will never produce enough revenue to balance the budget, just as it will never produce enough jobs. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [October 14, 2006, 9:19pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/34 "2006-10-14T21:19:38Z")
Waging an expensive war with tax cuts, This is fiscal responibility?This is stupid and irresponsible. ---
**Author:** ![Monocracy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/monocracy/32/4493_2.png) [@Monocracy](https://boards.straightdope.com/u/Monocracy)\ **Post date:** [October 14, 2006, 9:36pm UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/35 "2006-10-14T21:36:04Z")
[QUOTE=Weirddave] Well, you could look at the budget ([link](http://www.whitehouse.gov/omb/budget/fy2007/pdf/07msr.pdf) warning: pdf. Look for chart 2, it’s on page 13). Revenues are up 15% last year, the largest increase in over 20 years. Revenues also increased dramatically after tax cuts by Reagan, Kennedy and Coolidge. ( [cite](http://www.cato.org/pubs/handbook/hb105-10.html)) [/quote] That’s just a plain old lie. When Reagan cut taxes, revenues dropped. Your cite cherry picks the numbers. It starts with 1982 when it should be starting with 1981. There was a big drop in revenue that year, and the seven years after that were just playing catch up to try to match revenues the government would have had. And it’s great that revenues are up 15% this year, because for five straight years after Bush’s tax cuts they were virtually unchanged. We’re gonna need a lot more years of 15% raises before revenues match what they would have been without the tax cuts. Here is the site, with actual numbers, and no one to cherry pick the numbers for you: [http://www.bea.gov/bea/dn/nipaweb/SelectTable.asp?Selected=3#S3](http://www.bea.gov/bea/dn/nipaweb/SelectTable.asp?Selected=3#S3) (Table 3.2) And if you want to cut spending, how about cutting the interest expense on the national debt? Last year, it cost us over $400 billion, which is a huge chunk of the national budget. Tax cuts lead to deficits which lead to increased spending. ---
**Author:** ![Scotticher](https://avatars.discourse-cdn.com/v4/letter/s/e9c0ed/32.png) [@Scotticher](https://boards.straightdope.com/u/Scotticher)\ **Post date:** [October 15, 2006, 12:37am UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/36 "2006-10-15T00:37:14Z")
Isn’t the national deficit the highest it has ever been? And didn’t he begin his administration with a balanced budget…which I certainly don’t think we have at this point? And aren’t we borrowing money at a greater rate than we ever have? Because that is what I have read in the newspaper, and on the web. Am I wrong? Also, didn’t Bush’s tax cuts BENEFIT the rich more than anyone else? I’m really just asking, not trying to pick a fight. ---
**Author:** ![Zebra](https://avatars.discourse-cdn.com/v4/letter/z/c0e974/32.png) [@Zebra](https://boards.straightdope.com/u/Zebra)\ **Post date:** [October 15, 2006, 1:35am UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/37 "2006-10-15T01:35:56Z")
Well if George Bush announced it, then it must be so. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [October 15, 2006, 1:58am UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/38 "2006-10-15T01:58:29Z")
The only thing powering this economy is people spending the equity in their houses. Seen all the mortgage refinancing ads? They don’t advertise unless there is a huge market. Wages are stagnant, and folks are trying to maintain their standard of living any way they can: credit cards, mortgage refinancing, spending down their savings. This is a short term blip before the crash. One year before lights out, max. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [October 15, 2006, 2:17am UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/39 "2006-10-15T02:17:09Z")
Well, if it isn’t Mr. Sunshine! One pictures the ragged and forlorn CEO of AmEx, standing by the freeway entrance with a cardboard sign “Will Suck Your Life Out for Food”. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [October 15, 2006, 2:42am UTC](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225/40 "2006-10-15T02:42:33Z")
[QUOTE=elucidator] Well, if it isn’t Mr. Sunshine! One pictures the ragged and forlorn CEO of AmEx, standing by the freeway entrance with a cardboard sign “Will Suck Your Life Out for Food”. [/QUOTE] Speaking as an Amex finance employee who has met the CEO on several occasions, I can assure you that this is blatantly false. No matter what happens, the CEO will be extremely well dressed. [Previous page](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225.md?page=1) [Next page](https://boards.straightdope.com/t/it-turns-out-the-federal-budget-and-the-economy-are-doing-great-because-of-tax-cuts/376225.md?page=3)