Insight on the relationships between tax cuts and the deficit

This is an eye-opening post from James Fallows, in which he references a chart put together by the NY Times. Essentially, the biggest contributor to our current deficit woes is the Bush-era tax cuts, something the Republicans are in gross denial about. To quote the article from the Times:

A few lessons can be drawn from the numbers. First, the Bush tax cuts have had a huge damaging effect. If all of them expired as scheduled at the end of 2012, future deficits would be cut by about half, to sustainable levels. Second, a healthy budget requires a healthy economy; recessions wreak havoc by reducing tax revenue. Government has to spur demand and create jobs in a deep downturn, even though doing so worsens the deficit in the short run. Third, spending cuts alone will not close the gap. The chronic revenue shortfalls from serial tax cuts are simply too deep to fill with spending cuts alone. Taxes have to go up.

There is another lesson or two here. Tax cuts — so the Republicans claim — stimulate the economy, but Bush’s tax cuts did nothing of the sort. In fact, taken as a whole, tax cuts and all, Bush’s policies helped to put us into the very recession that has also contributed to the deficit.

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Categories: Politics | 6 Comments

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6 thoughts on “Insight on the relationships between tax cuts and the deficit

  1. The only one who is in denial here are you and the NY Slimes. The reason that we have a lousy economy is Obamacare, and the deficit and the uncertainty in the economy which keeps businesses from hiring new people. We have the highest business tax in the world which businesses add to the cost of goods and services sold to us which in effect we pay the tax.

    lete me give you an example of how sticking it to the rich ALWAYS BLOWS UP IN OUR FACES AND HURTS THE LITTLE GUY.

    Back in the eighties, the dems were in control in Gongress and they decided to institute class warfare again (standard liberal playbook) and passed a 10% luxury surcharge tax to “STICK IT TO THE RICH”. Now the rich are smart and don’t like spending their money on taxes (go to the article on Kerry parking his new yacht in a different state to avoid paying exorbitant state taxes on his new yacht)

    Well the rich did not want to pay a half million dollar tax on a $5 mil yacht and so they looked overseas. Low and behold they found that they could get the same yacht overseas for $3.5 mil and save the half mil luxury tax. They destroyed the american yacht building industry and the ones who were hurt were the blue collar guys building the yachts. They got permanently laid off, losing their jobs and their homes. They quietly dropped the tax as the absolute failure that it was and always is everytime that it is tried.

    John Wilder

  2. Steve Zeoli

    Your comment that Obamacare is the reason the economy is lousy is so silly as to be hardly worth responding to — yet, of course, I will. First of all, you must suffer from amnesia, because you seem to have forgotten that the economy was in the dumpster before Obama even became president. Health Care Reform wasn’t passed until last year, and most of the provisions of the law haven’t gone into effect yet. Perhaps Obama used his paranormal abilities to influence the past. Your assertion that taxing the wealthy always blows up and hurts the little guy is belied by the fact that Bill Clinton passed tax increases and what followed was the most vibrant U.S. economy in decades; one that fell apart AFTER Bush enacted his tax cuts. Sorry, you’re going to have to do better than that to convince me.

  3. If Obamacare is so great, why have they given out over 1,300 exemptions to it? They have 6 years of taxes to pay for 4 years of benefits. It will cut out a lot of medicare and mediciad patients because doc won’t take them anymore because of the deep cuts in reimbursements to docs, even lower than they already are.

    Clinton was forced kicking and dragging to reform entitlements like welfare and there were little tax cuts under his watch. Reagan on the other hand had big tax cuts and the economy came roaring back after Carter virtually destroyed it.

    Another example of tax increases hurting the little guy. I used to live in Minnesota, one of the liberal triuvirate of liberal politics, NY, California and Minnesota. They decided to stick it to rich landlords and passed a 300% increase in property taxes on them. The landlords passed the increased taxes on in the form of higher rents to their renters, the guys who could least afford to pay for them.

    John Wilder

  4. You heard it here first, Obama will be voted out in a landslide.
    John Wilder

    • Steve Zeoli

      You may be right, but only if Obama is stupid/weak enough to cave in to the extortionist Republican Tea Partiers.

  5. Steve Zeoli

    I never made a claim about the advantages or not of health care reform. I just said it isn’t what’s causing the bad economy, which you claimed in your first comment. (For the record, I think health care reform is sorely needed and the Health Care Reform Act was tepid and not nearly strong enough.)

    Bill Clinton made entitlement reform a campaign promise in 1992, and began that process in 1993, a full year before Republicans regained a majority in Congress. He was NOT forced to make those changes as you claim.

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