Bush Gets It Wrong On Taxes Again!
As Ronald Reagan would say: “There he goes again!”. George Bush is doing the rounds today proclaiming that his tax cuts are “paying for themselves” and are the reason the economy is “doing so well”. The New York Times has a transcript of his comments here: Bush Comments on the Economy His evidence is the news published yesterday that Federal tax revenues are higher than expected and tha, therefore, the deficit will be less this year than forecast.
Nonsense.
Here’s a very good analysis of the situation by our friends over at the Center on Budget and Policy Priorities: The Recent Upturn in Revenues and OMB?¢?‚¬?„¢s Mid-Session Review, revised 7/11/06
There’s a lot of meat here. First it’s clear that Bush is trying to use elastic accounting. When the tax cuts were passed he used predictions for the subsequent years to justify his argument that the taxes would pay for themselves. His prediction for 2006 is for approximately $300 billion higher tax revenues than this supposedly surprising high level we are now being told about. By his own accounting his tax cuts have a shortfall of that amount to make up!
Second: this business cycle has seen awful revenue gains. Typically revenues pick up dramatically as the business cycle improves. The “normal” pick up is around 10% from the trough to the peak of the cycle. This time through? Practically zero. Bush’s tax cuts eliminated any revenue gain that would have accrued from the economic improvement. He thus locked the country into huge deficits even when business was good [imagine the sea of red ink when things slow down!].
Third: revenues are frequently hard to predict. There have been many surprises during Bush’s reign. Two or three, back in 2001 through 2003 were strongly negative. Naturally Bush ignored those slumps today when he crowed about his success in rasining revenues while cutting taxes.
Finally: the upswing in revenues seems to reflect the widening inequality in earnings. One of the reasons the tax take has swelled is that the richer segments of America [the wealthy individuals and corporations] are paying more because their incomes have raced upward. Their marginal rates of tax has not changed, but the absolute amount of tax they owe has grown hugely.
None of what Bush is claiming is even remotely true. His regime has been an economic disaster, particulary for the average American. No amount of elision can hide his failure. His tax cuts have left future generations of Americans with massive debts to pay off: even with the improved deficit forecast for this year we will add a further $1,000 of debt to the total for every one of us.
Thanks George, but no thanks. Go ride your bike!