http://www.ombwatch.org/node/3605

http://andrewsulliva...rt-of-the-da.html

Recall what Obama said in Baltimore at the Republican retreat:

CONGRESSMAN HENSARLING: That's the question. You are soon to submit a new budget, Mr. President. Will that new budget, like your old budget, triple the national debt and continue to take us down the path of increasing the cost of government to almost 25 percent of our economy? That's the question, Mr. President.

THE PRESIDENT: Jeb, with all due respect, I've just got to take this last question as an example of how it's very hard to have the kind of bipartisan work that we're going to do, because the whole question was structured as a talking point for running a campaign.

Now, look, let's talk about the budget once again, because I'll go through it with you line by line. The fact of the matter is, is that when we came into office, the deficit was $1.3 trillion. -- $1.3 [trillion.] So when you say that suddenly I've got a monthly budget that is higher than the -- a monthly deficit that's higher than the annual deficit left by the Republicans, that's factually just not true, and you know it's not true.

And what is true is that we came in already with a $1.3 trillion deficit before I had passed any law. What is true is we came in with $8 trillion worth of debt over the next decade -- had nothing to do with anything that we had done. It had to do with the fact that in 2000 when there was a budget surplus of $200 billion, you had a Republican administration and a Republican Congress, and we had two tax cuts that weren't paid for.

You had a prescription drug plan -- the biggest entitlement plan, by the way, in several decades -- that was passed without it being paid for. You had two wars that were done through supplementals. And then you had $3 trillion projected because of the lost revenue of this recession. That's $8 trillion.

Now, we increased it by a trillion dollars because of the spending that we had to make on the stimulus. I am happy to have any independent fact-checker out there take a look at your presentation versus mine in terms of the accuracy of what I just said.

FWIW.

Cheers,
Scott.

Reynolds is an ideologue who works at a "libertarian" think tank that supplies Republican talking points. I wouldn't trust their "analysis". Reynolds is a Palin fan, too...

If you want an unbiased look at where the budget is headed, read this: http://cboblog.cbo.gov/?p=465 (From January)

[...]

Under current law, the federal fiscal outlook beyond this year is daunting: Projected deficits average about $600 billion per year over the 2011–2020 period. As a share of GDP, deficits drop markedly in the next few years but remain high—at 6.5 percent of GDP in 2011 and 4.1 percent in 2012, the first full fiscal year after certain tax provisions originally enacted in 2001, 2003, and 2009 are scheduled to expire. Thereafter, deficits are projected to range between 2.6 percent and 3.2 percent of GDP through 2020.

Those accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP. With such a large increase in debt, plus an expected increase in interest rates as the economic recovery strengthens, interest payments on the debt are poised to skyrocket. CBO projects that the government’s annual spending on net interest will more than triple between 2010 and 2020 in nominal terms (from $207 billion to $723 billion) and will more than double as a share of GDP (from 1.4 percent to 3.2 percent).

Moreover, CBO’s baseline projections understate the budget deficits that would arise under many observers’ interpretation of current policy, as opposed to current law. In particular, the projections assume that major provisions of the tax cuts enacted in 2001, 2003, and 2009 will expire as scheduled and that temporary changes that have kept the alternative minimum tax (AMT) from affecting many more taxpayers will not be extended. The baseline projections also assume that annual appropriations rise only with inflation, which would leave discretionary spending very low relative to GDP by historical standards. If the tax cuts were made permanent, the AMT was indexed for inflation, and annual appropriations kept pace with GDP, the deficit in 2020 would be nearly the same, historically large, share of GDP that it is today.

That's the situation before Obama and the Democrats are able to shift the course of the budget.

It was Bush's huge tax cuts, the wars, Medicare Part D, and refusal to pay for any of them, and the crash as a result of Bush Administration policies, that blew a hole in the budget - not Obama and the Democrats. The long-term health care costs (which are the greatest part of the projected federal budget increases) will be addressed by the HCR bill, if the Democrats gather the courage to pass it....

Cheers,
Scott.

We can't raise taxes on the rich because they'll move their money elsewhere.

We can't raise taxes on the rich because they won't work as hard and the economy will suffer.

We can't raise taxes on the rich because they'll hire accountants and find all the loopholes.

We can't raise taxes on the rich because it will hurt the poor and the middle class because they'll just pass them on.

We can't raise taxes on the rich because the poor don't pay income taxes and that's unfair.

Did I miss anything?

I guess the only answer is to say that if someone earns over $1M a year they should be exempt from all taxes. I guess we'd be living in a paradise then. Like Russia, or maybe Somalia.

:-/

There's a lot of history that tells us that each of those suppositions is wrong.

For example, Krugman, from 2006 in Rolling Stone - http://www.rollingst...th_transfer/print

[...]

Finally, there's the government's most direct method of affecting incomes: taxes. In this arena, Bush has made sure that the rich pay lower taxes than they have in decades. According to the latest estimates, once the Bush tax cuts have taken full effect, more than a third of the cash will go to people making more than $500,000 a year — a mere 0.8 percent of the population.

It's easy to get confused about the Bush tax cuts. For one thing, they are designed to confuse. The core of the Bush policy involves cutting taxes on high incomes, especially on the income wealthy Americans receive from capital gains and dividends. You might say that the Bush administration favors people who live off their wealth over people who have a job. But there are some middle-class "sweeteners" thrown in, so the administration can point to a few ordinary American families who have received significant tax cuts.

Furthermore, the administration has engaged in a systematic campaign of disinformation about whose taxes have been cut. Indeed, one of Bush's first actions after taking office was to tell the Treasury Department to stop producing estimates of how tax cuts are distributed by income class — that is, information on who gained how much. Instead, official reports on taxes under Bush are textbook examples of how to mislead with statistics, presenting a welter of confusing numbers that convey the false impression that the tax cuts favor middle-class families, not the wealthy.

In reality, only a few middle-class families received a significant tax cut under Bush. But every wealthy American — especially those who live off of stock earnings or their inheritance — got a big tax cut. To picture who gained the most, imagine the son of a very wealthy man, who expects to inherit $50 million in stock and live off the dividends. Before the Bush tax cuts, our lucky heir-to-be would have paid about $27 million in estate taxes and contributed 39.6 percent of his dividend income in taxes. Once Bush's cuts go into effect, he could inherit the whole estate tax-free and pay a tax rate of only fifteen percent on his stock earnings. Truly, this is a very good time to be one of the have mores.

It's worth noting that Bush doesn't simply favor the upper class: It's the upper-upper class he cares about. That became clear last fall, when the House and Senate passed rival tax-cutting bills. (What were they doing cutting taxes yet again in the face of a huge budget deficit and an expensive war? Never mind.) The Senate bill was devoted to providing relief to middle-class wage earners: According to the Tax Policy Center, two-thirds of the Senate tax cut would have gone to people with incomes of between $100,000 and $500,000 a year. Those making more than $1 million a year would have received only eight percent of the cut.

The House bill, by contrast, focused on extending tax cuts on capital gains and dividends. More than forty percent of the House cuts would have flowed to the $1 million-plus group; only thirty percent to the 100K to 500K taxpayers.

The White House favored the House bill — and the final, reconciled measure wound up awarding a quarter of the benefits to America's millionaires. That, in a nutshell, is the politics of income inequality under Bush.

Oh, one last thing: What about the claim that the Bush tax cuts did wonders for economic growth? In fact, job creation has been much slower under Bush than under Clinton, and overall growth since 2003 is largely the result of the huge housing boom, which has more to do with low interest rates than with taxes. But the biggest irony of all is that the real boom — the one in the 1990s — followed tax changes that were the reverse of Bush's policies. Clinton raised taxes on the rich, and the economy prospered.

A generation ago the distribution of income in the United States didn't look all that different from that of other advanced countries. We had more poverty, largely because of the unresolved legacy of slavery. But the gap between the economic elite and the middle class was no larger in America than it was in Europe.

Today, we're completely out of line with other advanced countries. The share of income received by the top 0.1 percent of Americans is twice the share received by the corresponding group in Britain, and three times the share in France. These days, to find societies as unequal as the United States you have to look beyond the advanced world, to Latin America. And if that comparison doesn't frighten you, it should.

[...]

HTH.

Cheers,
Scott.

The arguments seem to me to be:

1) Raising taxes always destroys incentives, always ultimately reduces revenue, and is always counter-productive because people will (rather than doing what makes the most sense to raise their incomes, make their businesses more successful, plan for their retirement) do whatever is necessary to keep from paying any tax increase. They'll lobby congress; they'll invest in tax shelters; they'll move their money off-shore; they'll quit.

2) The conclusive evidence from the Reagan and Clinton years is that one can have strong economic growth, reductions in unemployment and increases in employment, substantial reductions in the deficits, and increasing incomes for the average working person, even when taxes on the upper income groups are increased.

The conclusive evidence from the 2000s is that cutting taxes on the wealthy does not increase economic growth over the long term. It does not raise average incomes. It does not increase job growth. It does not reduce the federal deficit or the federal debt. It does not force the government to shrink. It does little except increase wealth and income disparities to levels comparable to banana republics.

So which is it? Is #1 correct, or is #2 correct? They can't both be right. Either the ideology under #1 is wrong, or the facts of #2 are wrong.

I vote for #1 being wrong. If you think #2 is wrong, then you need to present evidence. I've presented evidence why #2 is correct.

IOW, those of us in the reality-based community are unpersuaded that the last 30 years of "voodoo economics" was an insufficient test. The supply-siders' rhetoric has been shown to be incoherent and wrong. (E.g. they don't care about deficits even though they talk about them incessantly when a Democrat is president - http://yglesias.thin...the-deficit-2.php ) Clap Louder is unpersuasive. http://www.balloon-j.../?page_id=28596#C

It is possible, and necessary, to increase taxes on the wealthy to begin solving many of our economic problems.

HTH. ;-)

Cheers,
Scott.