Wednesday, October 18, 2006

Economists Disagree With Bush On Relationship Between Massive Tax Cuts And ... Cuts In Deficit, Economic Growth ...

President Bush and Republicans up for re-election have been touting lower-than-expected deficit projections, claiming that this is proof that Bush's massive tax cuts are successfully stimulating the economy.

But economists disagree. And not economists from some liberal think tank, but from the non-partisan Congressional Budget Office.

An analysis of Treasury data prepared last month by the Congressional Research Service estimates that economic growth fueled by the cuts is likely to generate revenue worth about 7 percent of the total cost of the cuts.

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

And even the Department of Treasury admits that the tax cuts haven't paid for themselves. "As a matter of principle, we do not think tax cuts pay for themselves," Robert Carroll, deputy assistant Treasury secretary for tax analysis, told the Post.

***

The entire Republican argument is disingenous. The deficit for the year ending Sept. 30 was $248 billion, compared with $413 billion for the previous year.

But is this a great accomplishment? Let's not forget that when the Bush team came into office, it inherited a budget that was projected to create surpluses of perhaps several hundred billion. Yes, the Bush team had to deal with the economic shock of 9/11 and the subsequent war in Afghanistan. But the Bush team chose to move forward with massive tax cuts after 9/11, when others suggested scaling back the tax cuts plans -- both to follow the concept of "shared sacrifice," and to not exacerbate the likelihood of massive deficits.

***

How else can we tell that the massive Bush-era tax cuts haven't stimulated the economy? From the words of Labor Secretary Elaine Chao.

Chao has said that the economy has only produced 140,000 jobs/month during the strongest period of the Bush-era economy. Economists suggest that a growing economy needs to create 150,000 jobs/month just to match population growth. By comparison, job growth during the eight years of the Clinton presidency was 236,000/month, according to the Bureau of Labor Statistics.

Chao has touted a 6% jump over five years in "overall compensation." That means that compensation is growing at a pace of 1.2% per year. With inflation at about 3% per year, that's not "growth." That's "not keeping up with inflation."

Furthermore, current compensation "growth" -- putrid as it is -- does not keep up with the compensation growth of the past seven economic growth periods.

***

The facts at hand -- again, not from some liberal think tank, but from non-partisan and Bush Administration sources -- won't stop Bush and Republicans seeking re-election from touting the great job they've done with the economy.

It's a mirage. It's up to Democrats to set the record straight.

12 Comments:

Anonymous Anonymous said...

Where is the Dow these days?

9:23 AM  
Anonymous rob of wilmington, del. said...

Very simplistic question, considering that a hefty chunk of Americans don't invest in the stock market.

here's a question to you, anonymous: how can you ignore a mountain of economic data?

11:08 AM  
Anonymous Anonymous said...

The Dow is a couple of thousand points below equaling where it was before the recession started if you take inflation into account (using the official BS inflation numbers).

11:37 AM  
Anonymous SharonAnn said...

Thanks. Great stuff there, I've added JABBS to my bookmarks.

11:38 AM  
Anonymous Lasher said...

Thanks, I've been looking for articles just like this

I'm sickened by ongoing ridiculous claims that the tax cuts are working and the economy is booming.

11:38 AM  
Anonymous xchrom said...

too bad the not so ''mainstream'' media can't report the truth.

11:38 AM  
Anonymous ProfessorGAC said...

Duh!

I don't know one person in the economics community, (economist, econometrician, analyst, or academic) who thinks there is ANY evidence of a robust economy. None at all. (And i know DOZENS of folks in this community.)

Therefore, it's impossible for the tax cuts to be responsible for the "good" economy. The economy is stagnant, unstable, and unsustainable.

So, CBO finally has some folks who have decided the paycheck isn't enough to keep lying about it, huh? Well, look who just caught up!

The Professor

11:39 AM  
Anonymous Anonymous said...

it's the difference between making a political claim, and making a claim based on facts.

Unfortuantely, if Bush makes the political claim 100 days in a row, the MSM will report that claim 100 days in a row.

11:56 AM  
Anonymous ProfessorGAC said...

You Are, Unfortunately, Correct

The facts are, however, ABUNDANTLY clear. One does not need an advanced degree in economics, or in mathematics, to understand the numbers. One does, however, need to quit cherry picking certain numbers and failing to examine the totality.

The econosluts at Treasury, Commerce, CBO, and GAO have been doing the bidding of their masters for so long, i fear they have forgotten how to actually do econometric analysis. Because it should not have taken 6 years for a conclusion based upon facts to see the light of day, in direct contradiction with the political claims.

Maybe they have a few new people who didn't know they were supposed to toe the line.

The Professor

11:56 AM  
Anonymous Anonymous said...

Too bad the Bush team could not have limited its failures to foreign affairs. It had to go and wreck the domestic economy too.

4:52 PM  
Anonymous whoop4467 said...

Yea, "trickle down economics' is a farse and if any money does move down it is a TRICKLE. Most of the money gained this way goes into the purchase of more stock, purchasae of goods and services outside the U.S. or the purchase of property or improvement of property owned outside the U.S. Corporate welfare does nothing for economic stimulation for all of us, only a select few(like war profiteers).

I like "flow up economics". If most of the tax and welfare benefits are given to the poor and middle class, then the money flows up through the economy to the "Haves". This is because every dollar gained by the poor and middle class is spent in the U.S. on things like grown up toys(fancy cars, boats, small private planes, etc), washers, dryers, family cars, clothes, new homes and all that goes with that, vacations in the U.S., entertainment, electronic gadgets, on and on until they are broke again. Some may even save a little. All of this money then flows up to the companies that provide goods and services and stimulates our economy to grow and grow and then hopefully we produce more in the U.S. and then we buy more and then we produce more and on and on until we no longer need to send all of our money outside of the U.S. to buy goods and services we need and WANT.

If horses could fly, maybe GWB/Chaney and their followers would mount one and ride into the sunset.

8:52 PM  
Anonymous Anonymous said...

Bravo to Whoop and JABBS who've combined offered some very enlightening, as well as entertaining and well-written posts. This kind of factual discussion merits attention from a wide audience, especially the Repukes.

1:40 AM  

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