Somebody explain to me how a conservative party can justifiably oppose pay-as-you-go in the midst of record deficits. I understand the reason that they gave:
Republicans said the push to add the rules to the budget was a back-door effort to make it harder to extend President Bush’s tax cuts.
Honestly, it seems stupid for a party to set itself up as a one-way tax ratchet. You expect that they’d commit mass suicide if something like a war necessitated a small tax hike in order to avoid raising our national debt ceiling. Cough.
When people talk about being good at campaigning and terrible at governing this is exactly what we have in mind. Of course you can win all kind of votes by promising that come hell or high water or crushing debt you’ll doggone make sure that taxes go down, voters love their bread and circuises. A special kind of doofus forgets where the campaign ends and the governing begins.
The paygo question seems like the sort of arena where fiscal conservatives would have something to add. Maybe we have some new definition of fiscal conservatism these days, but the fiscal conseravtives that I remember think that it’s a good idea to manage government spending in order to minimize debt. Tax cuts make perfect sense from a conservative perspective, but there’s nothing ‘conservative’ about throwing around unaccounted-for tax cuts and disregarding the books. That’s bread-and-circuises nincompoopery.
So welcome to bizarro world, where the GOP responds to ballooning debt by – doing nothing. At least until somebody proposes paygo at which point they scream like a cat in a clothes dryer.
Here’s a prediction: one day Democrats will take back Congress. Call me crazy but these things happen. The very next day those slumbering fiscal conservatives will wake up and, gosh-be-darned, deficits will matter again. Oh dear god in heaven will deficits matter. Every right-winger that Chris Matthews can book will cry bitter tears of righteous anger about how the Democrats have no plan – NO PLAN! – to bring the ridiculous deficits under control. The National Review will print four words an issue that don’t have to do with the national debt, &c. Until that day fiscal conservatives will stay safely tucked away and out of sight.
(via)
David
Back in the debates – I forget whether it was 2000 or 2004, but I’m leaning towards 2000 – Bush openly mocked the very idea of pay-as-you-go policies on spending and taxation. Made fun of the name “paygo” and everything. So this surprises who, exactly?
Steve
Of course it will make it harder to extend the tax cuts. President Bush’s “plan” to cut the deficit in half by 2009 also will make it harder to extend the tax cuts. Does that mean his plan is a bad idea?
In fact, not only did Bush push this plan during the State of the Union, he simultaneously pushed to make the tax cuts permanent. Never mind that it is PHYSICALLY IMPOSSIBLE to do both of these things.
Nice post, Tim.
Barry
Tim F, “voters” don’t like bread and circuses; only 53% of the vote went to Bush, despite all of the crap that the GOP pulled.
My pet prediction is that, within a few months of a Democrat getting elected, right-wing media outfits will start running clocks, counting the days since OBL killed thousands of Americans, and hasn’t been brought to justice.
zzyzx
Don’t you understand the Laffer Curve? Lowering taxes raises government revenue! If we could just get the tax rate lowered to 0%, we’d collect infinite revenue!
Pb
Steve,
And “plan” to cut the deficit in half (and no, not in dollars, in percent GDP…) is right–it’s all smoke and mirrors. Please ignore that emergency appropirations bill behind the curtain…
SeesThroughIt
The contemporary GOP perfectly encapsulated. Of course, they like to bray about how they win on “superiority of ideas” or some other chest-beating bullshit, but even if we take that at face value–which is a stupid thing to do–they never implement the ideas they run on. They don’t know their ass from a hole in the ground when it comes to governing, but they’ve got winning elections down pat.
Paul L.
Tim F. Do you believe the Tax cuts caused a greater deficit?
Then how do you explain the growth in federal tax revenues since the Tax cuts were fully enacted?
Growth in Federal Tax Revenues Since 2003 Tax Act
Oh zzyzx I could use your argument in reverse and say we should raise the tax rate to 100%.
Steve
Haha, I remember explaining this to Paul L. the last time he posted that chart, and you know what, he apparently didn’t care. I wouldn’t waste your time going through it again with him. Just stick with post hoc ergo propter hoc.
capelza
BIZZARRO World is exactly right….I have pointed this out to many who still use the “It would be worse under (insert Gore or Kerry) here and when I ask exactly how, they usually holler “Clinton did it, too!” or some such jibberish.
You know it has gotten all twilight zonish when it is a Democrat complaining about runaway spending and federal interference…
But your last paragraph is so right on it hurts, because that is exactly what will happen…
Pb
Paul L.,
Just try to be consistent. As a percentage of GDP, federal tax revenues are down 3.4 percentage points (that’s 19.4%) from their 2000 levels. In fact, as a percentage of GDP, the 2005 numbers (17.5%) aren’t even better than the 2002 numbers (17.9%)!
On the other hand, spending has increased by 1.7 percentage points (that’s 9.2%) over 2000 levels. And in total, the budget is still more negative now (-2.6% in the hole) than it was positive then (+2.4% in the black)! That is what your party has squandered.
Al Maviva
If you were looking for conservative outrage at swinish Republican pork barrelling, Tim, sorry, I gave all I had in an earlier comment. I’m still pissed, just not interested in detailing the whys & wherefores. Ask again tomorrow and I’ll have some words about it again. Right now I’m just tired of saying the same damn thing about it.
Tim F.
Steve,
If you mean this, it was Darrell rather than Paul L. A worthwhile reply to the Laffer question.
Hoodlumman
Will tax hikes even stop the financial trainwreck that Medicare/Medicaid/SS will be years down the road?
Bruce Moomaw
If the Dems retake power and want to defuse this issue in the future, I suggest that they support a balanced-budget Constitutional amendment (that is, one requiring a Congressional supermajority to run a deficit) with some teeth in it. Afer all, had it not been for Clinton’s opposition, Congress would have passed a balanced-budget amendment (albeit one with questionable teeth) in 1997.
But then, I’ve come to believe that this is also a ncessity for genuine national reasons, since politicians have now learned to use Keynes (who thought deficits should be run SOMETIMES, and compensated for by running surpluses at other times) as a phony justification for saying that we should ALWAYS run deficits. After we have such an amendment, we can then start having honest political slugfests about the extent to which taxes should be cut on the wealthy to stimulate the economy even when it means cutting government programs for everyone else. There is nothing either liberal or conservative about a balanced-budget amendment, which is why Sen. Paul Simon and Michael Kinsley backed it last time.
Steve
My bad, Tim. They all start to look the same after a while.
The Republican party line on the effect of tax cuts is just such a lie through and through that you almost don’t know where to begin. The subset of economists who believe tax cuts pay for themselves isn’t the same as the subset of climatologists who don’t believe in global warming, but their overall credibility is about the same.
Most everyone agrees that tax cuts tend to have a stimulating effect on the economy. Most everyone agrees that the stimulating effect is not enough to make up for the lost tax revenue, but that doesn’t stop some people from claiming that “tax cuts pay for themselves.” That’s simply a false statement.
Reagan’s tax cuts didn’t pay for themselves. Bush’s 2001 tax cut didn’t pay for itself. But somehow, when revenues went up after the 2003 tax cut, that brings us right back to “proving” that tax cuts pay for themselves! Like I said, it’s not a logical argument, it’s just political doublespeak, telling the people what they want to hear. Eat more sugar, it’s good for you.
If tax cuts truly increased government revenue, no one would be against them. What is the conservative talking point here? Are Democrats supposedly in the grip of the tax-preparer lobby or something?
The problem with the Laffer Curve is very simple. If you increase taxes from 99% to 100%, obviously you’ll lose revenue, because at 100% no one is going to work any more. Similarly, if you lower taxes from 1% to 0%, I assume even the most ardent Kool-Aid drinker will agree that you lose revenues. The question is where in the middle the tipping point lies. And since there’s not even a shred of evidence that we’re so high on the curve that raising taxes will lower revenue, it’s a purely theoretical debate.
The lesson is that as long as you are telling people what they want to hear, you can fool a lot of them with complete junk science.
Paul L.
Steve/Tim, So you believe that people (the “evil” rich) will try to earn the same amount of money when you tax them at 50% as when you tax them at 25/35/45%?
Note that between 2001 and 2003, the only tax cuts implemented were the middle-class tax cuts. The 2003 tax cuts covered everybody (including the “evil” rich).
As for Inflation: From
http://a255.g.akamaitech.net/7/255/2422/23feb20050900/www.gpoaccess.gov/usbudget/fy07/pdf/hist.pdf
Federal tax revenues
2003: 1,782,532 = 1,892,000 in 2005
2005: 2,153,859
That is 261,859 more than accounted by inflation.
Paul L.
Using your/ that liberals standard that makes you a Liar!!!!!!
Steve
Ok, I’m a liar. Got anything to say on the merits?
Pb
Steve,
While I agree with you 100% regarding the Laffer Curve, it’s still possible to look back through history and identify when we were doing ‘better’ or ‘worse’, and speculate that the taxation policies and/or the administration at the time might have had some effect on that.
Ancient Purple
That graph is one of the most pathetic things I think I have ever seen. I love the “this ONE variable is the SOLE reason revenues are increasing.” A graph like that gets you laughed at in a cause and effect debate.
If you want to play that game, here is my favorite: In every city in America, every time the number of churches increase, crime also increases. Therefore, churches are the sole reason crime increases!!!
Pooh
Well, when abortion becomes first degree murder of course you see an uptick.
SeesThroughIt
What’s particularly frustrating is that one can, as you have, provide all sorts of factual data illustrating how these upper-class tax cuts really don’t work, and all you’ll get in response is a general restatement of the tax-cut theory: “Look, lower taxes mean more money in your pocket, which means more money for you to throw around, which means more economic stimulation.”
Yes, yes, it’s a fine-sounding theory, but it doesn’t actually work in practice. It didn’t work with Reagan (though if you say that to a right-winger, they will go absolutely apeshit, and then they’ll blame it on Democrats), and they aren’t working under Bush. So you say that, and then, again, all you’ll get is a restatement of the theory, only this time with a bunch more, “What are you, stupid? Do you hate having money?” It’s really sad.
Paul L.
It is awaiting moderation. Here is the linkless version.
Steve/Tim, So you believe that people (the “evil” rich) will try to earn the same amount of money when you tax them at 50% as when you tax them at 25/35/45%?
Note that between 2001 and 2003, the only tax cuts implemented were the middle-class tax cuts. The 2003 tax cuts covered everybody (including the “evil” rich).
As for Inflation:
Federal tax revenues
2003: 1,782,532 = 1,892,000 in 2005
2005: 2,153,859
That is 261,859 more than accounted by inflation.
Pooh
STI, and it’s further frustrating that the basis for ‘growth’ from a tax cut is the money not taxed being spent (and re-spent, and…) So naturally, you would target tax-cuts at those most likely to spend. Which, unsurprisingly are the lower income folks, not the higher. If you actual goal was growth as opposed to…well, I’ll leave the speculation to you.
SeesThroughIt
Excellent point, Pooh. Most of the rich people I know got that way by not spending money–a penny saved is a penny earned and all that good stuff.
Paul L: I’m not quite sure what you mean by people “tring to earn more money” at various tax rates. If I’m drawing a salary or hourly wage, that’s my salary or hourly wage regardless of tax rate. Are you referring to seeking supplemental sources of income or something like that?
Paddy O'Shea
New Pew Poll shows Bushie’s approval dropping to an incredibly low 33%. 56% polled think Bush is “out of touch.”
http://people-press.org/reports/display.php3?ReportID=271
Bob In Pacifica
Bruce Moomaw, the trouble with a balanced budget amendment now as opposed to ten years ago is that we are so fucking in debt that the country would have to ground to a halt for 75 years. That’s a long time to wait for the potholes to be filled. That’s a lot of hard road to sell.
kanter
Check this crazy crap
Iraqi Police Find 87 Bodies in 24 Hours
The Other Steve
Paddy – To quote one of my favorite lines from Highlander…
“What does ‘incompetent’ mean?”
The Other Steve
No, the BBA just effects the deficit, not the debt. That is to get a balanced budget we just need to not add more to the debt.
If we could maintain the debt at $8.2 trillion for 30 years, without increasing it… inflation would allow us to pay it off easier. That is, the debt wouldn’t seem so huge.
That’s the thing the Republicans either don’t get, or are willfully ignorant on. The issue is not what percentage of GDP the deficit is at, it’s what percentage of GDP the debt is at.
Steve
More slowly:
I do not dispute that putting more money in people’s pockets helps stimulate the economy.
I do dispute that it stimulates the economy enough to make back MORE revenue than what you lose from the tax cuts, because there’s simply no evidence of that.
Revenue went down after Reagan’s tax cuts.
Revenue went down after Bush’s 2001 tax cut.
As for the 2003 tax cut, you can follow Tim’s link to my earlier comment where I explain:
1) Revenue was basically flat from 2003-04;
2) Revenue went up in 2005 because of a one-time corporate tax change that will result in lost revenue in future years.
Sitting here and saying “ha! the revenue went up in 2005 so I’ve finally proven tax cuts raise revenue!” is really, really lame. You have to pretend all the other tax cuts and all the other decreases in revenue simply never existed.
The only reason anyone thinks that tax cuts make more revenue than they lose is that they really, really want it to be true.
Steve
This is true, but the deficits right now are so huge, you simply can’t jack up taxes high enough to eliminate them right away. For both political and economic reasons, I might add. The problem created by Bush promising everyone the stars will have to be solved gradually.
BassMaster
If the Dems retake power and want to defuse this issue in the future, I suggest that they support a balanced-budget Constitutional amendment (that is, one requiring a Congressional supermajority to run a deficit) with some teeth in it. Afer all, had it not been for Clinton’s opposition, Congress would have passed a balanced-budget amendment (albeit one with questionable teeth) in 1997.
A balanced budget amendment would be either a disaster or a joke. It would cripple the nation’s ability to respond to a crisis if it actually required expenditures to equal income. If it allowed for “emergency” spending, all defecit spending would be an emergency.
The trick is to not vote for people who, say, vote for tax cuts but refuse to cut spending (and have been saying that this is what they would do for 25 years, Voodoo economics indeed) in favor of people who, say, have a recent history of balancing the budget and even running surpluses.
zzyzx
The problem with the Laffer Curve is that the people who talk it up don’t seem to understand that it’s a curve. I’m willing to accept that there’s a point where taxes reduce productivity to such a large extent that tax revenue goes down. However – and here’s the tricky point – at some point it’s going to stop working. Sure people are going to work harder at a 36% maximum bracket instead of a 90% bracket, but who really is going to change their behavior that much when the bracket goes from 39% to 33%?
This is good for dealing with abuses, but it’s not the one solution to everything.
Pb
Paddy,
Don’t know if you’ve mentioned this one yet, but Survey USA’s 50 State Survey has him at 36% approval, 60% disapproval, which is a six point shift in net approval since last month. When you consider that for this poll, the MoE for the nation is probably around +/- 0.6%, that’s a *huge* drop…
Blue Neponset
The “tax cuts are always wicked awesome” crowd are just playing a shell game, IMO.
Tax cuts don’t stimulate the economy because they don’t add anything to the economy. The only difference between me spending a tax cut of $50 on office supplies and the government spending a tax increase of $50 on office supplies is who gets to spend the money.
What does stimulate the economy is increasing the amount both the government and I have to spend by borrowing it; this is especially true if the increased debt is purchased by a foreign country. If I spend a tax cut of $50 on office supplies and the Government borrows $50 from China and spends it on office supplies then we are adding $50 to the economy.
The private sector is suppose to spend more efficiently than the Government, and that is probably true, but each dollar the Gov’t has to borrow is one less dollar available to be invested in the private sector. If you finance a tax cut with debt the amount of money the private sector didn’t get to spend is the same before and after the tax cut.
Paddy O'Shea
Pb: Ah, my beloved home state of New Jersey, 26% approval, 70% disapproval. Thanks for pointing that one out!
You know, I grew up in Jersey City, and from the front windows of our apartment most mornings you could see the sunshine reflecting off the World Trade Towers.
That and the Statue of Liberty’s backside.
So sad to think that our government was turned over to some patrician fool’s useless son, and that a bitter consequence of this act of betrayal was that our enemies were shown the opportunity to destroy those beautiful buildings and the lives of those working inside.
Pooh
Blue,
Your first point might be true if the government’s spending were in any way constrained by cash-on-hand. As long as you deficit spend, you can basically make sure that both you and the government spned $50 on office supplies. And then everyone gets a pony.
Paddy O'Shea
New WSJ/NBC Poll gives Bush a 37% approval number, which is their lowest yet for the Executive Cypher.
Anybody willing to consider that we really don’t have a president anymore?
http://www.msnbc.msn.com/id/11843383/
Remfin
Anyone else get the feeling Paddy was hired by the Poll Worker’s of America Union or something to drum up demand to increase business? Cause there’s no way some “normal” person cares that much about polls
Come on John, make good on your anger – add a filter that blackholes any Paddy post with “poll” or a % sign!
ppGaz
That’s right, Remfin. A political blog will ban talk of a president’s poll numbers.
Brilliant! Next, several articles about the Steelers’ off-season activities.
You could get a job at the White House, pal. Seriously. They are looking for a replacement for Scotty McClellan.
Ancient Purple
I guess I would feel better about the rich if they weren’t pandering to the religious right for votes to keep their government brokers in power so they can continue their tax cuts.
It takes a certain amount of testicular fortitute to talk about what a great Christian you are while ignoring the fact that unbridled personal wealth (while others don’t even have access to decent health care) is hardly a tenant of the doctrine of a carpenter from Nazareth.
Perry Como
Sounds like a job for greasemonkey.
Bruce Moomaw
BassMaster: “A balanced budget amendment would be either a disaster or a joke. It would cripple the nation’s ability to respond to a crisis if it actually required expenditures to equal income. If it allowed for ’emergency’ spending, all defecit spending would be an emergency.”
Wrong. A Congressional supermajority would make it harder — NOT impossible — to run a deficit. That is, it would be an attempt to provide a counterbalance for the degree of automatic temptation of legislators to spend more than they tax. Which is why Simon and Kinsley backed it. The real questions are (1) what level of supermajority would be optimum; and (2) how could we make sure of sealing off various cutesy legalistic escape hatches for Congress?
“The trick is to not vote for people who, say, vote for tax cuts but refuse to cut spending (and have been saying that this is what they would do for 25 years, Voodoo economics indeed) in favor of people who, say, have a recent history of balancing the budget and even running surpluses.”
Except that we’ve found out the hard way that that message has strong and automatic appeal to the voters — and, as a group, it always will. I’m not a great fan of requiring supermajorities; but this is one case where it does seem to be an absolute necessity to counter the instinctive human temptation toward wishful thinking that one can get something for nothing. Without it, it’s very easy to see this country falling into an eternal cycle of fiscal bulimia from now on — with the politicians who favor Binging getting all the praise, and the politicians who finally have to make up for this through a Purge period of spending less than they tax being condemned to eternal hellfire by the voters. The GOP (under Reagan) inaugurated our large-scale addiction to this; but it won’t be long now before the Democrats give in to the temptation as well.
searp
The Republican stewardship of government finances has been a disaster, full stop. It is so painfully obvious that the only argument is essentially diversionary – things will get better in the future, just wait.
This was the Bolshevik argument: things are temporarily bad now, but eventually we will get to Utopia.
To his credit, Bush didn’t use the Laffer curve argument for his original tax cuts. His argument was: we have too much money in the gov, we’re going to give it back to you.
Of course, if I overpay the gov by $10.00, and the gov promises to donate $10.00 a month to the Rich People’s Charity, that hasn’t exactly done anything for me, has it? Nor has it helped the gov – their bank account is poorer by $10.00 a month every month. The winner is….
RonB
Paul L, I dont see a whole lot of connection between incentive to work and fluctuation in taxes, especially in the higher brackets. Those people are motivated by more than profit, theres greed, maintenance of lifestyle and standing, and ego. You cant kill that with a few points of income tax.
Also, many tax cuts were on marginal rates, something I cannot understand. There is a big difference in taxing personal income at 50% and taxing marginal income at 50%. Why they lowered these tax rates I have no idea-we should have continued to pay down the debt. And I seriously doubt anyone wants to jack up personal rates to 50%, not even the liberalest liberal. But marginal taxes serve as a good stream of revenue and it was foolish to lower them even lower than they were.
Regarding your claim that Bush’s cuts increased revenue, Id have to agree with other posters here that just because one happened after the other, you can’t say the former was the cause of the latter. Clinton raised taxes and revenue went up. So simply because there was a confluence of tax cuts with an upturn in the economy doesn’t necessarily mean that they are linked causatively.
Remfin
You seem to have pegged me horribly wrong ppGaz. To say I’m not a fan of this White House would be putting it quite mildly.
I don’t think I’ve ever seen any that were on-topic (by the time a poll thread or open thread has come around Paddy has already tired everyone out on whatever poll of the day there is). Every presentation reinforces the lefty/Dem stereotype about following polls and just insulting people. Outside of the insults I don’t think I’ve ever seen any kind of personal opinion or arguement. They’re not funny, they aren’t even attempting to be. And outside of complaining about having the 5th poll posted in a thread about cancer treatments or something deleted, none of them are of the meta- variety. I think that covers the 5 basic types of useful posts?
Just once I’d like to see a poll used as part of an actual arguement or a real opinion, that’s it, would totally turn me around.
The Other Steve
Actually you do raise a good point.
In both cases… Reagan and Bush, where tax rates were dropped… spending was also increased at a historically SUBSTANTIAL rate.
I’m not going to say unequivocally that tax cuts or spending boost economy. But I will say that the data used by Conservatives to justify their arguments is highly flawed.
I still find it interesting that under Clinton, tax rates were increased slightly, and spending was held in check and the economy increased at the fastest rate since… well… just about ever. This appears the only example we can point to that isn’t so clouded.
demimondian
Not true. Not true at all.
From the perspective of economic stimulus, some money *is* more equal than other. As a general rule, the more hands touch a given “dollar bill” before it returns to rest in the Federal Reserve, the most economic activity that dollar creates. Thus, buying from a retail outlet, which pays a wholesaler, which pays a large manufacturer, which pays a paerson, who buys something else from the retail outlet (ad infinitum) generates more economic activity and a larger GDP with the same money supply than giving money to someone who will immediately invest it in treasury bonds, causing the dollars spent to return to the Fed.
[snark]Since wealthy tax payers are more likely to be in the second class than the first, giving them tax breaks makes the economy larger by giving money to people who won’t use it to trigger economic activity.[/snark]