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Discussion: (57 comments)

  1. the argument about whether or not a tax cut “works” or not misses a critical aspect.

    A tax cut when you have a budget surplus is a win-win.

    A tax cut even when you have a balanced budget is not unreasonable if you can and are willing to undo it if it drives you into deficit which is what Reagan did – he went back and increased taxes when the budget was headed into deficit.

    but what is the plan if you are in deficit and cut taxes and it does not work – and makes the deficit even worse?

    what do you do then?

    When the budget went into deficit under the Bush tax cuts, nothing was done – and the result is a structural deficit and a 16 trillion debt.

    Tax cuts under this situation without a Plan B for backing up if the deficit gets worse – makes no sense.

    everything seems to be predicated on the idea that “it worked before” and ” it has to work now” …end of thought.

    if it doesn’t “work” the proponents have no remedy other than “oh well”.

    this seems bizarre.

    what do we do if the deficit gets worse after tax cuts?

    1. The tax structure does impact economic growth, IMO.

      But another question is that of how tax revenues…. and the national debt….. impacts spending.

      The way I see it, when the debt-to-GDP ratio finally hits 2.0, the average J6P might finally realize that we have a problem. At that point, there is at least a chance of spending restraint.

      If we given more money to the politicians, they’ll spend every penny, plus whatever they can borrow.

      1. I think measuring ANYTHING against GDP is deeply flawed.

        what matters is how much your revenues are vs your spending and despite claims to the contrary – revenues are the lowest in 50 years.

        In an effort to “starve the best” we have created a 16 trillion debt – and we now spend 227 billion on interest alone.

        the idea that politicians will spend every penny and more does not hold up to scrutiny when you consider tax rates were HIGHER under Clinton/Reagan and they BALANCED budgets.

        we have myths here – that won’t die.

        the reality is the tax rates were higher and so were revenues.

        The reality is that Reagan did cut taxes and revenues did increase but what is ignored is that he cut taxes again and then the budget went into deficit so he backed on and increased them again.

        That’s responsible.

        We signed up for two wars and a new subsidized medicare benefit and did not pay for it – and instead cut taxes further.

        1. Che is dead

          “We signed up for two wars and a new subsidized medicare benefit and did not pay for it – and instead cut taxes further.” — Larry G

          One problem. Tax revenues actually increased after the Bush tax cuts. The left assumes that the increase in economic activity would have happened absent the tax cuts, applies the old rates and imagines that we have somehow lost revenue. Of course, they know that this is complete nonsense which is why they are reluctant to roll back the Bush tax cuts for anyone but the wealthy.

          1. ” One problem. Tax revenues actually increased after the Bush tax cuts”

            yes.. but when we went into deficit – they did not backtrack – like Reagan did when he cut taxes too much.

            The difference between Reagan and Bush is Reagan understood and was responsible.

            When you cut taxes too much and you go into deficit – the answer is not to continue to say “it worked under Reagan”.

            the primary duty – is to NOT let the budget go into deficit because if you do you end up with what we have right now – 16 trillion in debt and interest payments escalating and eating up more and more of what few revenues we are taking in.

            and Unlike other spending – the interest is due when notes are redeemed.

          2. “Yes… But when we went into deficits…”

            You’ve got to be kidding. The fact that they were STILL spending more than they were taking in, in spite of increasing revenue, doesn’t suggest that they have spending problem rather than a revenue problem?

          3. One problem. Tax revenues actually increased after the Bush tax cuts

            Wrong. Nominal individual income tax receipts declined from fiscal year 2001 through 2005 and have never recovered to the 2001 level as a percentage of GDP. CBO Tables E-2 and E-4.

          4. Can you not read your own link, Marmico? 2005 Tax revenue (individual and total) was above 2000 (let alone 2001!) and remained higher even through the 2008 crash and for at least two years after.

            Tax collection as a percentage of GDP is a completely worthless metric for this purpose. I’d say “nice try” but your ham-fisted attempt to spin the data is so amateurish and obvious as to be nothing but laughable.

          5. John Dewey

            Larry G: “but when we went into deficit – they did not backtrack – like Reagan did when he cut taxes too much.”

            What in the world are you writing about, Larry? Please explain what you mean when you claim that Reagan “backtracked”.

          6. John Dewey

            che is dead: “Tax revenues actually increased after the Bush tax cuts.”

            marmico: ‘Wrong. Nominal individual income tax receipts declined from fiscal year 2001 through 2005″

            No, marmico. As usual, you are wrong.

            The Bush tax rate cuts – part of the Jobs and Growth Tax Relief Reconciliation Act of 2003 – were not signed into law until May 28, 2003.

            The data you referred to are the tax receipts for federal fiscal years. So the tax receipts for 2003 are for the period 1Oct2002 to 30Sep2003.

            If you can’t do the math, that means that the Bush tax rate cuts were not law until 2/3 of FY2003 was over.

            As is clearly shown by the data you provided, income tax receipts increased for every year after 2003, the last year of the higher marginal tax rates.

            If you need this spelled out for you, marmico, here it is:

            Che was correct. Martmico was wrong.

          7. Growing federal government deficits of the past three decades were always caused by explosions in spending. Always./i>

            What are you?

            A simpleton like methinks. The Feds need to get spending back to 21% and revenues back to 18% of GDP, the post WW2 average.

            As long as nominal GDP (call it 5%) grows faster than the deficit (call it 3%), then the debt to GDP ratio will decline.

            So as we sit, spending is 22.8% (12 month rolling average) and revenues are 16.2% (a peak in corporate tax revenues no doubt). Wow, the arithmetic is simple. Glass half full with spending cuts and glass half empty with revenue increases.

          8. Che is dead

            “I’m shittin’ my pants mama, can you bring me some Pampers …” — marmico

            If you’re “shittin’ your pants” , then why is that so much shit ends up between your ears?

            The Bush tax cuts weren’t in full effect until 2003, and they resulted in a massive increase in federal tax receipts. From 2004 to 2007, federal tax revenues increased by $785 billion. Individual tax receipts increased by more than 46 percent. (see your own chart – moron) That was the largest four-year increase in American history. $15 trillion of new wealth was created. The U.S. economy added 8 million new jobs, and median household wealth increased by $20,000 in real terms. What’s more, the federal budget deficit went from $413 billion in 2004 to $318 billion in 2005 to $248 billion in 2006 to $162 billion in 2007.

            I know, I know. For liberals, numbers are hard.

          9. Marmico, the only thing you’re capable of is squawking “moron”. You’re probably staring into a mirror.

            Your own data proves you wrong. You can justify your theft and envy any way you’d like. You’ll still end up living in shit like your diseased brethren did before you.

          10. If he’s shitting his pants, Che, what passes for Marmico’s brain is leaking out.

          11. The Bush tax cuts weren’t in full effect until 2003, and they resulted in a massive increase in federal tax receipts.

            You are full of shit. Conflating individual tax receipts with total tax receipts. 2001 fiscal year total federal revenues were $1.991 trillion, 2009 revenues were $2.105 trillion. Peanuts based on population, productivity and deflator(gross domestic product or income) growth.

            If you wanna argue about fiscal years and presidential years, let me know. There are “Great Depression” type complications with the 2009 fiscal year. Fair enough. As a for instance, I would consent to a $0.1 trillion Obama ARRA revenue reducing stimpack in fiscal 2009. Automatic stabilizers that reduce revenues in recessions are what they are.

          12. You’re probably staring into a mirror.

            Thank the evangelicals (that would be Boudreaux from Louisiana) that it’s not your ugly wrinkled face in the mirror.

            Polly wanna cracker. We can dress you up but we can’t take you out. You are less than useless with empiricism.

            Go put some soap on your saddle and mount and ride a T-Rex!

          13. LOL! I love it when Marmico loses his shit.

        2. John Dewey

          larryG: ‘In an effort to “starve the best” we have created a 16 trillion debt – and we now spend 227 billion on interest alone.”

          Do you bother to research what you write before you write it, Larry?

          There was no effort – by Republicans or Democrats – to starve the beast. During both the George W. Bush and the Barack Obama years, federal government spending exploded. No effort to control spending was even attempted. Not during recession years of 2001, 2002, 2008, or 2009. Not during recovery years 2003, 2004, 2005, 2006, 2007, 2010, 2011, or 2012.

          Get this into your head once and for all, Larry. Growing federal government deficits of the past three decades were always caused by explosions in spending. Always.

          1. Methinks, are you as dense as the rest of your libertarian fox hole comrades? I’m shittin’ my pants mama, can you bring me some Pampers or Professor Perry’s “polly wanna cracker”.

            You can’t read the data. Therefore, I need to write it out for simpletons (Soviet education, huh) like you. Nominal fiscal year individual income tax receipts ($billions) are as follows:

            2000………………1,004.5
            2001…………………994.3
            2002…………………858.3
            2003…………………793.7
            2004…………………809.0
            2005…………………927.2
            2006………………1,043.9
            2007………………1,163.5

          2. Che is dead

            “I’m shittin’ my pants mama, can you bring me some Pampers …” — marmico

            If you’re “shittin’ your pants” , then why is that so much shit ends up between your ears?

            The Bush tax cuts weren’t in full effect until 2003, and they resulted in a massive increase in federal tax receipts. From 2004 to 2007, federal tax revenues increased by $785 billion. Individual tax receipts increased by more than 46 percent. (see your own chart – moron) That was the largest four-year increase in American history. $15 trillion of new wealth was created. The U.S. economy added 8 million new jobs, and median household wealth increased by $20,000 in real terms. What’s more, the federal budget deficit went from $413 billion in 2004 to $318 billion in 2005 to $248 billion in 2006 to $162 billion in 2007.

            For liberals, numbers are hard.

          3. Marmico, the only thing you’re capable of is squawking “moron”. You’re probably staring into a mirror.

            Your own data proves you wrong. You can justify your theft and envy any way you’d like. You’ll still end up living in shit like your diseased brethren did before you.

          4. ” Che was correct. Martmico was wrong.”

            where did the deficit come from after the Bush tax cuts?

          5. “where did the deficit come from after the Bush tax cuts?”

            If you’re talking about 2001-2008: the Clinton recession Bush inherited, and too much “compassionate conservative” spending. Also, I haven’t seen any evidence for this, but the portion of the Bush tax-cuts that removed millions of lower income people from the tax rolls had to be revenue losers.

          6. John Dewey

            Larry: “where did the deficit come from after the Bush tax cuts?”

            The deficits after the Bush tax rate cuts of 2003 came from sharp increases in federal government spending:

            FY ………… Spending increase
            2004………….+6.8%
            2005………….+7.8%
            2006………….+7.4%
            2007………….+2.8%
            2008………….+9.3%

          7. re: sharp increases in govt spending…

            for what?

            bonus question – if you cut taxes and increase spending and as a result go into deficit – what do you do?

            what did Reagan do when that happened?

    2. Nobody is talking about tax cuts. All that is being discussed at the federal level is keeping tax RATES at their current levels.

      I would love to see tax RATES cut even further, but that isn’t even on the table right now, even though a tax RATE cut would likely spur economic activity and generate more revenue to our already-flush-with-cash federal government.

      Democrats will not cut spending other than for defense. If the government cut the entire defense budget, there would still be a substantial deficit. The government spends too much money and has no intention of reigning it in.

      1. this explains what Reagan did when he cut taxes twice and the second time the budget went into deficit.

        http://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm

        1. Che is dead

          Budgets under Reagan went into deficit as a result of his build up of the military, a very small price to pay in order to help force the near bloodless end of the Soviet empire.

          Then, as now, it’s the spending.

          1. Reagan also was dealing with a Democrat House. O’Neill understood something that seems to escape Boehner; spending originates in the House. O,Neill was determined to give Reagan more than he asked for and he often succeeded. Boehner should be just as determined to give The Anointed Won a whole lot less than he’s asking for, but the federal government never cuts spending. Ever.

        2. John Dewey

          Supply side economists from the very beginning advised Reagan to both lower tax rates and eliminate tax loopholes. They advised him to remove the interference in free markets caused by special interest tax breaks.

          Ronald Reagan did not reverse course when he convinced Congress to eliminate tax breaks and closed loopholes. Those measures were part of the supply side plan all along.

          What you probably do not realize is those supply side measures – reducing tax rates, eliminating special interest tax breaks, and closing loopholes – are exactly what Republicans have advocated all throughout 2012.

          1. Frank Buck

            Lets all just take the taxs and economy aside for awhile and realise obama is just not your fathers DEM. He is extreme hard left; Comunist , Markist, Call it what you will. Until you Kennedy Dems realize what you voted for IE my own liberial brethern ,it will be difficult to stop the tide of the so proclaimed unbiased media

    3. I agree with Larry, in this sense, the 60s were a different situation from today. At the time, Federal govt spending was at 16-19% of GDP and state and local was only about 12%. Today, the Federal govt is spending between 20-25% of GDP, hundreds of billions of dollars more, and state and local have doubled to 20% of GDP. Since state and local govt have grown so big, we could cut the federal govt back to less than 10% of GDP and have the same size of govt overall as the 60s, yet that option never seems to be on the table.

      At that time, federal debt was at 50% of GDP and falling from the WWII high of 122%, now it’s back up to 100%. The notion that tax cuts would act the same in the light of the ridiculous govt spending and debt of today is silly. There is only one true tax cut, cutting spending. So I agree with Larry’s premise and come to a completely different conclusion.

      There is a fundamental disagreement here. Larry and his ilk want to lock in spending and raise taxes to make it so. I want to cut spending instead, so much that we go into surplus and can start paying down the debt, as we were doing in the 50s. I suspect there are a lot more Larry’s than me however, considering how the top 10% currently pay 70% of all federal income taxes and the percentage of tax filers who pay nothing has grown from 27% to 42% in just the last decade. The entitlements, Social Security and Medicare, are separate, but nothing more than a ponzi scheme. When a few are paying in so much more than the rest but all have equal votes, of course the non-payers are going to vote themselves more goodies. This doesn’t end well.

      1. Larry and his ilk don’t realize that if discretionary spending were cut by 100% (eliminated completely), we’d still be $261 Billion in the hole on mandatory spending.

        The forecast additional tax revenue is just a meaningless drop in the vast ocean of spending. Of course, it won’t be forthcoming because the targeted tax victims are already taking measures to reduce their liability. It’s just not possible to plug a hole this big with a shakedown of the citizenry. Not even Stalin could pull that off.

        I agree this won’t end well. And the United States has the will and the power to get much more aggressive with its citizens than any European country has. I guess it’s possible to reverse course, but it’s not probable. This country is history; it’s just a matter of time before you see the full effect of the disaster it has become.

    4. Teaparty_man

      What is the simple explanation as to the Bush tax cuts, and a higher deficit? Spending. And Bush, the repub elite, and the dems all waddled up to the trough and spent all the extra that came in and more. The facts show that more tax rev came in than at any other time previous, but, was blown on all sorts of govmint garbage.

      1. re: ” The facts show that more tax rev came in than at any other time previous, but, was blown on all sorts of govmint garbage.”

        name the spending.

        two wars, doubling the DOD budget, creation of new entitlements Medicare Part C&D, creation of Homeland Security and war on terror.

        is that the spending you were referring to or was there additional that you would name?

        do you know why the Bush Tax cuts were not permanent?

        do you think the same people who voted for the tax cuts voted for the increased spending?

  2. Krugman is wrong. What we need is a marginal tax rate of 125% – for all incomes above $80,000.

    Anyone making money over $80,000/year must be making it by stealing – so, they should pay $1.25 for every $1 earned.

    On top of this, 25% of any of their existing assets should be expropriated – and when they are poor, they should be thrown in jail – THAT is how we get an economy to grow and for all to become rich.

    (Quoting Kennedy? A vast right wing conspiracy – Kennedy was a Republican in Democrat’s Clothing and knew nothing about anything. Krugman as you all know is the sage of all sages and knows everything. If you quote anything Krugman has written that contradicts what Krugman said years ago, you are being a disruptive and should be ashamed of yourself – so says the all knowing one)

    1. Anyone making money over $80,000/year must be making it by stealing – so, they should pay $1.25 for every $1 earned.

      Including Krugnuts.

      Nobody EVER paid that 91% except people who received unexpected windfalls and couldn’t plan to reduce the tax burden. I remember Ronald Reagan saying that when he reached a certain point in his income, he’d refuse to make more movies and spent the rest of the year at his ranch. What idiot would toil to earn a dollar of which 91% would be stolen. Almost ANY other activity is more worthwhile at that tax rate than producing taxable income.

      Krugman is no longer an economist. He’s just a moron.

      1. The problem is that people like Krugman either a) know that it is not possible to bring back 91% rates or b) if they did, they have a way to avoid paying those taxes.

        I continue to believe that unless insane policies are actually implemented (i.e. forced on others at the point of a gun) – the insane people will continue to believe that prosperity comes through expropriation of private property.

        I am also convinced that Krugman is indeed insane.

        1. The man is just dishonest to the core. Anyone who advocates theft with as much zeal as Krugman is just a filth.

      2. Quite frankly, you’re right. I’m being far too kind. He’s not just the worst excuse for an economist (because he actually knows better), he’s a despicable human being who advocates the tired, diseased ideas of theft and misery. He’s a peddler of pain

        In recent memory, his commentary on economics has been nothing more than economic fallacies taped together by calls for thuggery. I wish him the worst that life has to offer.

        1. Finally. I’ve only been wooing you for months.

  3. PeakTrader

    Obama doesn’t believe the American people will make the correct choices with a substantial tax cut (the tax cuts were too small and too slow).

    Also, it seems, Obama is angry that some people are rich and successful.

    Basically, that’s why the country is in a depression.

    1. Hardly.

      Our depression is due to structural issues; in our banking/finance system, in our housing market, in our infrastructure and in our governemnt/political sytem which refuses to do the hard job of fixing any of this. Top it off with trillions beings spent on military excursions. (which, incidentally, when you spend that much money on fancy hardware, you use it, if only to justify the expense.)

      Laying our depression at the feet of one politician? C’mon!

      1. Che is dead

        “Laying our depression at the feet of one politician? C’mon!” — Moe

        Isn’t that exactly what you, your dear leader, and the rest of your leftist cult have been doing for more than 4 years now?

        1. Isn’t that exactly what you, your dear leader, and the rest of your leftist cult have been doing for more than 4 years now?

          Listen, Moe is a nice guy when it comes to libertarians in foxholes. I’m not. So leave him alone. Moe would help you put on your Pampers. I would blow the back of your skull out. Got it.

          C’mon and argue with me polly wanna cracker “turkey”, Castro’s buddy.

          1. ” I would blow the back of your skull out. Got it.”

            So now you’re threatening murder? Wow, you’ve ratcheted up from your bigoted, anti-homosexual attacks.

            Funny stuff, Marmico. You’re only a pretend psychopath hiding behind your keyboard, douchebag. Nobody is impressed,or cowering.

      2. John Dewey

        Moe,

        The recession which started in 2008 was caused by the federal government:

        1. government interference in free markets in the form of Fannie Mae and Freddie Mac guarantees of mortgages;

        2. the Federal Reserve’s huge swings in interest rates from 2002 to 2007.

        The only fix which is needed to restore economic growth is for the federal government to stop interfering in free markets and for the Federal Reserve to stop monkeying with interest rates.

  4. PeakTrader

    Krugman is a technocrat. He can see a piece of a puzzle well, but doesn’t put the pieces together properly.

    1. Verges? He went over that psychological cliff 13 years ago!

  5. Hell_Is_Like_Newark

    The 50′s were not as growth orientated as the conventional wisdom implies:

    You had 3 periods of recession / low growth (1953 – 54, 1956 – 57, 1959 – 60) with a contraction of over 10% of GDP in 1st quarter of 1958. When there was growth, inflation was (historically) high at times (4%+) when the United States was supposed to be on a gold standard.

    This was also a period when the USA had a post-war intact industrial base that the world was forced to buy from.

    Compare this to after the 1962 tax cuts where growth was solid, with some quarters rates exceeded 8% (even after adjusting for inflation). Kennedy issued an executive order to have the treasury re-issue silver certificates. The dollar was strong enough to begin issuing specie again (LBJ reversed that order).

  6. Why do we accept such poor argumentation today? Why do we allow someone to point to a single, uncontrolled anecdote as proof of the workings of a complex system?

    1. Because we’ve all been educated in the indoctrination camps euphemistically referred to as “public schools”. There’s very little learning or truth to be had there, but plenty of dumbed-down statist propaganda catering to our most vile instincts.

  7. morganovich

    krugman also conveniently ignores that fact that this was NOT an apples to apples comparison.

    the US did not used to tax offshore income. as a result, NO ONE paid that 90% rate. they just shunted investments to switzerland or the bahamas. they incorporated holding companies offshore and used them to duck taxes.

    claiming that that system is in any way analogous to today’s in terms of the effects rates would have is just flat out bogus.

    i’m am sure mr krugman knows that, but why let basic economics and finance get in the way of a good class war?

  8. I think the universal concept that the 50′s to 60′s example shows is the elasticity of labor (proxy for production) in relation to after tax income rates (1-tax rate). It is very positive particularly for the rich, in the range of .25 to .50, from studies. It is basic common sense, but so often ignored as it turns out once again that incentives do matter. People (especailly the rich or soon to be to be rich) will work longer and harder when they see more of the fruits from their labor.

  9. PeakTrader

    Economic policies enacted under the Obama Administration have been counterproductive and ineffective.

    You’d be in depression too if you took your high-performance SUV to get fixed, spent a fortune over several years, and ended up with a sub-compact battery operated clunker.

  10. And Krugman won a Nobel Peace award in Economics. What a moron.

  11. We need new words to describe krugnuts, stiglitz, soros, obama and friends, fast. The old words .are not adequately describing the threats to the USA and the agenda of Bretton Woods II. International redistribution is on the way, they think we do not deserve this lifestyle.

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