Posted on 12/04/2012 8:25:22 AM PST by ksen
The Republican Party has long promoted itself as the party of business. Republicans understand the needs of business, we are told, and if the country would leave the economy in their hands business would boom. All we need to do is to give those at the very top of the income distribution – the “job creators” – more income through tax breaks, and then sit back and wait for the magic happen. Our investment in the wealthy will produce remarkable economic growth, and everyone will be better off.
The Bush tax cuts were a test of these claims about supply-side economic policies. To justify the tax cuts the nation was, in effect, given a business prospectus from the Republican Party. We were promised that cutting taxes on the wealthy would result in much higher economic growth and broadly shared prosperity. For those who wondered how we would pay for such a large cut to the government’s revenue stream, the Republican prospectus had a remarkable claim. The tax cuts wouldn’t cost us anything. Growth would be so strong that the tax cuts would more than pay for themselves. Even those who admitted that the tax cuts might not be fully self-financing still made strong claims about faster economic growth offsetting much of the lost revenue from the tax cuts.
The reality, of course, has been quite different. There is little evidence that the Bush tax cuts, or any other tax cuts directed at the so-called job creators, have had a noticeable effect on economic growth. And the promise of broadly shared prosperity has not been realized. Most of the gains from economic growth in recent decades have gone to the top of the income distribution while the inflation adjusted wages of the working class have been relatively flat. Furthermore, the tax cuts have not paid for themselves as promised, and it hasn’t even been close. The Bush tax cuts have already cost us trillions in revenue, and if they are extended for high income tax payers, they will cost us roughly another trillion over the next decade.
The failure of Republicans to deliver on their promise that tax cuts would be mostly self-financing is a large factor in the deterioration in our long-run fiscal outlook, and it is putting considerable pressure on programs such as Social Security. In fact, the Bush tax cuts can be thought of as a loan from the Social Security Trust Fund that was supposed to be paid back with the revenues from higher economic growth, a loan that is presently in default.
To see this, recall that the government began intentionally collecting a surplus from the Social Security program beginning in 1983 in order to prefund the retirement needs of baby boomers. The idea was to run a surplus for several decades while the baby-boomers were still working to get ready for the deficit years the system would experience after they retired.
The revenue from Social Security over and above what was needed to fund payouts reduced the overall government debt and allowed taxes to be lower than they could have been without these surplus funds. For example, the surplus that Bush inherited from the Clinton administration was largely due to the Social Security Trust Fund, and Bush argued it would be better to give this surplus to the private sector through tax cuts than to leave it in the hands of the government. But it wasn’t better. The income of the wealthy grew as they pocketed the tax cuts, but workers experienced stagnant wages, a recession that hit working class households particularly hard, and intense pressure to cut important social programs.
Despite their failed promises, the Republican Party is asking that we extend the tax cuts for the wealthy, and some are even calling for further reductions in tax rates. However, if the Republican Party is truly the party of business, then surely it will understand that no responsible financial institution would continue to invest in a business that failed meet, or even come close to the growth and revenue projections that justified the investment in the first place. The payoffs from tax cuts that were promised during the Bush years have not been realized, and the failed promises about growth and revenue have damaged the health, education, and retirement programs the working class depends upon in our increasingly globalized economy.
A true party of business would end our investment in the false promise of supply-side economics. However, a party with a goal of reducing the scale of programs such as Social Security and Medicare along with delivering tax cuts to wealthy political backers would use arguments about the economic effects of tax cuts to disguise its true intentions. Which description fits best? Many Republicans still claim that tax cuts for the wealthy enhance economic growth despite the evidence to the contrary, but it’s rare to hear a Republican admit that these supply-side policies have failed.
The Republican Party has long promoted itself as the party of business. Republicans understand the needs of business, we are told, and if the country would leave the economy in their hands business would boom. All we need to do is to give those at the very top of the income distribution – the “job creators” – more income through tax breaks, and then sit back and wait for the magic happen. Our investment in the wealthy will produce remarkable economic growth, and everyone will be better off.
The Bush tax cuts were a test of these claims about supply-side economic policies. To justify the tax cuts the nation was, in effect, given a business prospectus from the Republican Party. We were promised that cutting taxes on the wealthy would result in much higher economic growth and broadly shared prosperity. For those who wondered how we would pay for such a large cut to the government’s revenue stream, the Republican prospectus had a remarkable claim. The tax cuts wouldn’t cost us anything. Growth would be so strong that the tax cuts would more than pay for themselves. Even those who admitted that the tax cuts might not be fully self-financing still made strong claims about faster economic growth offsetting much of the lost revenue from the tax cuts.
The reality, of course, has been quite different. There is little evidence that the Bush tax cuts, or any other tax cuts directed at the so-called job creators, have had a noticeable effect on economic growth. And the promise of broadly shared prosperity has not been realized. Most of the gains from economic growth in recent decades have gone to the top of the income distribution while the inflation adjusted wages of the working class have been relatively flat. Furthermore, the tax cuts have not paid for themselves as promised, and it hasn’t even been close. The Bush tax cuts have already cost us trillions in revenue, and if they are extended for high income tax payers, they will cost us roughly another trillion over the next decade.
The failure of Republicans to deliver on their promise that tax cuts would be mostly self-financing is a large factor in the deterioration in our long-run fiscal outlook, and it is putting considerable pressure on programs such as Social Security. In fact, the Bush tax cuts can be thought of as a loan from the Social Security Trust Fund that was supposed to be paid back with the revenues from higher economic growth, a loan that is presently in default.
To see this, recall that the government began intentionally collecting a surplus from the Social Security program beginning in 1983 in order to prefund the retirement needs of baby boomers. The idea was to run a surplus for several decades while the baby-boomers were still working to get ready for the deficit years the system would experience after they retired.
The revenue from Social Security over and above what was needed to fund payouts reduced the overall government debt and allowed taxes to be lower than they could have been without these surplus funds. For example, the surplus that Bush inherited from the Clinton administration was largely due to the Social Security Trust Fund, and Bush argued it would be better to give this surplus to the private sector through tax cuts than to leave it in the hands of the government. But it wasn’t better. The income of the wealthy grew as they pocketed the tax cuts, but workers experienced stagnant wages, a recession that hit working class households particularly hard, and intense pressure to cut important social programs.
Despite their failed promises, the Republican Party is asking that we extend the tax cuts for the wealthy, and some are even calling for further reductions in tax rates. However, if the Republican Party is truly the party of business, then surely it will understand that no responsible financial institution would continue to invest in a business that failed meet, or even come close to the growth and revenue projections that justified the investment in the first place. The payoffs from tax cuts that were promised during the Bush years have not been realized, and the failed promises about growth and revenue have damaged the health, education, and retirement programs the working class depends upon in our increasingly globalized economy.
A true party of business would end our investment in the false promise of supply-side economics. However, a party with a goal of reducing the scale of programs such as Social Security and Medicare along with delivering tax cuts to wealthy political backers would use arguments about the economic effects of tax cuts to disguise its true intentions. Which description fits best? Many Republicans still claim that tax cuts for the wealthy enhance economic growth despite the evidence to the contrary, but it’s rare to hear a Republican admit that these supply-side policies have failed.
Lets start here first:
Internal Revenue Service data show that 3 percent of Senate staffers and more than 4 percent of House staffers owed taxes in 2010, adding up to about $10.6 million in unpaid taxes. More than 98,000 civilian federal employees were delinquent on their taxes in 2010, adding up to more than $1 billion in taxes owed, according to the IRS.
Bush smoocher huh?
You can’t just tinker with marginal rates and call it supply side. Buy every other measure the environment for business got worse under Bush.
Buy = by.
This is like blaming free markets for poverty when we haven’t had free markets since the Civil War
do these studies include government regulation and inflation as taxes?
I’ll still take it over redistribution.
And here is another one for you,
“They didn’t cause the income gap to increase. Given all the talk about Bush’s massive tax cuts for the rich, you might also think that his tax cuts contributed to a widening of the income gap. Except that didn’t happen, either. According to the Census Bureau, the “gini index” of income inequality was the same when Bush left office as when he came in. (It’s actually risen each year under Obama.)”
Read More At IBD: http://news.investors.com/ibd-editorials-perspective/112812-635034-5-secrets-about-the-bush-tax-cuts.htm#ixzz2E6QVxkXE
bump
Reagan cut marginal tax rates greatly.
That was the core idea, and it worked well.
Since then the dealing has been on much smaller margins. Bush made a significant temporary reduction, but much smaller than Reagans, and median household income did rise again until the last bubble burst.
The real problem now isn’t actual rates, even marginal ones, but structural impediments such as regulations and their associated litigation and fear of liability. These represent a much broader based hidden tax and have increased without restraint regardless of the administration. The last serious effort at pruning them was late in the Carter administration, continued by Reagan, when much of the overhead, mainly on freighting and transportation was reduced. This contributed to the Reagan boom, and to date.
This sort of regulatory and litigious overhead is not reflected in crude tax burden calculations.
IIRC, it calls for stimulus spending during times of economic slowdowns and for frugality during times of prosperity. Somehow, they never seem to get around to implementing the second part.
You are defending a tax system that defines fairness as a certain class of people paying a higher percentage. That progressive ideology, as all progressive ideologies, is false.
It would also zero out spending on non-essential operations.
bump
Exactly. They can call it “Supply Side” or whatever, but it wasn’t really. Very little about the federal government changed, it didn’t get smaller or less expensive or less intrusive.
Nothing but a talking point
Financed by debt. It is unarguable that the top percentages of income earners have reaped the majority of economic and productivity gains in this country. Throwing out there that people have flat screen tvs now is equivalent to Marie Antoinette stating, "Let them eat cake."
The argument should be on whether or not you think this is necessarily harmful in the long run.
So what’s your point? Do you wish for the government to have more revenue? Do you want the government to redistribute wealth to insure more “equity”?
Best statement so far. Supply side works to drive economic growth if and only if government spending remains stable as a percent of GDP. There in lies the problem. Not even Reagan was able to reign in government spending and we all know what has happened since then. Consider this also, can one argue that the advent of the global economy and so called free trade driven the new capital from supply side overseas? Did supply side do nothing but grow the economies of the third world?
Actually not. Read this,
“They didn’t cause the income gap to increase. Given all the talk about Bush’s massive tax cuts for the rich, you might also think that his tax cuts contributed to a widening of the income gap. Except that didn’t happen, either. According to the Census Bureau, the “gini index” of income inequality was the same when Bush left office as when he came in. (It’s actually risen each year under Obama.)”
Read More At IBD: http://news.investors.com/ibd-editorials-perspective/112812-635034-5-secrets-about-the-bush-tax-cuts.htm#ixzz2E6QVxkXE
There was real poverty during the Great Depression. There is no such thing in America today. Help is available for those that need it and clearly less are worse off than back then. It is pure class envy to look at what other’s have and say you are “entitled” to the same. Remember the 10th Commandment, “You shall not covet your neighbor’s house; you shall not covet your neighbor’s wife, or his male servant, or his female servant, or his ox, or his donkey, or anything that is your neighbor’s.”
According to this site -
The number of pages in the US tax code went from 40,500 pages in 1995 to 67,500 pages in 2008.
So that tells Bush and the gang were tinkering with things besides the marginal tax rates in those years.
As for GDP, I suggest you look at Warren Brookes, "The Economy in Mind" for an assessment of the JFK tax cuts (which sparked significant growth). On the Reagan tax cuts, try "The Supply Side Revolution." Reagan's economy created 14 million (!!!!!~!) NET new jobs. Bush's smaller cuts created 6 million. Clinton, in between, still rode the Reagan cuts.
The historical evidence of the 20s, 60s, 80s, and 2000s is that whatever happens to the rich, cutting their taxes is the fastest route to increase the SHARE of taxes paid by the rich. That's why rich libs are ALWAYS in favor of increasing tax RATES, because they know the TAX REALITY and REVENUE will go down if rates go up.
As to GNP, GNP is based on a number of things, including high energy prices which dampens economic activity and overregulation. Since the 20s, we have been heavily overregulated, even in the Reagan years where there was some deregulation.
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