Bush vs President Clinton

Some people like McG rarely understands the subject they talk about on a2k.

Here's the official analysis by some respected organizations.

New Report Questions Effectiveness, Design of
Bush Tax Cuts through 2004 and Beyond

Comments by Brookings economist William Gale

View Related Analyses

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A new study of three years of Administration tax cuts, issued by the Center on Budget and Policy Priorities, finds adverse fiscal, distributional, and long-term economic effects from the tax cuts. The study, Tax Returns: A Comprehensive Assessment of the Bush Administration Tax Cuts, represents perhaps the most comprehensive analysis yet issued of the effects of the tax cuts, synthesizing previous findings on both the 2001, 2002, and 2003 tax cuts and the tax policy proposals in the Administration's fiscal year 2005 budget and featuring significant new data from the Urban Institute-Brookings Institution Tax Policy Center.

Among the study's highlights:

* The average tax cut for the top one percent of households will be nearly $35,000 this year, 54 times the average tax cut of $647 that the middle fifth of households will receive. This finding is based on a new analysis by the Tax Policy Center that examines the effects of all components of the tax cuts and is the first comprehensive Tax Policy Center analysis to be based on a revised and improved Tax Policy Center model that fully incorporates the corporate and estate tax reductions.

* The tax cuts will bestow more than $30 billion in 2004 on the 257,000 households with incomes exceeding $1 million, with these households securing average tax cuts of $123,600 each. The $30+ billion in tax cuts that these "millionaires" will receive in 2004 far exceeds the total amount of tax cuts that the nearly 29 million households who comprise the middle fifth of the U.S. population will get.

* The tax cuts were not well designed to stimulate a weak economy. Only eight to 14 percent of the 2003 tax-cut package, which was promoted as being necessary to boost economic recovery, consists of high "bang-for-the-buck" tax cuts that will be provided by the end of fiscal year 2004. (A high bang-for-the-buck proposal is one that increases economic "demand" in the short term by more than one dollar for each dollar of lost tax revenue.) The tax cuts consequently have produced significantly less economic stimulus than could have been provided for the same (or less) budgetary cost. The failure of policymakers to design and enact more effective stimulus measures has likely contributed to job creation being more meager during this recovery than in other recoveries since the end of World War II.

* From 2005 through 2014, the increased interest payments on the debt that will result from the tax cuts will amount to approximately $1.1 trillion, if the tax cuts are made permanent and the other tax-cut proposals in the Administration's fiscal year 2005 budget are enacted. The interest payments would reach $218 billion in 2014.

* Without the tax cuts, deficits would be modest over the next ten years and be below $100 billion in 2014. By contrast, with the Administration's tax-cut policies, the deficit is likely to grow to approximately $677 billion by 2014.

Figure 1

"The tax cuts have contributed to federal revenues, measured as a share of the economy, dropping to their lowest level since the Truman Administration, and have conferred the greatest benefits on households at the highest income levels," said Isaac Shapiro, senior fellow at the Center on Budget and Policy Priorities and co-author of the study. "The tax cuts also have produced less economic stimulus and job growth than could have been accomplished with the same or even lesser amounts of resources, because the tax cuts were poorly designed to respond to the economic slump."

Shapiro added: "The problems that the tax cuts pose are likely to grow more severe if the tax cuts are made permanent, since the persistent, large deficits to which they would be a major contributing factor are likely to slow future economic growth, saddle future generations with sizable interest payments on a greatly enlarged national debt, and leave the nation ill-prepared for the retirement of baby boomers."

Other significant findings from the study include the following.

Bulk of Middle-Class Tax Cuts Could Have Been Provided at One-Third the Cost

The tax cuts enacted over the past three years include three major "middle-class" provisions: the provisions establishing the 10 percent tax bracket, expanding the Child Tax Credit, and providing tax relief to married couples. These three tax cuts were enacted in 2001 and became fully effective in 2003, when their implementation was accelerated.

These three provisions provide substantial help to the broad middle class. These measures also provide significant tax benefits to high-income households. The middle fifth of households will receive an average tax cut of $547 in 2004 from these provisions. The top one percent of households will receive an average tax cut of $1,320 from these measures.

But the distribution of tax benefits under the other tax-cut provisions enacted in the past three years is far less evenly distributed. The new Tax Policy Center data show that the top one percent of households will receive an average tax cut in 2004 of $33,700 from the other tax-cut provisions. By contrast, the middle fifth of households will receive an average tax cut of just $100 from these other provisions.

The study also finds that these three middle-class provisions would account for only about one-third of the cost of the tax cuts when the Administration's tax cuts were fully in effect. The bulk of the tax-cut benefits that the middle class will receive thus could have been provided for about one-third of the long-term cost that the Treasury will bear if the Administration's full tax-cut agenda is enacted, with nearly all of the recent tax cuts being made permanent and some new tax cuts being added on top.

Long-Term Costs and Distributional Effects

If the Administration's tax-cut agenda is approved (and relief from the swelling Alternative Minimum Tax is continued, as most observers expect it will be), future costs will be extremely large.

* Over the 10-year period from 2005 through 2014, the tax cuts will increase federal deficits by nearly $4 trillion. This includes the cost of the increased interest payments that will have to be paid on the national debt.

* Over the next 75 years, the cost of the tax cuts would be more than three times the size of the Social Security shortfall, and larger than the shortfalls in the Social Security and Medicare Hospital Insurance trust funds combined.

As uneven as the distribution of the tax cuts is in 2004, the distribution will become still more uneven over time. The tax cuts of greatest benefit to the middle class already are fully in effect. Some of the tax cuts of most benefit to high-income households, however ?- such as the elimination of the estate tax ?- are only partly in effect now or have not yet begun to take effect.

The Very Well-Off: Big Winners on Two Fronts

In addition to the large tax cuts they are now receiving, high-income households secured huge gains in income in the 1980s and 1990s. The Congressional Budget Office publishes the most comprehensive data available on changes in incomes and taxes for different income groups. Just-released CBO data cover years from 1979 until 2001. These data show:

* The average after-tax income of the top one percent of the population more than doubled over this period, rising from $294,300 in 1979 to $703,100 in 2001, an increase of 139 percent. (These figures are adjusted for inflation.)

* By contrast, the average after-tax income of households that make up the middle fifth of the U.S. population rose $6,300, or 17 percent, during this period. The average after-tax income of the poorest fifth of households rose $1,100, or eight percent.

Jobs and Economic Growth

Job growth during this recovery might have lagged well behind that of previous recoveries even if recent economic policies had been better designed. Nonetheless, the unusually poor job growth of the past couple of years suggests the Administration's tax cuts have fallen well short of accomplishing one of their stated goals.

* Employment remains substantially below its level at the start of the downturn, a development unparalleled this far into a post-World War II recovery. Substantial job growth typically occurs by this point.

* The Economic Policy Institute has compared actual job growth since the summer of 2003 to the level of job growth the Administration predicted would occur with passage of the 2003 tax cut. The Administration predicted that with passage of that measure, 5.5 million jobs would be created in the 18 months from June 2003 through December 2004. Employment figures through March 2004, however, indicate that in the first half of this 18-month period, only 689,000 jobs were created. This amounts to just 13 percent of the Administration's jobs projection.

Overall economic growth also has been below par. Whether measured from the start of the recession or the end of the recession, the economy has grown more slowly in the past few years than it grew, on average, at comparable stages of other post-World War II recoveries.

The Administration's Story

The Administration has highlighted the tax-cut benefits the middle class has received and also has promoted its tax cuts as being highly beneficial to groups such as small business owners. The Center's study finds much of the information the Administration has put forward on these matters has been selective or misleading. As one example, President Bush has often cited the "average" tax cut that American families are receiving. The large majority of families, however, are getting considerably less than this "average" amount. The tax cut that the typical household will receive in 2004 is less than half the amount that the President has described as being the "average" tax cut this year. The Administration's average tax-cut figures are skewed upward by the inclusion of the very large tax cuts going to a relatively small number of very affluent taxpayers.

Administration officials also have touted the benefits to small business owners of the reductions in the top income tax rate. But Treasury Department data show that the top-rate reduction benefits only two percent of small business owners.

The Center's study concludes that the majority of Americans are likely to end up worse off over time as a result of the tax cuts, because action ultimately will need to be taken to rein in burgeoning deficits and pay for the tax cuts. "Because the tax cuts are so tilted toward the highest-income households," said Joel Friedman, a senior fellow at the Center and co-author of the report, "the burden of financing these lopsided tax cuts eventually is likely to be borne disproportionately by households that have gained only modestly from the tax cuts. This will be the case unless offsetting spending cuts or tax increases are enacted that reduce benefits or raise taxes primarily on high-income households, an unlikely scenario. Over the long term, most Americans may well end up as net losers from the tax cuts."

Please do not miss reading the last sentence; the most important one in the article IMHO.

To which, Woiyo responded



Woiyo, can you read English?

I did not say that anyone was paying more in taxes than in 2000, I said that without the Bush tax cuts, we were collecting more in revenue in 2000 than this year.

The country had grown larger in five years. We have numerically more people working now. Yet if you eliminate the Social Security tax, (which is officially "off-budget"), you get the following figures:


US Government Revenue Minus Social Security Tax:

2000: $1372.4 billion
2005: $1359.8 billion

Republicans are lying when they saying cutting taxes spurs the economy which creates more tax revenue. It does not work that way. Without those tax cuts, Clinton could get rid of the deficit and put the country on a good financial footing. With the Bush tax cuts, the US Government collects numerically less total revenue, even though we now have more population and more people working than five years ago.

Which is why we now have huge deficits where a surplus used to exist. And a national debt that is going out of control.

If you love America and care about her future, you have to go for a balanced budget-and that means getting rid of the disastrous tax cuts. And that means voting for a balanced budget Democrat, because the Republicans favor the tax cuts for the wealthy which is driving up the deficits and national debt.

1. He definitely doesn't understand English.
2. He puppets the rhetoric of the conservatives even though credible organizations says otherwise.
3. He cannot see the struggles of the middle class families; more falling into poverty, losing their health insurance, and pay raises not keeping up with inflation.

Some people have calcified brains that can't be penetrated with evidence. Their belief in their party is similar to religion. No amount of facts will deter their belief.

Clinton was good for Republicans as he made more people rich and conservative. Bush is good for Democrats as he makes more people poor and thus become Democrats.

talk, That's a brilliant analogy of Clinton and Bush. I always thought Clinton was more conservative than liberal, and Bush is definitely a democrat; spending like a drunken sailor with no tomorrows.

I just wanted you to laugh.

The stupidity of your commentary reinforces my belief that you and your ilk can never have an onjective thought and refuse to see the facts AS YOU POST THEM.

WITH then tax cuts, your figures suggest that we are collecting the same amount of revenue. I have more in my pocket yet the country is still collecting the same revenue.

Only stupid people like you think that is a bad thing.

No, Woiyo, that is not a good thing.

The population has grown in the past five years. The government must supply more because we have more people. Numerically, we have more people working. IF things were normal, the revenues would be growing.

In fact, since 1962, the revenues of the US government-minus Social Security tax-have grown at the rate of 6.7% a year. THAT'S normal. Standing still year after year is not.

For the first five years of Clinton's presidency, on-budget, (ie. minus social Secuirity) revenues grew at a rate of 8.9% a year. That is why Clinton could produce a surplus, and put a halt to the runaway deficits and ballooning national debt of the Reagan-Bush years. I'll give Reagan credit, the economy was in big trouble when he took over and he got it started again. But the downside was that in his later years, plus Bush I years, the deficits began to mount up and hurt us badly.

The Republicans have been selling this line that if you cut taxes to the wealthy, they willl invest more, more people will be working and paying taxes, and in the end we get more revenue. Well, it has not worked that way.

When it is normal to increase 6.7% a year, and you have been standing still for five years, you are falling behind.

When your population grows and your government revenue is standing still year after year, you are falling behind.

When more people are working, but your government revenue does not grow year after year, you are falling behind.

The Bush tax cut plan is a disaster for the country.

Don't spend your $20 all in one place!

You do not have the intellectual capacity to debate this issue. So take your childish comments somewhere else.

Woiyo:

Anytime you would like to respond to my analysis would be fine with me.

In order to agree with your position, one must support high taxes and wasteful spending. I support neither. Over the past 20 years this govt has expanded spending in areas that provide no return (paying extortion to foreign countries and social welfare programs to the unwilling as examples). That trend needs to stop and while the Bush tax plan does NOT do anything in this regard, cutting taxes accross the board has helped turn the economy around.

However, the cuts needed to be deeper at the middle brackets and spending has to be reduced.

GW has NOT done a good job in either area but the tax bill passed a few years ago needed to be extended.

So what you are saying, then Woiyo, is that you believe it is a good thing to cut taxes REGARDLESS of what happens to the budget?

If the deficits get large, larger, larger still, cut taxes anyway!

If the national debt gets big, bigger, bigger still, cut taxes anyway!

If ten percent, fifteen percent, twenty percent of our budget soon is devoted to paying off the interest on the money we had to borrow to make up previous deficits, cut taxes anyway.

By all means, cut taxes. IF you can cut the size of the budget to fit the reduced revenue, that is fine. But if you cannot cut the size of the budget, go ahead and cut taxes anyway!


That is your position, correct?

Not without cuts in spending.

EXACTLY!

Until spending and pork are cut from the federal budget, the deficit will remain going up. If spending is NOT curtailed, all raising taxes does is give Congress more money to waste.

But you're NOT cutting spending. Even under Reagan, the budget got bigger every year.

In my lifetime, and I suppose yours as well, nobody has ever come up with a politically viable means of reducing the budget.

So Woiyo and McGentrix come up supporting these tax cut bills, then don't come up with any viable budget cuts with any chance of success, and that is supposed to be okay.

Fact is, your entire plan is to just cut taxes, and if we soon end up paying twenty or twenty five percent of our budget to pay off the interest on the money we had to borrow to make up previous shortfalls-hey that's not your fault.

Reckless, extreme, and will lead to disaster.

I just posted 2 simnple ideas where to make spending cuts. So, once again, you react without fully absorbing an objective approach.

I see you have offerred no alternatives, except to keep increasing taxes to cover the waste in the govt spending. BRILLIANT!

Let's just eliminate spending. That's the answer! Then our taxes will be zero.

I'm glad you offered two simple ideas to make spending cuts, but you fail to show how they can ever be implemented.

Ronald Reagan said pretty much the same thing, yet his budgets grew at the rate of 5.8% a year. And he delivered big deficits besides. As I said previously, he inherited a bad situation coming in and he got the country economically moving again, so he's entitled to have some downside as well. But if you keep on mounting large deficit after large deficit, year after year after year, you put the country in the hole which gets harder and harder to get out of.

Woiyo, your economic "plan" is to cut taxes, advocate spending cuts which have never happened in your or my lifetime, even under Ronald Reagan, and if everything goes to hell, claim that it ain't your fault.

If you care about the future of America, you have to support a candidate with a realistic plan to balance the budget and cut these insame deficits.