Make no mistake, the Bush tax cuts, and the series of tax cuts piled on since the economy plunged into deep recession beginning in 2007, are the primary cause of deficits and a major contributor to projected long term debt.
From an article by Bruce Bartlett, top economic advisor to former President Ronald Reagan among other leading conservative Republicans at the time.
But revenue has been below 15 percent of G.D.P. since 2009, and the last time we had three years in a row when revenue as a share of G.D.P. was that low was 1941 to 1943.
Revenue has averaged 18 percent of G.D.P. since 1970 and a little more than that in the postwar era. At a similar stage in previous business cycles, two years past the trough, revenue was considerably higher: 18 percent of G.D.P. in 1977 after the 1973-75 recession; 17.3 percent of G.D.P. in 1984 after the 1981-82 recession, and 17.5 percent of G.D.P. in 1993 after the 1990-91 recession. Revenue was markedly lower, however, at this point after the 2001 recession and was just 16.2 percent of G.D.P. in 2003.
The reason, of course, is that taxes were cut in 2001, 2002, 2003, 2004 and 2006.
It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year.
By contrast, after the 1982 and 1993 tax increases, growth was much more robust. Real G.D.P. rose 7.2 percent in 1984 and continued to rise at more than 3 percent a year for the balance of the 1980s.
Real G.D.P. growth was 4.1 percent in 1994 despite widespread predictions by opponents of the 1993 tax increase that it would bring on another recession. Real growth averaged 4 percent for the balance of the 1990s. By contrast, real G.D.P. growth in the nonrecession years of the 2000s averaged just 2.7 percent a year — barely above the postwar average.
Much is made of spending projections for Medicare, Medicaid and Social Security but it’s seldom mentioned that even those rising costs could be covered if Congress rolled back it’s tax cutting frenzy of the past 12 years.
Tax collections could keep pace with those costs if Congress permitted the George W. Bush tax cuts to expire on schedule in 2012 and allowed the alternative minimum tax to hit millions of additional households, the CBO said. But under current tax policies, the CBO said, tax collections would barely cover the cost of the health and retirement programs alone by 2035.
Economics professor Robert Reich, former Secretary of Labor under President Bill Clinton, nails down how the solve our long term budget debt.
Stop the Austerity Train Wreck!
The biggest question right now on Planet Washington is whether the congressional supercommittee will reach an agreement.
That’s the wrong question. Agreement or not, Washington is on the road to making budget cuts that will slow the economy, increase unemployment, and impose additional hardship on millions of Americans.
The real question is how to stop this austerity train wreck, and substitute the following:
FIRST: no cuts before jobs are back – until unemployment is down to 5 percent. Until then, the economy needs a boost, not a cut. Consumers – whose spending is 70 percent of the economy – don’t have the money to boost the economy on their own. Their pay is dropping and they’re losing jobs.
SECOND: Make the boost big enough. 14 million Americans are out of work, and 10 million are working part time who need full-time jobs. The President’s proposed jobs program is a start but it’s tiny relative to what needs to be done. It would create fewer than 2 million jobs. We need a big jobs program – rebuilding America’s crumbling infrastructure, and including a WPA and Civilian Conservation Corps.
THIRD: To pay for this, raise taxes on the super-rich. It’s only fair. Never before has so much income and wealth been concentrated at the very top, and taxes on the top so low. Go back to the 70 percent marginal tax we had before 1980. And include more tax brackets at the top. It doesn’t make sense that any income over $375,000 is taxed at the same 35 percent, even if it’s a billion dollars. And tax all sources of income at the same rate, including capital gains.
FOURTH: Cut the budget where the real bloat is. Military spending and corporate welfare. End weapons systems that don’t work and stop wars we shouldn’t be fighting to begin with, and we save over $300 billion a year. Cut corporate welfare – subsidies and special tax breaks going to big agribusiness, big oil, big pharma, and big insurance – and we save another $100 billion.
Do you hear me, Washington? Do these four things and restore jobs and prosperity. Fail to do these, and you’ll make things much, much worse.
Beezer here. The problem is that the GOP is totally owned by those in the top 1% of the income pyramid. The nation’s wealthiest families use the GOP as a tool to protect their corporate subsidies and the tax breaks available only to the wealthy. So far their influence in Congress has managed to control the national discussion of what to do, concentrating this discussion mainly on cutting federal programs that benefits the non-wealthy such as Medicare, Social Security and Medicaid instead of rolling back a dozen years of piling tax cut upon tax cut that have almost entirely further enriched the already wealthy. The GOP promotes austerity programs for everyone but their 1% benefactors, even as poll after poll shows that the majority of citizens understand tax cuts are a huge part of the problem. The GOP ignores these polls because they don’t represent the majority of Americans. They represent a very small slice of America, the 1% who own them and to whom they owe their allegiance. We don’t think this allegiance will survive the 2012 elections because the austerity is already being felt by the majority at the municipal level. Services are being drastically cut at this level, not to mention the GOP proposals to extend cuts even further. Congressional approval levels are in the single digits, below those for British Petroleum during the Gulf Oil spill disaster. Obama’s levels are below 50%, but even at those levels the President’s approval rating is four times that for Congress. Occupy Wall Street protests bring nothing but derision from GOP politicians, who portray the participants as nothing but unemployed malcontents who want to destroy Capitalism. They are wrong. Many of the participants are employed. And many of those who are not employed are college graduates who face huge tuition debts they cannot pay back without jobs. These young adults have parents. The GOP response for them to ‘suck it up’ while the wealthiest 1% rake in all the income is not going to fly politically, in our opinion. Obama appears finally to understand the overall situation and is relentlessly pressing for passage of a jobs act in the face of GOP opposition. He should not only continue but he should up the ante by increasing the size of the jobs act. Hiring directly to rebuild America’s crumbling infrastructure is the single policy that will begin economic recovery. When the GOP controlled Congress balks, he should portray Congress as a ‘do nothing’ Congress as did Truman after WWII. Let the tax cuts expire, the money is being hoarded. It isn’t being invested and not enough is being spent on consumption because GOP tax cut politics have starved the 99% so much they can no longer consume enough to support Main Street businesses. Reich is correct. If the GOP is not stopped, the nation is in for a real train wreck.