In this thread, http://forums.ayonae.ro/showthread.php?t=8015&page=3&pp=10, the question was posed -- "At what point is the massive hudge [sic] revenue from the tax breaks supposed to start rolling in again?"

I answered in that thread that it has been "rolling in" and was rebuffed.

Well, it looks like we now have even more confirmation that the 2003 tax breaks have resulted in increased revenues. Here's a nice editorial on the effect of the 2003 tax breaks and the CBO's recent announcement:

http://www.opinionjournal.com/editorial/feature.html?id=110008640

For those that don't want to read it, these paragraphs are particularly enlightening:

"The real news, and where the policy credit belongs, is with the 2003 tax cuts. They've succeeded even beyond Art Laffer's dreams, if that's possible. In the nine quarters preceding that cut on dividend and capital gains rates and in marginal income-tax rates, economic growth averaged an annual 1.1%. In the 12 quarters--three full years--since the tax cut passed, growth has averaged a remarkable 4%. Monetary policy has also fueled this expansion, but the tax cuts were perfectly targeted to improve the incentives to take risks among businesses shell-shocked by the dot-com collapse, 9/11 and Sarbanes-Oxley.

...

Remember the folks who said the tax cuts would "blow a hole in the deficit?" Well, revenues as a share of the economy are now expected to rise this year to 18.3%, slightly above the modern historical average of 18.2%. The remaining budget deficit of a little under $300 billion will be about 2.3% of GDP, which is smaller than in 17 of the previous 25 years. Throw in the surpluses rolling into the states, and the overall U.S. "fiscal deficit" is now economically trivial."

Link to actually CBO report:

http://www.cbo.gov/showdoc.cfm?index=7366&sequence=0

"I think you should buy yourself a very small brownie, light a candle and blow it out," said former Congressional Budget Office Director Douglas Holz-Eakin. "This is tiny compared to the big problem, and it's on the wrong side of the budget. The big problem is on the spending side, and there is a question of just how permanent this will be."

Double digit increases in corporate profit margins are good (26% is VERY good). They were good in the late 90s. So, we had almost the exact same type of growth under Clinton without these tax cuts. I see nothing here but the cyclical nature of the economy. Its not permanent, and the bottom will fall out because that is the nature of things, and tax cuts are not the miracle cure all that some people think they are.

Despite the crowing, Revenues are still 100 Billion behind what the White House promised 5 years ago when it sold us these cuts.

The basic question is whether those tax cuts have helped or hurt the economy. The White House supply-side gang says they’ve helped, and points to the slight upturn in tax revenues to argue its case.

But every economic recovery offers good news. That’s why we call them recoveries. The business cycle is, after all, a cycle. When the cycle is turning down, the news is bad. When it’s turning up, news is good.

The best way to find out whether the Bush tax cuts have really helped is to compare the current recovery with every previous recovery since World War II. What do we find? Real revenue growth in this one is trailing the average of all previous recoveries. So is the rate of new investment. So is the rate of job creation.

You don’t have to have total recall to remember that after Bill Clinton raised taxes and cut spending, we had faster revenue growth than now, a higher rate of new investment, more jobs and a more rapidly-vanishing deficit.

but.. let me not rain on the parade.. let us just light the candle on our tiny brownies and smile.

I'll take the tiny brownies!!

Of course they were stale and well into crumbling in the last 2 years of Clinton's reign.

L2 is right, the economy is always in ebb/flow and to be honest Presidents have lil to do with either.

Fandros

Hey, Enron showed a profit on paper too.

"Regardless of what shows on paper it is still quite impossible to have more with less" said Spock to Kirk...

That quote shows a huge ignorance of economic functions.

But I bet if the same numbers were reported with Dubya not around you'd be dancing in the streets Rover.

;P

Fandros

I think the problem is too much republican control.

Clinton was a more effective executive in his 2nd term because he was constantly defending. Our democracy works best with the branches actively checking each others power.
What we have now is a joke.
Bush would have been a 100x better president with a Democratically controlled Congress. Vetos would have been flying, lively debates, checks on power. The way its SUPPOSED to be. Congress controlled government spending under Clinton partly as a check on his power. This rubber stamp congress with its rubber stamp president trying to get a rubber stamp Supreme Court is really a travesty.

Which is why spending is totally out of control. Great, revenues are up. Thats a good thing... corporations are doing well, that means good things for everyone. But it really is a horribly mixed bag.
Imagine if you came home from work and happily told your wife you got a $2,000 dollar raise at work and then she told you she racked up $20,000 in credit card debt that day.
Would you being going out to dinner to celebrate? I think not.

Would you being going out to dinner to celebrate? I think not.
No, you'd be saying, "We're already $20k in the hole, so what's another $50 over dinner going to matter?" and you'd go out to dinner anyway. Essentially what our leaders are doing with the budget.

That quote shows a huge ignorance of economic functions.

But I bet if the same numbers were reported with Dubya not around you'd be dancing in the streets Rover.

;P

Fandros

Well I guess if I ran my company based on the less we take in the more we'll have in the end I would most certainly end up in a bit of debt.

So I'm supposed to believe that by cutting taxes (taking in less than we were before) and by spending more (don't forget that extra 1 billion or so per day Iraq costs) that is reducing a deficit? Doesn't make BUSINESS sense. What does make sense is that we are probably taking in a much larger amount of money on import taxes as we are importing more goods on a daily basis.

Economics can show whatever numbers it needs to, just move things around...but in the end 5+5-3=7 no matter how you paint it.

Lower taxes equate to more spending. Kinda proven during Regan era imho.

Sadly I agree with L2, too much spending kinda wipes out any advances.

Fandros

Sadly I agree with L2, too much spending kinda wipes out any advances.


It's ok........breathe deeply.......relax......the more you do it the easier it gets......baby steps.....you will be ok.......

You mean actually stop spending? Really? Just stop it all together? No more spending? That will save us money?
We need to put together a committee to study this, and It'll only cost $540 million dollars, a steal!

It's ok........breathe deeply.......relax......the more you do it the easier it gets......baby steps.....you will be ok.......

*snicker*
Is this a sign of the apocalypse? Fanny agreed with L2.

that, in combination with what's going on in Israel. Sure signs!

LMAO no no no L2 and I aren't on complete opposite sides of the fence on every topic ;P

For example, I think we'd both agree a good Scotch after a long days work isn't a bad thing!!

Fandros

Single malt or Blended?


Rev

I'd prefer a Guinness.

Single malt pref but I do enjoy a good blend as well.

Depends on the occassion/weather/mood as you know ;)

Fandros

bah heathen, its single malt or nothing. ok thats not entirely true


Rev

"we had faster revenue growth than now"

Actually Ll you should try reading the posts once in a while.

From the CBO:

"For the first nine months of fiscal year 2006, CBO estimates, total receipts rose by 12.8 percent compared with the same period in 2005. That increase represents the second-highest rate of growth for that nine-month period in the past 25 years (surpassed only by last year’s strong growth)."

Furt, you are looking at this awfully myopically. Let me break it down in a plainer sense.

When comparing the two eras, imagine two runners racing a mile, 1600m, whatever, 4 laps around a track.
Yes, Bush had a very good time this lap, but he is still behind in overall time. The economic recovery in Clintons era was faster overall. This dramatic spike in Bushs tenure does not make up for the overall sluggishness of this recovery.

Does that mean Clinton was a better president? No, it just means that Tax cuts dont matter a whole lot in the economic picture. The ebb and flow of a market this big and this global transcend tax breaks much like the tide of large body of water is influenced by some splashing around.

What tax cuts do effect, however, is our ballooning deficit.

L2 is right, we happen to be in a high or rising point right now, just as most of clintons presidency was. now it could be argued that clintons presidency was helped by the rather insane internet boom bubble, but that is a debate for another day.


Wow 5 post in 1 day I am gonna be 1000 in no time, best guess at this rate is sometime next year.

Rev

"What tax cuts do effect, however, is our ballooning deficit."

I agree with you that they have an effect in that the tax cuts have lowered the ballooning deficit through the largest increases in tax revenue in the last 25 years. Were it not for the tax cuts, our deficit would be a much greater issue. Now if we can only control entitlement spending we'll have it under control -- spending is the real culprit of the deficit.

I'm not looking at things "myopically." I'm looking at purely the economic results after the 2003 tax cut and whether revenues have increased as predicted or decreased you and other Democrats predicted. Not only have they increased, but they have increased for the last two years in greater amounts than at any time in the past 25 years even during the Clinton years (which revenues were also primarily bolstered by Congress's capital gains tax cut). You categorically stated that the increased tax revenue has not come in. The facts have clearly proven differently.

Furthermore to argue that taxes (cuts and increases) have no effect on the economy ignores plain evidence that they do. Look at the economy's performance after various tax cuts and increase in the past 80 years. http://www.heritage.org/Research/Taxes/BG1544.cfm That article does not take into account the effect of the 2003 tax cuts, but the effect of the 2003 tax cuts further bolsters the article's analysis that tax cuts increase revenues.

For a more discrete example of taxes affecting the economy, simply look at the luxury tax increase in the early 90s. The economic effect of that tax was real and devastating. Congress had to repeal it because the effect was so bad.

revenues have increased as predicted

100 Billion less than predicited actually.

"100 Billion less than predicited [sic] actually."

Wrong again.

In 2004, the CBO predicted 2005 and 2006 revenues to be 2,049 and 2,256 respectively.

Table 1-2 http://www.cbo.gov/showdoc.cfm?index=4985&sequence=2

2005 actual receipts were 2,154 (105 HIGHER than predicted not less),

http://www.cbo.gov/ftpdocs/68xx/doc6837/11-2005-MBR.pdf

2006 estimated receipts are 2,313 (57 HIGHER than predicted)

http://www.cbo.gov/budget/budproj.pdf

I could only find a March report for FY2006 estimate so the latest thinking from June may even be higher than the March report.

I think L2 is refering to the budget projects calculated back in 2000 or 2001 by the Government.


Rev

For a more discrete example of taxes affecting the economy, simply look at the luxury tax increase passed by Clinton. The economic effect of that tax was real and devastating. Congress had to repeal it because the effect was so bad.

Since you offer no evidence to support this claim, I will simply say BULLSHIT!

Congress had to repeal the luxury tax because they were among the people targetted by the tax. The people most affected by that tax were the same group that is targetted by the Bush cuts: the wealthy.

All this twisting and spinning about cuts versus higher taxing is all a waste of time. We need to replace the income tax structure we have with a flat sales tax.

And as far as the comment on entitlement spending being the problem, try looking at the pork projects such as the Trent Lott Aircraft Carrier the Navy did not want, but which Lott forced on them in order to get their other wants taken care of in budget negotiations. Naturally, the ship was to be built in Lott's voter shipyards. Plus, he had it budgetted for 20% over what the Navy said it would cost. That is where the spending problems lie.

"Since you offer no evidence to support this claim, I will simply say BULLSHIT!"

I edited my post because I had the year of passage wrong -- it was repealed during Clinton administration and passed during Bush's (1990).

Evidence:
http://www.pbs.org/newshour/bb/budget/budget_1-1.html

What more do you want? The luxury tax was a huge mistake. It didn't affect the "rich" because they simply bought boats overseas.

As for budget projections from 2000 and 2001 those would be completely worthless because they don't take into account the 2003 tax cuts at all.

By their own estimates, the Bush administration have added an additional $2.2 trillion to the national debt. So, trying to make a big deal out of the news that this year's projected deficit will be less than what they thought is laughable, at best.

This is not about you, Furt, or about Bush or about Clinton; it is about the way that our government has been allowed to waste money that we do not have in the bank, turning the U.S. into a debtor nation. I wonder how many agencies and businesses will be shut down and people locked out from jobs when China comes calling for payment.

Something I was wondering..
I have to admit this is getting into areas of economic theory that are beyond my dabbling in the area... so this is an honest query.

In 2001 when EGTRRA was passed, the estimated cost of the tax cuts was 1.7 Trillion until 2011, thats 1.35 trillion in the actual cut and loss from treasury + the debt service fees.

Now I understand its a bit of leap to count money you never had, but.... Have these tax cuts even paid for themselves? I mean I understand that was 1.35 trillion released into the economy, but the understanding was that the cash would be returned in revenue. If it hasnt then we have actually made a bad investment? Is this a correct analysis?

Ask yourself how the government was going to collect "1.7 trillion by 2011" if our nation's economy tanked. It's not just the eb and flow of the cycle. The tax cuts and the Fed's control of interest rates kept us out of a much worse situation. Had a longer recession or even a depression occurred, there's not a chance the govt would have ever seen these predicted surplusses.

And lastly, I think most people are forgetting that 9/11 occurred at a very critical (most unfortunate) point in our economy's recovery. You can't look at the natural up and downs of our economy without acknowledging how devastating that event was.

Do not forget that we have had alot of natural disasters (well.. Bush did create Katrina and blow the levies). In addition to the War on Terror, it is not hard to see why we have a deficet. But, I am sure even if the above situations did not exist, the money would have been spent elsewhere. I am sure there are some type of endangered tapeworms that need research and protection. No matter who is in charge.. we have always spent money. SOUEEY!

Government Agencies will spend more and more money to justify their budget increases for the next year.
The problem is, there is no incentive for people in Government agencies to conserve. The mentality is they have to spend more to get more.
It's a runaway problem with no solution.
There should be some incentives for Government agencies to act more like the private sector: they get rewarded for saving money, rather than spending more...

If we could get a president/congress in who would actaully look at what is being spent and on what and cut out the crap spending, yes I am refering to things like the USS trent Lott, then we could start reducing the budget. My personal feelings on it is you shouldnt be allowed to spend more than you take in. The government bitches about the US personal debt problem, but they are the worst offender, you have to lea by example.


Of course I also would be more than happy to see a national sales taxes if it got rid of the peronal income tax. but thats not going to happen it would put to many folks out of work in the accounting field as well as all the tax lier, opps i mean lawyers.

"I wonder how many agencies and businesses will be shut down and people locked out from jobs when China comes calling for payment."

A lot of businesses and jobs, but you've got to remember those businesses and jobs are (or will be) in China.

As a percentage of our GDP, the current deficit is not particularly alarming. Monetary policy remains good, wage inflation is under control, and economy/employment remains solid.

Yeah, wouldn't want people's wages to be rising, would we.

Yeah, wouldn't want people's wages to be rising, would we.

Have seen this with the postal service, and heard similar stories from others, that over the past ten years approximately, every negotiated contract that increased salaries negated the wage increases pretty much totally by increasing employee contribution to health benefits.

So, wages have stayed flat or lost ground consistently for the past ten years or so, measured against the rise in cost of living.

"Yeah, wouldn't want people's wages to be rising, would we."

Sounds like you weren't around in the 70s. High levels of inflation are not a fun thing.

The WSJ (http://online.wsj.com/public/article/SB115309455426108211-aSO8gOxrM07FcOpKYn_ZCpNbUQ4_20070717.html?mod=blog s) comments on the revenue issue. The premise:
But this explanation falls short. While tax revenue is growing far faster than the Bush administration forecast in its budget projections in February, the nation's economy isn't.

What has changed isn't the size of the economy, but how the economic pie is divided. The share of national income going to corporations and the wealthiest individuals, already large, has expanded, while the share going to typical wage earners has shrunk. Because corporations and the wealthy generally pay income tax at higher rates than does the typical wage earner, that shift benefits the federal Treasury.
Sounds like you weren't around in the 70s. High levels of inflation are not a fun thing.
Neither is poverty. Economic immobility isn't all that great, either.

"Yeah, wouldn't want people's wages to be rising, would we."

Sounds like you weren't around in the 70s. High levels of inflation are not a fun thing.

Instead we have a higher CPI without people's wages rising. Glad we solved THAT problem ...

Read an article in paper the other day that stated in 2004 90% of American workers saw a 1.2% increase in income, compared to the top 2% seeing about 12.5% increase.

Guess those tax cuts are working.

Read an article in paper the other day that stated in 2004 90% of American workers saw a 1.2% increase in income, compared to the top 2% seeing about 12.5% increase.

Guess those tax cuts are working.

Yeah, we all know that rich people just horde thier money, and never invest it back into the economy. That's how the rich keep getting richer. Making your money work for you is just a joke.
In case you are confused, this is what they call sarcasm.

"Instead we have a higher CPI without people's wages rising. Glad we solved THAT problem ..."

Me too. Compared to the 70s we are in a much better position fiscally.

Out of curiosity, before I start typing out the response I've been mulling to that statement, can you define what the Bretton Woods system did? If we don't have at least some consensus on that then any further discussion will be futile.

I'm going to have to go back and read this full thread... I love a good tax debate.

There are lies, there are damn lies and there are statistics...