Reagan Budget Director Slams GOP for 'Theology' Of Tax Cuts

[one...two...tree 2,762]

As Congress prepares to take up extension of the Bush tax cuts during its lame duck session, Republican lawmakers have been unanimous in demanding that the cuts for the richest two percent of Americans be extended, claiming they are necessary for economic growth and that tax cuts (miraculously) pay for themselves.

While independent economists have shown these arguments to be false, today on CNN's Fareed Zakaria GPS, President Reagan's former budget director took on his own party for pushing this faulty logic. David Stockman, who led the all-important Office of Management and Budget under Reagan and was a chief architect of his fiscal policy, criticized today's GOP for misreading Reagan's legacy by adopting a "theology" of tax cuts. Stockman has spoken out before, but took perhaps his strongest stance yet against his own party today, saying "I'll never forgive the Bush administration" for "destroying the last vestige of fiscal responsibility that we had in the Republican Party." He also broke with Republican orthodoxy on a number of key issues:

– We need "a higher tax burden on the upper income."

– "After 1985, the Republican Party adopted the idea that tax cuts can solve the whole problem, and that therefore in the future, deficits didn't matter and tax cuts would be the solution of first, second, and third resort."

– The 2001 Bush tax cut "was totally not needed."

– On claims that Reagan proved tax cuts lead to higher government revenues: "Reagan proved nothing of the kind and yet that became the mantra and it just led the Republican Party away from its traditional sound money, fiscal restraint."

– Former Vice President Cheney "should have known better" than claim the Bush tax cuts would pay for themselves.

– "I'll never forgive the Bush administration and Paulson for basically destroying the last vestige of fiscal responsibility that we had in the Republican Party. After that, I don't know how we ever make the tough choices."

http://www.alternet....27_of_tax_cuts/

[wshc 46]

Stockman was always stabbing his president and his party in the back. That is why he gets press coverage from the liberal main stream media now. Although the Republicans might have lost their way on fiscal restraint, they are correct on tax cuts paying for themself. Incoming revenue records were set under President Bush after the tax cuts of 2001. Reagan's tax cuts produced the longest peacetime years of economic expansion in the history of the USA. The Regan economic explosion carried over in to Clinton's term of office, which Clinton took credit for. If the Clinton tax increases would not have killed the Reagan boom, then things would have been much different now.

Just remember, before tax dollars are the government's to spend on the things they want to spend it on, you have to earn that money first. It is your money. Who spends it better, you or Washington? Opposing tax cuts just fuels the "struggle of the classes" that the democrats depend so heavily on to get their voters out. Hatred for wealth is what Hugo Chavez uses as well as the European socialist parties to keep their voters motivated. There is always the promise of making those evil wealthy people pay for "winning the lottery" in life.

No one has ever had a job from one of the socialist however, unless it has been as a committe member in one of their community organizer positions. Like it or not, wealthy people create lots of jobs and generate lots of economic activity.

Edited November 29, 2010 by wshc

[DEDixon 39]

Who spends it better, you or Washington?

you be the judge, but looks like neither one to me:

Average credit card debt per household with credit card debt: $15,788

609.8 million credit cards held by U.S. consumers.

Average number of credit cards held by cardholders: 3.5, as of yearend 2008

Average APR on new credit card offer: 14.35 percent

Total U.S. revolving debt (98 percent of which is made up of credit card debt): $852.6 billion, as of March 2010

Total U.S. consumer debt: $2.42 trillion, as of June 2010

U.S. credit card 60-day delinquency rate: 4.27 percent.

U.S. credit card default rate: 13.01 percent.

seems the more americans get in their hands, the more they spend.... probably spending on things that make the economy's of japan and china better.

[wshc 46]

seems the more americans get in their hands, the more they spend.... probably spending on things that make the economy's of japan and china better.

That is the point. The more Amreicans get in their hands the more they spend. Economic activity. Taxes are payed on that activity and that increases the tax revenue of the government as a side effect. Then the government has more to waste, or to use poorly, as an example the USCIS that can not even process immigration cases in a timely manner. You see my point if your life is ever touched by a government agency.

As far as helping the economy of Japan and China, that is also a side effect. But for every electronic widget or any other type of good, there is a direct benefit to the Amreican company selling that widget. The employees that are working and paying taxes at the local BMW dealer might be helping the German economy by helping BMW, but the car dealer is hiring American workers. Those are Americn jobs. (This applies to goods manufactured in Japan, China and anywhere else in the world.)

Tax the people more and you hamper that activity.

[Mr. Big Dog 10,747]

Although the Republicans might have lost their way on fiscal restraint, they are correct on tax cuts paying for themself. Incoming revenue records were set under President Bush after the tax cuts of 2001. Reagan's tax cuts produced the longest peacetime years of economic expansion in the history of the USA. The Regan economic explosion carried over in to Clinton's term of office, which Clinton took credit for. If the Clinton tax increases would not have killed the Reagan boom, then things would have been much different now.

Oh Lord. Where to start?

In 2005 Dollars, tax revenues were 2.025 trillion dollars in 2000. In 2001, those revenues were down to 1.991 trillion. They then slid down to 1.853 trillion in 2002 and further declined to 1.782 trillion (2003) before climbing up to 1.880 trillion in 2004. Only in 2005 did reveneues actually go up to exceed the 2000 level. Measured on GDP, tax revenues remained below their historic average throughout the period. Which makes sense as otherwise you couldn't claim that tax cuts leave the money in the people's pockets rather than giving it to the government. If the people keep it, naturally, the government won't have it - i.e. the government loses revenues.

Of course, the argument is that tax cuts spur economic growth leading to both higher receipts by the government and more money in the pockets of the people. That would be great if it actually worked time and again. But it doesn't. Otherwise, we'd have a tax rate of zero which would maximize economic growth and tax revenues. Only it can't work on the revenue side since 0% of anything still is zero. Hence, there must be a tax rate that optimizes revenue. And there is. It's what the Reagan tax policy was built on under the then correct assumption that tax rates were above the optimal point - which at the time they likely were. Not sure that that is the case anymore.

Then there is the little problem with the economic growth argument - you know, that tax cuts spur economic growth which is the basis for the "tax cuts pay for themselves" argument. Looking at the actuals, on all but one indicator - corporate profits - the Bush tax cuts failed to deliver. And when I say failed, I mean they failed huge.

Clinton's tax hikes killed the Reagan expansion? Maybe the Reagan tax hikes killed the Reagan expansion? He sure raised taxes enough during his 8 years in office - 11 times to be exact. Among those tax increases was TEFRA which was the largest peacetime tax increase in history. George H. W. Bush raised taxes as well during his tenure. But sure, it must have been Slick Willie's tax increases that killed the economy since obviously Republican tax increases are good for the economy while Democrat tax increases are the bad stuff. What a joke that argument is.

The Gipper's Tax Increases in Billions of Dollars

• Tax Equity and Fiscal Responsibility Act of 1982 +57.3
  
• Highway Revenue Act of 1982 +4.9
  
• Social Security Amendments of 1983 +24.6
  
• Railroad Retirement Revenue Act of 1983 +1.2
  
• Deficit Reduction Act of 1984 +25.4
  
• Consolidated Omnibus Budget Reconciliation Act of 1985 +2.9
  
• Omnibus Budget Reconciliation Act of 1985 +2.4
  
• Superfund Amendments and Reauthorization Act of 1986 +0.6
  
• Continuing Resolution for 1987 +2.8
  
• Omnibus Budget Reconciliation Act of 1987 +8.6
  
• Continuing Resolution for 1988 +2.0
  
• Total cumulative tax increases +132.7
  

[JohnSmith2007 353]

Oh Lord. Where to start?

In 2005 Dollars, tax revenues were 2.025 trillion dollars in 2000. In 2001, those revenues were down to 1.991 trillion. They then slid down to 1.853 trillion in 2002 and further declined to 1.782 trillion (2003) before climbing up to 1.880 trillion in 2004. Only in 2005 did reveneues actually go up to exceed the 2000 level. Measured on GDP, tax revenues remained below their historic average throughout the period. Which makes sense as otherwise you couldn't claim that tax cuts leave the money in the people's pockets rather than giving it to the government. If the people keep it, naturally, the government won't have it - i.e. the government loses revenues.

Of course, the argument is that tax cuts spur economic growth leading to both higher receipts by the government and more money in the pockets of the people. That would be great if it actually worked time and again. But it doesn't. Otherwise, we'd have a tax rate of zero which would maximize economic growth and tax revenues. Only it can't work on the revenue side since 0% of anything still is zero. Hence, there must be a tax rate that optimizes revenue. And there is. It's what the Reagan tax policy was built on under the then correct assumption that tax rates were above the optimal point - which at the time they likely were. Not sure that that is the case anymore.

Then there is the little problem with the economic growth argument - you know, that tax cuts spur economic growth which is the basis for the "tax cuts pay for themselves" argument. Looking at the actuals, on all but one indicator - corporate profits - the Bush tax cuts failed to deliver. And when I say failed, I mean they failed huge.

Clinton's tax hikes killed the Reagan expansion? Maybe the Reagan tax hikes killed the Reagan expansion? He sure raised taxes enough during his 8 years in office - 11 times to be exact. Among those tax increases was TEFRA which was the largest peacetime tax increase in history. George H. W. Bush raised taxes as well during his tenure. But sure, it must have been Slick Willie's tax increases that killed the economy since obviously Republican tax increases are good for the economy while Democrat tax increases are the bad stuff. What a joke that argument is.

The Gipper's Tax Increases in Billions of Dollars

• Tax Equity and Fiscal Responsibility Act of 1982 +57.3
  
• Highway Revenue Act of 1982 +4.9
  
• Social Security Amendments of 1983 +24.6
  
• Railroad Retirement Revenue Act of 1983 +1.2
  
• Deficit Reduction Act of 1984 +25.4
  
• Consolidated Omnibus Budget Reconciliation Act of 1985 +2.9
  
• Omnibus Budget Reconciliation Act of 1985 +2.4
  
• Superfund Amendments and Reauthorization Act of 1986 +0.6
  
• Continuing Resolution for 1987 +2.8
  
• Omnibus Budget Reconciliation Act of 1987 +8.6
  
• Continuing Resolution for 1988 +2.0
  
• Total cumulative tax increases +132.7
  

That is a pretty tilted way of looking at it. The fact is that he took back about half of his tax cuts with increases. The net change was still about a 142.6 billion tax cut. His goal was to cut taxes a lot to stimulate the economy after the disaster that was Carter. When things picked up because of the cuts he then took some of them back to increase the government revenue. What Reagan did was responsible. What the dems want to do now, raise taxes in a recession, is irresponsible class warfair.

Legislated Tax Changes by Ronald Reagan as of 1988

Tax Cuts Billions of Dollars

Economic Recovery Tax Act of 1981 -264.4

Interest and Dividends Tax Compliance Act of 1983 -1.8

Federal Employees’ Retirement System Act of 1986 -0.2

Tax Reform Act of 1986 -8.9

Total cumulative tax cuts -275.3

Tax Increases Billions of Dollars

Tax Equity and Fiscal Responsibility Act of 1982 +57.3

Highway Revenue Act of 1982 +4.9

Social Security Amendments of 1983 +24.6

Railroad Retirement Revenue Act of 1983 +1.2

Deficit Reduction Act of 1984 +25.4

Consolidated Omnibus Budget Reconciliation Act of 1985 +2.9

Omnibus Budget Reconciliation Act of 1985 +2.4

Superfund Amendments and Reauthorization Act of 1986 +0.6

Continuing Resolution for 1987 +2.8

Omnibus Budget Reconciliation Act of 1987 +8.6

Continuing Resolution for 1988 +2.0

Total cumulative tax increases +132.7

[Mr. Big Dog 10,747]

That is a pretty tilted way of looking at it. The fact is that he took back about half of his tax cuts with increases. The net change was still about a 142.6 billion tax cut. His goal was to cut taxes a lot to stimulate the economy after the disaster that was Carter. When things picked up because of the cuts he then took some of them back to increase the government revenue. What Reagan did was responsible. What the dems want to do now, raise taxes in a recession, is irresponsible class warfair.

The recovery was barely underway when Reagan signed TEFRA. Remember that the unemployment rate back in late 1982 was almost 11% and the tax hikes happened all the same. Miraculously, the economy picked up steam afterwards (not necessicarily because of it) with corporate earnings jumping some 30% in the 3rd quarter of 1983 vs. the same in 1982. The unemployment rate was reduced to just over 7% two years after TEFRA.

There's little evidence to suggest that tax hikes killed the recovery. It would the same letting the Bush tax cuts expire at the end of this year. After all, that's not a tax hike but merely the scheduled roll-back of earlier tax cuts. That this can be done at the onset of a recovery without hurtung it has been demonstrated by the Gipper. It would, once again, be the responsible thing to do.

[JohnSmith2007 353]

The recovery was barely underway when Reagan signed TEFRA. Remember that the unemployment rate back in late 1982 was almost 11% and the tax hikes happened all the same. Miraculously, the economy picked up steam afterwards (not necessicarily because of it) with corporate earnings jumping some 30% in the 3rd quarter of 1983 vs. the same in 1982. The unemployment rate was reduced to just over 7% two years after TEFRA.

There's little evidence to suggest that tax hikes killed the recovery. It would the same letting the Bush tax cuts expire at the end of this year. After all, that's not a tax hike but merely the scheduled roll-back of earlier tax cuts. That this can be done at the onset of a recovery without hurtung it has been demonstrated by the Gipper. It would, once again, be the responsible thing to do.

I must disagree with that. To raise taxes on anyone at this point would be suicide. Our economy is in much worse shape than most people think right now. The stock market is artifically high and isn't a good gage of the state of things right now. I would be in favor of making the cuts for everyone permanent so to remove the doubt that is killing the growth. The problem isn't the mechanics of the economy, it is the faith in the economy and the doubt for business as to what the tax rate is going to be in the future. If they knew what to expect for the long term we will start to see long term investment. Without it business will continue to stand on the side and tread water and the economy will continue to stagnate.

[Mr. Big Dog 10,747]

I must disagree with that. To raise taxes on anyone at this point would be suicide. Our economy is in much worse shape than most people think right now. The stock market is artifically high and isn't a good gage of the state of things right now. I would be in favor of making the cuts for everyone permanent so to remove the doubt that is killing the growth. The problem isn't the mechanics of the economy, it is the faith in the economy and the doubt for business as to what the tax rate is going to be in the future. If they knew what to expect for the long term we will start to see long term investment. Without it business will continue to stand on the side and tread water and the economy will continue to stagnate.

Corporations are and have been sitting on trillions of dollars for some time now. They continue to rake in record profits. If doubt is impeding growth, remove the doubt. Let the unproductive tax cuts expire. Taxes ain't killing growth or impede job creation - they haven't done that in the early 80's and they won't do it now. Fact is that growth and job creation were far better prior to Bush tax cuts than they were since. Setting a signal that we're serious about addressing the defict and debt problem, on the other hand, would set a climate that's conducive to economic growth.

[JohnSmith2007 353]

Corporations are and have been sitting on trillions of dollars for some time now. They continue to rake in record profits. If doubt is impeding growth, remove the doubt. Let the unproductive tax cuts expire. Taxes ain't killing growth or impede job creation - they haven't done that in the early 80's and they won't do it now. Fact is that growth and job creation were far better prior to Bush tax cuts than they were since. Setting a signal that we're serious about addressing the defict and debt problem, on the other hand, would set a climate that's conducive to economic growth.

Lets just say we totaly disagree with each other on this. Cutting taxes for everyone would stimulate the economy much more than the trillions wasted on stimulus and would have cost less. I wish we could undo the stimulus and in its place give everyone, rich and poor alike, a 25% tax cut. We would be booming right now if we had done that.

[Mr. Big Dog 10,747]

Cutting taxes for everyone would stimulate the economy much more than the trillions wasted on stimulus and would have cost less.

There's no evidence to support this statement. There's little to no stimulus to be had from tax cuts for the uber wealthy. Estimates are something to the tune of $0.20 worth of economic activity for every tax dollar cut. It's essentially pissing away money you don't have. There's more stimulus to be had from tax cuts for lower and middle class incomes - it's still less than a dollar worth of activity out of every dollar spent but the ration is more favorable.

With that in mind, you could do the following at a comparatively reasonable cost: Forget any Bush tax cut extension - trim 300 billion p.a. off the deficit. To lighten the blow (espectcially to lower and middle income families), cut a stimulus check of $1,000.00 to each and every one of the 130 million taxpayers. The cost of that would be 130 billion dollars - less than what the Bush tax cut extension would cost just over the next two years for just the top 2% of income earners.

[JohnSmith2007 353]

There's no evidence to support this statement. There's little to no stimulus to be had from tax cuts for the uber wealthy. Estimates are something to the tune of $0.20 worth of economic activity for every tax dollar cut. It's essentially pissing away money you don't have. There's more stimulus to be had from tax cuts for lower and middle class incomes - it's still less than a dollar worth of activity out of every dollar spent but the ration is more favorable.

With that in mind, you could do the following at a comparatively reasonable cost: Forget any Bush tax cut extension - trim 300 billion p.a. off the deficit. To lighten the blow (espectcially to lower and middle income families), cut a stimulus check of $1,000.00 to each and every one of the 130 million taxpayers. The cost of that would be 130 billion dollars - less than what the Bush tax cut extension would cost just over the next two years for just the top 2% of income earners.

You seem to ignore the fact that the rich are the very ones that provide jobs to the rest of us. Those 250K earners are for the most part, small business owners. To punish them with a tax hike will kill jobs. If only one class of people were to get a tax cut it should be them. Without them we would all be out of a job. Your idea of giving $1000 to everyone is a short term solution. The tax cuts to those that create the jobs is a long term solution.

[Mr. Big Dog 10,747]

You seem to ignore the fact that the rich are the very ones that provide jobs to the rest of us. Those 250K earners are for the most part, small business owners. To punish them with a tax hike will kill jobs.

Source for the bold?

Here's some background on the Bush tax cuts:

Extending the tax cuts would be a good way to stimulate the economy.

According to the Congressional Budget Office and other authorities, extending all of the Bush tax cuts would have a small bang for the buck, the equivalent of a 10- to 40-cent increase in GDP for every dollar spent.

Why? As the CBO notes, most Bush tax cut dollars go to higher-income households, and these top earners don't spend as much of their income as lower earners. In fact, of 11 potential stimulus policies the CBO recently examined, an extension of all of the Bush tax cuts ties for lowest bang for the buck.

Allowing the high-income tax cuts to expire would hurt small businesses.

This claim is misleading. If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets -- individuals earning more than about $170,000 a year and families earning more than about $210,000 a year. - that's not "most" but a tiny sliver

Edited November 29, 2010 by Mr. Big Dog

[JohnSmith2007 353]

Source for the bold?

Here's some background on the Bush tax cuts:

Extending the tax cuts would be a good way to stimulate the economy.

According to the Congressional Budget Office and other authorities, extending all of the Bush tax cuts would have a small bang for the buck, the equivalent of a 10- to 40-cent increase in GDP for every dollar spent.

Why? As the CBO notes, most Bush tax cut dollars go to higher-income households, and these top earners don't spend as much of their income as lower earners. In fact, of 11 potential stimulus policies the CBO recently examined, an extension of all of the Bush tax cuts ties for lowest bang for the buck.

Allowing the high-income tax cuts to expire would hurt small businesses.

This claim is misleading. If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets -- individuals earning more than about $170,000 a year and families earning more than about $210,000 a year. - that's not "most" but a tiny sliver

I just don't agree with your numbers. The CBO has a terrible track record of getting things right. In my own experience I have worked all my life for small business. Without exception they are owned by a person or family. In every case if you hurt the owner with higher taxes you hurt the business. Face it, dems don't like business. The fact they want to raise taxes on the very people that create the jobs in the first place shows they haven't a clue as to how things work.

[Mr. Big Dog 10,747]

I just don't agree with your numbers. The CBO has a terrible track record of getting things right. In my own experience I have worked all my life for small business. Without exception they are owned by a person or family. In every case if you hurt the owner with higher taxes you hurt the business. Face it, dems don't like business. The fact they want to raise taxes on the very people that create the jobs in the first place shows they haven't a clue as to how things work.

You don't agree with the statistic that less than 2% of small business income tax returns fall into the category of income for which the Bush era tax breaks shouldn't be extended? That's not as much an opinion as it's data. What's there to agree or disagree with? We can talk about whether this is 2% or 3% or 5% but nowhere is there any evidence that most small bsinesses would have their taxes raised back to 2000 levels. The GOP making it a talking point that the top 2% of income earners are mostly small businesses does not make it so in the real world.

Dems don't like business? Then why is it that thus far only business has actually recovered making record profits while John and Jane America are still strucggling to come back from this recession? All this while Dems are in charge. Odd...