May 20, 2010

Not the Cause of the Surplus Swing

Justin Katz

One gets the sense that when certain commentators on the left claim that "tax cuts for the rich" were the most substantial cause of our government's deficit, they simply mean that the cuts were the part that they liked the least. According to Brian Riedl, the tax cuts — especially just those for "the rich" — have been a relatively minor factor:

... among tax-increase advocates, it has become an article of faith that President Bush's 2001 and 2003 tax cuts caused the budget deficit. Newsweeks Fareed Zakaria echoed this conventional wisdom recently: "The Bush tax cuts are the single largest part of the black hole that is the federal budget deficit." Similarly, in 2004, when Sen. John Kerry , Massachusetts Democrat, accused Mr. Bush of having "taken a $5.6 trillion surplus and turned it into deficits as far as the eye can see," he focused on "Bush's unaffordable tax cuts for the wealthiest people." ...

Instead, the largest cause of the swing (33 percent) was economic and technical revisions, arising from CBOs understandable failure to anticipate two recessions and two major stock market corrections over the next decade. Other causes of the lost surplus were the 2009 stimulus (6 percent), other new spending (32 percent), new net interest costs (12 percent), and other small tax cuts and tax rebates (3 percent). ...

Furthermore, Mr. Kerrys quote further singled out "tax cuts for the wealthiest people." On that theme, Mr. Obama has proposed ending the tax cuts only for those earning more than $250,000 annually. Yet CBO data shows that just 25 percent of the tax cuts went to those making more than $250,000. Therefore, the "tax cuts for the wealthiest" come to approximately 4 percent of the total swing from projected surpluses to actual deficits.

I guess that massive amount of new spending (initiated under Bush and taken to the heights of parody under the current administration) doesn't count, though, since it was good and noble and just what government ought to be doing.

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The Court Appointed receiver can tell Central Falls what to do but doesn't have the power to throw out contracts and debts from creditors. Only Federal Chapter 9 Bankruptcy has that power.

What will really change here? Nothing.

The receiver will force them to raise taxes as much as possible - something that could be done without a receiver and they will have to have layoffs because they can't touch the contracts.

The funny thing is that raising taxes in CF will (I'll wager) mostly end up being paid by Uncle Sam through Section 8 so who will pay for this nightmare one way or the other? Taxpayers who actually pay taxes. The hard working people that live in CF & pay taxes (the real minority there), well I feel sorry for them. They are stuck between a rock and a hard place.

Layoffs are the threat that make these muni unions jump. Carcieri had the opportunity to call the union bluff but wimped out. Larisa and company dealt with an expired contract and won but this situation is different.

The state should simply authorize Chapter 9 Bankruptcy but that would mean union losses and thats unacceptable to all the union supporter in the GA which is just about all of them.

11 USC 903 - Reservation of State power to control municipalities

This chapter does not limit or impair the power of a State to control, by legislation or otherwise, a municipality of or in such State in the exercise of the political or governmental powers of such municipality, including expenditures for such exercise, but

(1) a State law prescribing a method of composition of indebtedness of such municipality may not bind any creditor that does not consent to such composition; and

(2) a judgment entered under such a law may not bind a creditor that does not consent to such composition.

Posted by: doughboys at May 20, 2010 2:20 PM

Sorry this went into the wrong post here. Please delete these - thanks

Posted by: doughboys at May 20, 2010 2:21 PM

>> was economic and technical revisions, arising from..... understandable failure to anticipate two recessions and two major stock market corrections over the next decade.

Hah Hah Hah Hah......
That is the most entertaining excuse I've ever heard for the conservatives mishandling of the country and the economy!

But, heck, keep trying to rewrite history! It won't work.......hard to imagine the Washington Times even being entered into the record...

But, for now, I can't stop laughing...that's rich stuff...
"economic revisions..... arising from..... understandable failure"

That is quite a joke...and a car accident is a revision of our route, caused by an understandable failure to avoid the tree.

Posted by: Stuart at May 20, 2010 6:54 PM

Maybe I am mistaken again...thinking that conservatives really care about facts and the truth - but here are the generally accepted charts and figures about the Deficit and the reasons:

You might want to take notice of the combination of the Bush cuts and his wars being by FAR the vast drivers of debt and deficit.

Just saying.......I doubt the Washington Rev. Moon reporter did this level of research.....

Posted by: Stuart at May 20, 2010 7:01 PM

""tax cuts for the rich" were the most substantial cause of our government's deficit,"

Quite simply, there isn't a level of taxation that could fund Congress' spending for the last two years.

"initiated under Bush and taken to the heights of parody under the current administration"

Well said.

Posted by: Monique at May 20, 2010 7:23 PM

A more fitting way of expressing it, Monique, might be to say that Obama was handed the car that Bush had crashed into a tree and asked to win the Indy 500 with it within 1 month.

A person, business or org can only work with what they have or are given. In the case of our current President, he was handed the largest pile of crap in recent history...not by "understandable failure", but because of intentional and horrible steering of this country in the wrong direction.

Of all the crazy ideas that Tea Partiers and Neo-cons have, the craziest one seems to be that you can wave a magic wand and make all the bad things....which took 10-30 years to create....go away!

That's akin to me building up credit card debt, school debt, a giant mortgage and other deficits over my entire life and then........on New Years Eve they suddenly disappear........

C'mon, have some reason......just a bit of basic logic and understanding of cause and effect.

Posted by: Stuart at May 20, 2010 7:33 PM

Stuart, as ageeable as i generally find some of your commentary on GWB, your habit of disregarding the roles that dems played over the past 9 years discredits you. The "tax cuts for the rich" - really an across the board tax cut - was not the cause of the budget deficit but rather an ill conceived [snip] campaign to "spread democracy" that was embraced by Obama's top 2 officials when they were senators.

And your "New Year's Eve" analogy is strange, given that Obama has excused school loans, mortgage debts, and credit card fees...

Posted by: jp at May 21, 2010 10:04 AM

It is certainly impossible for a short discussion on a comments section to cover all bases. I tend to be more a big picture guy.....and that big picture is this:

1. Reagan and his friends "let the Bull run loose", which was everything from trickle down to tax cuts which were not paid for......

2. The Newt revolutions (Contract on America) in 1994 ushered in almost complete Republican control from 1994 to 2006. During that time, the regulations were stripped which allowed for the Wall Street banks to become Casinos.

3. GW and his controllers (and friends) then sold the country further down the river (to corporations) and cut regulations and taxes in a irresponsible matter - meaning they cut NEEDED revenues as well as regulations. They basically let the Fox eat the chickens.

Obama was dealt by far the worst hand than any President in modern history has had - and, IMHO, is doing a bang-up job considering that.

However, Justins attempt to act like all this supply side, trickle down, deregulation, tax cuts for the rich, insertion of religion into government, foreign adventurism, etc.....was just "initiated" under Bush is a crazy notion. The more accurate take would be that the ideas were brought to their logical conclusion under Bush/Cheney.

What is happening now are emergency attempts to cure the patient. We might not even be able to succeed in that, but we do have to try. There is a good chance we will be sunk for decades as a result of allowing multi-national business interests and general selfishness to run our country.

Posted by: Stuart at May 21, 2010 11:11 AM
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