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The Tax and Spend Spectator
Fiscal Cliff Notes: Part II
Obama’s blaming increased budget deficits on the Bush tax cuts is demonstrably false.
One of the big advantages that President Obama has, as he plays “chicken” with the Congressional Republicans along the “fiscal cliff,” is that Obama is a master of the plausible lie, which will never be exposed by the mainstream media — nor, apparently, by the Republicans.
A key lie that has been repeated over and over, largely unanswered, is that President Bush’s “tax cuts for the rich” cost the government so much lost tax revenue that this added to the budget deficit — so that the government cannot afford to allow the cost of letting the Bush tax rates continue for “the rich.”
It sounds very plausible, and constant repetition without a challenge may well be enough to convince the voting public that, if the Republican-controlled House of Representatives does not go along with Barack Obama’s demands for more spending and higher tax rates on the top 2 percent, it just shows that they care more for “the rich” than for the other 98 percent.
What is remarkable is how easy it is to show how completely false Obama’s argument is. That also makes it completely inexplicable why the Republicans have not done so.
The official statistics which show plainly how wrong Barack Obama is can be found in his own “Economic Report of the President” for 2012, on page 411. You can look it up.
You may be able to find a copy of the “Economic Report of the President” for 2012 at your local public library. Or you can buy a hard copy from the Government Printing Office or download an electronic version from the Internet.
For those who find that “a picture is worth a thousand words,” they need only see the graphs published in the November 30th issue of Investor’s Business Daily.
What both the statistical tables in the “Economic Report of the President” and the graphs in Investor’s Business Daily show is that (1) tax revenues went up — not down — after tax rates were cut during the Bush administration, and (2) the budget deficit declined, year after year, after the cut in tax rates that have been blamed by Obama for increasing the deficit.
Indeed, the New York Times reported in 2006: “An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.”
While the New York Times may not have expected this, there is nothing unprecedented about lower tax rates leading to higher tax revenues, despite automatic assumptions by many in the media and elsewhere that tax rates and tax revenues automatically move in the same direction. They do not.
The Congressional Budget Office has been embarrassed repeatedly by making projections based on the assumption that tax revenues and tax rates move in the same direction.
This has happened as recently as the George W. Bush administration and as far back as the Reagan administration. Moreover, tax revenues went up when tax rates went down, as far back as the Coolidge administration, before there was a Congressional Budget Office to make false predictions.
The bottom line is that Barack Obama’s blaming increased budget deficits on the Bush tax cuts is demonstrably false. What caused the decreasing budget deficits after the Bush tax cuts to suddenly reverse and start increasing was the mortgage crisis. The deficit increased in 2008, followed by a huge increase in 2009.
So it is sheer hogwash that “tax cuts for the rich” caused the government to lose tax revenues. The government gained tax revenues, not lost them. Moreover, “the rich” paid a larger amount of taxes, and a larger share of all taxes, after the tax rates were cut.
That is because people change their economic behavior when tax rates are changed, contrary to what the Congressional Budget Office and others seem to assume, and this can stimulate the economy more than a government “stimulus” has done under either Bush or Obama.
Yet there is no need to assume that Barack Obama is mistaken about the way to get the economy out of the doldrums. His top priority has always been increasing the size and scope of government. If that means sacrificing the economy or the truth, that is no deterrent to Obama. That is why he is willing to play chicken with Republicans along the fiscal cliff.
COPYRIGHT 2012 CREATORS.COM
About the Author
Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
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c. j. acworth| 12.5.12 @ 8:09AM
It would perhaps be equally instructive to show what happened to spending under Bush. A new drug entitlement, plus whatever a spendthrift congress wanted to lard on to the budget. It's why the Stupid Party has no credibility on spending. Did Bush actually veto a single spending bill during his 8 years?
Nancy in NC| 12.5.12 @ 8:39AM
Probably not, but a great question.
Bush was a much nicer man than Ozero, however certainly not a true conservative. The GOP has been infiltrated by GOP progressives that are slightly less toxic than the D type.
The Ruling Class can be found on both sides of the aisle. We as voters have ignored the truth for too long, and our schools have failed to teach basic economics and basic concepts of freedom. Socialism is preferred by those who feel entitled to other people's stuff and those namby pamby feel gooders of the left.
John Navratil| 12.5.12 @ 8:40AM
c.j. acworth,
Bush vetoed nothing in his first term and was, overall, the least vetoing President in history. He vetoed 12 and was overridden 4 time making him among the most overturned President.
My personal favorite was when he did not veto McCain-Feingold, but punted it to the courts.
However, he did veto a spending bill or two. One was SChip for which he was excoriated by the Dems. Ultimately he acquiesced in other ways.
c. j. acworth| 12.5.12 @ 9:28AM
Yes, he did acquiesce. And so the "base line" for spending moved ever higher, never to be rolled back. And yes, Nancy, he was a very nice man. Far more caring about his fellow creature than Obama. That is why he was so destructive. He wanted to "help". Hey, I voted for the guy twice, because I was even more afraid of the alternatives. But the Republican brand for fiscal prudence was destroyed by his lack of leadership on spending. So now we are all screwed to the wall.
Von Mises Jr| 12.5.12 @ 9:55AM
You asked the 64 trillion dollar question, c. j.
While Peter Ferarra and others are focused on the tax rates and the Laffer Curve it really misses the point in the bigger picture.
When Clinton left office in 2000, the Federal Budget was $1.8 trillion. When Bush left Office in 2008, the Federal Budget was $2.93 trillion or an increase of $1.13 trillion in eight years. That was a 63% increase or about 7.9% per year.
Obama increased it from $2.92 trillion to $3.7 trillion in four years. That is a 26% in four years or about 6.5% per year. Of course, we are dealing with higher numbers so the percentages fall as a statistical mirage.
The point is that Bush added $1.13 trillion and Obama added $770B per year reoccurring spending so far. So the conclusion is that Obama is Bush, and Bush was Obama. They are a distinction without a difference.
c. j. acworth| 12.5.12 @ 10:51AM
Yes, and while everyone seems to be arguing about tax rates, no one is talking about spending. Obama wants to raise taxes on the "millionaires and billionaires", but he does not want to use the money thus raised for debt reduction. He wants billions in new SPENDING. Why isn't the Stupid Party making that point whenever one of them gets in front of a camera?
I guess that's why they are called the Stupid Party.
Von Mises Jr| 12.5.12 @ 11:52AM
He proposes to raise taxes of $1.6 trillion in ten years. But he will piss away $1.6 trillion this year more than we have in the next deficit.
He wants another $200B in pork spending for the next Solyndra and Ener1. If he raised $160B in new taxes and spends $200B more in 2013, we are sinking fast.
This is like trying to bail out the Titanic with a water bucket.
Stevemmn| 12.5.12 @ 11:14PM
It's worse than that. It's like trying to bail out the Titanic with a water bucket, and moving the water from one end the ship to the other instead of tossing it overboard. Tax increases and doubling down on spending will do worse than nothing.
ata777| 12.5.12 @ 9:23AM
there was no need to go beyond the first paragraph here. the last election proved that people no longer care what the truth is. truth takes far too much effort.
Von Mises Jr| 12.5.12 @ 10:07AM
The conclusion that seems obvious is that we live in a dream world. We tout that the Republicans are for lower taxes and lower spending. They are not. The Republicans are wolves in sheep's clothing while the Democrats are wolves in wolves’ clothing. At least with the Democrats, they are honest that they are Marxist and you know you are going to get plucked without a kiss. The Boehner and Bush crowd tell you they love you, but you still wake up alone in the morning feeling dirty.
Q: If this were not true, then why wouldn't the Republicans tell us the truth?
A: It is true and that is why they don't explain economics to the "Stupid" people. So they must love "Stupid" people almost as much as Socialist in the Democrat party loves "Stupid" people.
If you want proof, all you need to do is go to the Keynote Christie's Agenda21 "Development and Redevelopment Draft Plan" and they spell it out for you loud and clear.
The difference is that the Democrats love the Marxist model of socialism, and the Republicans love the statist Leviathan socialist model.
Forward to serfdom.
Purp| 12.5.12 @ 11:44AM
It's all about power and money - their own.
But Mr Sowell must be senile... or Nuts.
Never in modern history have tax cuts = tax revenues to go up... the Congressional Research Service, a non-partisan group, proved it with a study reported over the last 65 years, taxes going up did not hurt growth and tax cuts did not increase revenues.
And the Investors Bus Daily is a shill mag for the right ... hardly an authoritative source.
Von Mises Jr| 12.5.12 @ 11:54AM
If I understood what you even said, I would still not try to argue with a fool. One must be a fool to argue with one. I am not. So visit MoveOn.org's site. You may have more luck there.
So just piss off, Caliban.
Purp| 12.5.12 @ 8:16PM
What part of tax cuts don't produce growth do you not understand.
The Bush tax cuts are a perfect example. There was no huge economic spurt after his tax cuts, now were there?
Facts fly in the face of your ideology, but you will not learn, will you?
junkyard infidel| 12.5.12 @ 12:16PM
perp-a-traitor .. the peanut in mr. sowell's turd is more intelligent than you !
Von Mises Jr| 12.5.12 @ 1:38PM
I thought you were going to say corn. Then cornholio would get all excited.
Purp| 12.5.12 @ 8:16PM
Because you say so? Hardly.... another idiot that knows nothing.
JD| 12.5.12 @ 1:42PM
Purp, you lie so boldly yet again.
Tax rate cuts have ALWAYS correlated with revenue increases, both vs prior amounts and vs CBO projections of what revenue would have been without the rate cuts.
Cite your sources.
Purp| 12.5.12 @ 8:21PM
Prove it, Chuckles. That is completely false.
It seems to makes sense, but it doesn't happen in reality.
http://www.nytimes.com/2012/11......html?_r=0
And the actual report you can read for yourself -
Click the link to the study ... that Republicans tried to hide :
http://www.dpcc.senate.gov/?p=blog&id=193
Stevemmn| 12.5.12 @ 11:19PM
Sowell already proved it. Citing the Democratic Party's propaganda arm at the NY Slimes doesn't prove anything.
JD| 12.5.12 @ 11:32PM
Your one outlier study was withdrawn because it was deeply flawed and could not stand up to scrutiny, Purp. No one tried to "hide" it. They debunked it.
No doubt you will continue to post it repeatedly, as though no one can debunk it, just as you do your "study" correlating marginal tax rates and the economy, which I thoroughly debunk every time by showing EFFECTIVE tax rates. You recognize no difference between logic and opinion.
JD| 12.6.12 @ 12:08AM
Oh my, I should have read your new crap more thoroughly. It's the same as the old crap!
Incredible! You just keep ignoring the difference between marginal tax rates and effective tax rates no matter how many times people beat you over the head with it! And you're too stupid to comprehend that you're missing it!
Drunken Sailor| 12.5.12 @ 3:03PM
You didn't even bother to download the report and go to page 411 like Mr. Sowell said did you? Figures. I posted a link to the report for you to save you time. Download it and scroll to page 411.
Keep in mind this is Obama's own council of economic advisors.
Then again you don't really care about facts do you?
http://www.whitehouse.gov/admi.....-President
Purp| 12.5.12 @ 8:38PM
Yes, I did... but can you read a chart?
Right after the Bush Tax Cuts in 2001 and again in 2003, tax revenues FELL. Read that - FELL!
By everyone's accounts tax revenues gained when the Fed kept rates low and the mortgage industry and Wall Street bubbles took off after 2005 to 2007. (Hardly what you would call sustainable economic growth, now is it? Especially when we clearly have the evidence of the result today don't we? )
No, you are wrong just like Sowell is. But believe in your little theories of human behavior, which historically is unpredictable.
Not everyone acts the way you expect them to, but history shows they surely don't act the way you say they did.
JD| 12.5.12 @ 11:35PM
If we are to believe your absurd notion that the impact of federal policies is immediate, then I suggest you look to the 1990s, where the economy went downhill after Clinton's tax hikes and only started improving when Republicans took office and started improving things.
Bush inherited a downturn from Clinton, but made sure it was short. Unfortunately, Barney Frank et al would not let him stave off the housing bubble.
CJW| 12.5.12 @ 5:35PM
Purpie the Village Idiot's view of the unborn child:
"Purp| 11.7.12 @ 1:16PM
The unborn have no rights - they are biological entities until God allows them to be born."
Who Knows?| 12.5.12 @ 12:03PM
Figures lie and liars figure.
And, Americans are by and large ever in the MEGO mode when it comes to numbers.
They are numb to numbers, and it will take what numbers refer to that make the difference.
So, say gas goes to $10 a gallon. Maybe THIS will force people to get it, that they have to WORK longer for the same amount of gas than when it was $3 a gallon.
Those days are coming.
spike59| 12.6.12 @ 5:45AM
ONly fitting that the 'Golden State', along with Hawaii and NYC, Obamazombie holding pens all, are now, or are set to be, the most highly taxed places in the country-you ordered it from the menu, Dems, now EAT IT
http://blogs.sacbee.com/capito.....-rate.html