Thursday, September 1, 2011

How Big Were The Bush Tax Cuts In Creating Our Deficit?

Super-Economy points out some of the smoke-and-mirrors used by apologists for the Obama Administration, trying to exaggerate the effect of the Bush tax cuts on the deficit problem.  (Remember: English isn't his first language.)
1. Don’t confuse the “Bush Tax Cuts” with “Bush Tax Cuts For The Rich”. Obama’s plan to repeal the Bush Tax Cuts only for those making $250.000 per year will raise one quarter as much revenue as the entire tax cut. 
2. Don’t accept analyses which add the AMT-fix to the Bush-tax cuts. This is an accounting trick. Every modern administration, including Obama, passes an AMT-fix. The Alternative Minimum Tax was designed not to allow the rich to use too many deductions, but wasn’t inflation indexed. Therefore in order to prevent it from hurting the middle class each administration has to pass a law postponing it. 
Over the next decade, the Total Bush tax cuts reduce revenue by about 1.7% of GDP per year (0.4% of which represents tax cuts for the rich). During this period the deficit is expected to average about6.7% of GDP. 

Also, Super-Economy graphs non-defense spending as a percentage of gross domestic product, and points out that the Obama Administration has done something really quite unprecedented--and worse, this is apparently not a temporary response to the recession:
The 2008 crisis was used to justify the expansion of government. But if the expansion was merely temporary, it would not have caused the U.S debt to be downgraded. As the Presidents chief of staff said: "Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before." Using the crises as a pretext, the plan was to expand the size and score of government permanently. 
Thus according to the latest CBO long term budget outlook, and using the Whitehouse own estimate for defense spending, non-defense federal spending is projected to be 19.6% in 2016, when the recession is projected to be long over. Spending in 2016 is projected to be 4 percentage points higher than the historic average, with deficits of 6% of GDP.  
Of course, since Obama's policies have worked out so well for creating jobs for young people, this is just fine!

1 comment:

Robin said...

The current deficit has zero contribution from the Bush tax cuts. They expired in December of 2010.

The current tax rates are the Obama tax cuts. He signed them in December of 2010.