deficit reduction WAS A BLIP!

Parent Cafe
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<p>In response to someone who said Bush’s tax cuts were working and everything was great…ANOTHER VIEW!!! Krugman was right!
Editorial
A Deficit Disorder</p>

<p>Published: July 24, 2005
With much ado, the White House recently announced that windfall tax revenues in the first half of 2005 would probably reduce this year’s federal budget deficit to $333 billion, a $79 billion drop from last year. </p>

<p>Forum: Today’s Editorials
That would be a truly hopeful development if the administration planned to use the unexpected improvement as a starting point for continuing deficit reduction. But no. The White House sees the deficit drop as an opportunity to continue the same policies that caused the red ink in the first place. Specifically, the administration is promoting the deficit’s decline as evidence that tax cuts spur investment and in so doing increase revenue; ergo, tax cutting should continue, particularly for stock- and bondholders. </p>

<p>A big problem with the administration’s reasoning is that much of this year’s bolstered tax revenue is due to the expiration of one of the tax cuts from President Bush’s first term. From late 2001 through 2004, taxes were lower than they otherwise would have been because a temporary tax break allowed business to quickly write off purchases of new equipment. Starting this year, purchases must be deducted more gradually, a change that has increased corporate tax payments in 2005. </p>

<p>Other tax revenue boosters are one-shot deals. A law enacted last year and valid only in 2005 allows companies to bring hundreds of billions of dollars in untaxed foreign profits back into the United States at a special low rate of 5.25 percent, compared with the normal corporate rate of 35 percent. That is inflating corporate tax receipts this year, but is expected to reduce tax revenue over time, since companies will take advantage of the break in 2005 rather than repatriating profits at a higher rate later on. </p>

<p>Meanwhile, revenue from personal income taxes has been higher than anticipated largely because of profit-taking on investments in 2004 - a feat that will be difficult to duplicate in the current choppy financial markets. Moreover, revenue from investments, while welcome, is a far less important source of tax dollars than withholding from paychecks, which is relatively scant in today’s persistently tepid job market. </p>

<p>Even if revenues continued to be substantially higher than expected - a very unlikely prospect - deficits would still be larger than the administration is projecting. Its calculations do not include any costs after 2006 for Iraq and Afghanistan. There are also hidden time bombs in the form of costs that are going to explode just after the projection’s five-year horizon, such as the Medicare prescription drug benefit, which is expected to add $550 billion to the federal budget deficit from 2011 through 2015. </p>

<p>Also unaccounted for are the costs for continuing relief from the alternative minimum tax. That is the tricky provision in the tax code that is supposed to apply to the superrich, but increasingly afflicts nonwealthy taxpayers instead, causing them to forfeit all or part of the savings they were supposed to gain from the Bush tax cuts. Mr. Bush says he is committed to reforming the tax, but has offered no plan. Members of his tax reform panel recently recommended abolishing the alternative minimum tax, but proposed nothing to cover the cost of repeal: $1.2 trillion over 10 years. Simply extending a temporary relief provision that is on the books for this year would add about $200 billion to the deficit over five years. </p>

<p>In Tax Notes, a nonprofit journal, an administration critic recently expressed the common belief that the alternative minimum tax is being allowed to linger on the books because fixing it would expose how utterly unaffordable the Bush tax policies really are. A White House official quickly labeled the charge “absurd.” But what is really absurd is the fiction, now being peddled by the White House, that the budget outlook is improving appreciably on Mr. Bush’s watch.</p>

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<p>Laura, it would be nice if you would cite a source and then link directly to it, instead of pasting entire articles. I’m guessing either the Nation or Mother Jones, but even they copyright their material.</p>

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<p>“Krugman was right!”</p>

<p>Paul Krugman has indeed been right many times, but that was also a long time ago. A long time before he allowed his bigotted political views to cloud his otherwise stellar judgment. I have personally witnessed how Krugman adapts his position according to the audience. On the one hand, you have his NY Times columns who are meant to fuel the animosity of his selected audience towards our current government policies. In this context, Krugman will often use clich</p>

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<p>It was from the NY times this morning. They have fact checkers and I’d trust them before many other iffy sources. A lot of papers and sources would rather not bring up the fact that some sources of revenue are ending and it gives a false reading. I wouldn’t believe any info coming out of any part of our administration for anything.</p>

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<p>“They have fact checkers and I’d trust them before many other iffy sources.”</p>

<p>Ever heard of Jayson Blair? </p>

<p>The NY Times likes to pretend to obtain their facts directly from the horse’s mouth; too bad they often poll the opposite side of the animal.</p>

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<p>Well, I was watching the news and they Admin made big old tadoo about all the new jobs, while at the same time, there was a new pieces about the tens of thousand of layoffs in one week…so while maybe there were “new” jobs, many people were just laid off…</p>

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<p>They’ve been very careful after Jason Blair. Just because you don’t like the facts they quote, doesn’t mean they’re not true…</p>

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<p>Alan Reynolds needs to go back to first grade and learn how to count. You would think after reading his nonsense that there were no deficits and just monumental surpluses.</p>

<p>Why don’t we just cut taxes to zero? Then government revenues can really explode. </p>

<p>We have been doing supply-side economics for 25 years. If you fell asleep 25 years ago and woke up today, you would think after all this growth we would no longer have a deficit. In fact, we would owe no debt at all.</p>

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<p>Xiggie, i just realized you’re 18, I guess if you know more than Princeton prof Krugman and know more than him how to interpret the facts you don’t really need college?</p>

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<p>CGM, what is unusual to have layoffs and job growth at the same time? It is a sign of the times to witness large losses of jobs in one segment of the economy while other are growing rapidly. While this does not do a lot of good for people working in industries that are irremediably doomed, it is noth a very novel concept. It is also impossible to have a perfect balance between our incredible appetite for cheaper goods and maintain the same employment level in the industries that have not been competitive for years. </p>

<p>As usual, there are many ways to look at the same data and draw different conclusions. However, the economic performance of the United States in the past 36 months compares quite favorably to the other members of the industrialized world, especially to the European nations. We cannot, however, forget that the last four years have not been easy for the overwhelming majority of the world.</p>

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<p>Lauras50, thank you for reminding me of one of the great attributes of my young age: taking the time to read what someone has written.</p>

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<p>Laura, your hubris is showing. You keep denigrating–on the basis of age–young people who are clearly your intellectual–um–equals.
Krugman may have once had something serious to say about economics, but at this point in his career, he’s just another looney lefty–like Cornel West–that the “most conservative” Ivy keeps on the payroll. Check out Donald Luskin and his “Krugman Truth Squad” for an ongoing report on Krugman’s unfolding dementia.</p>

<p><a href=“http://www.nationalreview.com/nrof_luskin/luskin200507120940.asp[/url]”>http://www.nationalreview.com/nrof_luskin/luskin200507120940.asp&lt;/a&gt;&lt;/p&gt;

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<p>Xiggi, people lie. Numbers don’t. Look at the deficits of the last 25 years after we went to supply economics. Doesn’t it **** you off that our generation is going to saddle you with debt? My grandparents didn’t do that. They lived within their means. What happened?</p>

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<p>I’m in the employment field and I can tell you the computer field is still hurting and will probably never be what it was, as more and more jobs get outsourced. The jobs in general employment that are being offered are at lower and lower levels, more service oriented and are not at the same rate of pay as the one’s we’re losing. The only people making a lot of money in our new aristocracy are the upper managers who are now able to be hired for 3 months, fail and walk away with millions. At a lower level in the company it would be called stealing. Bush will never admit that things are not going as well for most of the middle class…oh wait…we’ve lost most of our middle class. I don’t think he actually knows anyone below very rich and hey, they’re doing fabulously! So the economy most be great.</p>

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<p>driver, I used to work at the same place as Don Luskin. Gotta love that federal tax revenue chart.</p>

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<p>

Are you actually CGM posting under another name?</p>

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<p>Dstark, I do not look at the economic record of the last 25 years with unabated glee. </p>

<p>In the context of this thread, my comments related to the past few years. While we are starting to be able to compare the impact of the Reagan-Bush three tems, the following Clintons terms, it is way to early to correctly measure the performance of the last years, except by comparing them to other countries.</p>

<p>The jury is still out, and will be for many years.</p>

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<p>Driver, I wouldn’t trust anything in the national review, secondly I hardly think that just because Xiggi believes in the same things that you do that he must be intellectually smarter than I am. The deficits are still a disaster, as Dstark rightly points out and economically we are on a descent. You can not purchase much, if you’re income keeps getting lower and lower. As Ford used to say, “I want my workers to be able to afford my cars!” The top percent can not buy enough to continue our purchasing frenzy by themselves. I’m now working two jobs, I used to be able to make good money with just one. Many of my friends are working like crazy just to tread water…and we’re considered fairly well to do. I’ve seen so many small business go under. I thought we wanted to make them do well, that was the mantra of the Bushies…to help our small businesses grow and hire people. The large businesses are putting us all out of business. Then the large business offshore their workers and put their headquarters out of reach of US tax collects. All you conservative, what business are you in that you feel so successfull, I think I’ll switch to it! Employment has been so tough and most of my competitors are long gone out of business. Great economy!</p>

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<p>Xiggi, it is easy to have economic growth when you borrow yourselves silly. The stock market has gone up about 15 times since 1981. Real estate around Northern Cal has gone up (I’m guessing) 10 times. You’re good with charts…how much has our debt gone up? I’m talking personal debt.</p>

<p>If the jury is still out, don’t be so quick to jump on Cato’s bandwagon.</p>

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<p>lauras50, I see what you see. </p>

<p>So does Robert Reich. I love this speech and question and answer session.
<a href=“http://webcast.berkeley.edu%5B/url%5D”>http://webcast.berkeley.edu</a> Click on events. I believe the speech is around April 5th. He talks about what you talk about.</p>

<p>He says globalization, and technology are increasing the difference between the haves and have nots. I can’t remember if he mentions tax policy. I would if I gave that speech.</p>