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Works Every Time It's Been Tried
Topic Started: Jun 19 2006, 07:42 AM (202 Views)
JBryan
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I am the grey one
Surging

By The Editors


More than two years ago, when President Bush announced his aim to cut the federal budget deficit in half by 2009, many critics guffawed. They called the goal an impossibility, a naïve and futile effort that would be undermined by the fat-cat Republican tax cuts. A Boston Globe headline declared, “Bush’s plan to halve federal deficit seen as unlikely; Higher spending, lower taxes don’t mix, analysts say.” An Associated Press story went out on the wire with the headline, “Bush goal of halving federal deficits draws skepticism, derision.”

In that AP article, Sen. Kent Conrad, the top Democrat on the Senate Budget Committee, was quoted deriding Bush’s plan: “It’s like so much with this administration in respect to fiscal matters, it’s all spin, all the time.” Former Congressional Budget Office director Robert Reischauer called the proposal “fanciful.” To Democrats, the AP reported, Bush’s goal was simply “laughable.”

But the critics are no longer laughing. Driven by a surging national economy, tax revenues are increasing and the deficit is rapidly shrinking. The president’s deficit-reduction plan looks like it will not only succeed, but will do so years ahead of schedule.

The country was facing the largest projected deficit in history when Bush promised to halve it as a percentage of GDP by 2009. Due to high wartime spending and the residual effects of the 2000–01 recession, the White House expected the 2004 deficit to reach $521 billion, or 4.5 percent of GDP. Bush’s goal was to reduce this to 2.25 percent by 2009.

After all the beans were finally counted, the 2004 deficit came in at $413 billion—roughly 3.5 percent of GDP. The economy had begun expanding, partly in response to Bush’s tax cuts, creating jobs and boosting revenue. This trend continued into the next year, pushing the deficit down to $319 billion in 2005.

This year, the projections look even better. Through the first eight months of this budget year, the deficit is $227 billion—16.7 percent lower than this time last year. That’s largely because government revenues in these eight months have reached $1.545 trillion, up 12.9 percent from last year.

This huge revenue boost means that the deficit is going down even as an out-of-control Congress continues its spending profligacy. Federal spending has already swelled by $130 billion so far this fiscal year—a 7.9 percent increase compared with the same period last year. Such increases can’t be blamed entirely on the demands of the War on Terror, either, as Defense and Homeland Security together account for only 30 percent of Congress’s total spending increases since 2001.

Despite the strong updraft of federal spending, the deficit is on track in the next few years to continue falling until it approaches 2 percent of GDP. This is below the 2.5 percent that has been the national average since 1970, demonstrating that the president’s critics were simply wrong when they claimed that the Bush tax cuts would lead the country into economic ruin.

There is a lesson here, and it is vindicatory of the central claim of supply-side theory: Easing the national tax burden spurs economic growth, significantly mitigating the revenue loss that results from tax cuts. The national economy is a dynamic system, and it responds to the incentives and disincentives imposed on it by government policies. When businesses and individuals are allowed to keep more of what they produce, they produce more. And when investors are allowed to keep higher returns, they invest in more productive endeavors. This boosts GDP, which in turn boosts tax revenues.

We cannot grow our way out of our long-term fiscal woes. Pro-growth tax policies must be supplemented by serious entitlement reform to curtail the huge unfunded liabilities created by Social Security, Medicare, and Medicaid. And spending cuts on other domestic programs would be worthwhile as a way to reduce Washington’s influence to its proper size, quite apart from their effect on budget balances. Surging revenues are a reason to stick with the tax cuts. They are no reason to quit trying to bring spending under control.


http://article.nationalreview.com/print/?q...DhlYjM4MzEwNDk=
"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne


There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it".


Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody.

Eleanor: At my age there's not much traffic anymore.

From The Lion in Winter.
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Mark
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HOLY CARP!!!
Just imagine what it would be like if the burden of income based taxation was eliminated all together!

___.___
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o 0
When I see an adult on a bicycle, I do not despair for the future of the human race. H.G. Wells
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big al
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Bull-Carp
Slowing the rate of digging doesn't get you out of a hole. If the federal government could curtail their spendthrift ways so that spending as a percent of GDP declined as it did several years under the Clinton administration. we might actually see budget surpluses again. Then we could begin to crawl out from under the federal debt and reduce the risk of being beholden to foreign creditors like the Chinese.

Big Al
Location: Western PA

"jesu, der simcha fun der man's farlangen."
-bachophile
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George K
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Finally
The rate of digging may not have slowed, but the bottom is getting closer. Here's a graph of deficit/revenue for the last 10 years;

Posted Image
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"Now look here, you Baltic gas passer... "
- Mik, 6/14/08


Nothing is as effective as homeopathy.

I'd rather listen to an hour of Abba than an hour of The Beatles.
- Klaus, 4/29/18
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George K
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Finally
And compared to other nations:

Posted Image
A guide to GKSR: Click

"Now look here, you Baltic gas passer... "
- Mik, 6/14/08


Nothing is as effective as homeopathy.

I'd rather listen to an hour of Abba than an hour of The Beatles.
- Klaus, 4/29/18
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JBryan
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I am the grey one
big al
Jun 19 2006, 11:14 AM
Slowing the rate of digging doesn't get you out of a hole.  If the federal government could curtail their spendthrift ways so that spending as a percent of GDP declined as it did several years under the Clinton administration. we might actually see budget surpluses again.  Then we could begin to crawl out from under the federal debt and reduce the risk of being beholden to foreign creditors like the Chinese.

Big Al

I certainly don't disagree with you on this and neither do the authors of this editorial:

Quote:
 
We cannot grow our way out of our long-term fiscal woes. Pro-growth tax policies must be supplemented by serious entitlement reform to curtail the huge unfunded liabilities created by Social Security, Medicare, and Medicaid. And spending cuts on other domestic programs would be worthwhile as a way to reduce Washington’s influence to its proper size, quite apart from their effect on budget balances. Surging revenues are a reason to stick with the tax cuts. They are no reason to quit trying to bring spending under control.
"Any man who would make an X rated movie should be forced to take his daughter to see it". - John Wayne


There is a line we cross when we go from "I will believe it when I see it" to "I will see it when I believe it".


Henry II: I marvel at you after all these years. Still like a democratic drawbridge: going down for everybody.

Eleanor: At my age there's not much traffic anymore.

From The Lion in Winter.
Offline Profile Quote Post Goto Top
 
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