Are the Bush Tax Cuts the source of deficit?

Good info Hornpharmd.

As many of us argued when the Bush tax cuts were enacted and we fought 2 wars off the books, instead of tax cuts, we should have run a balanced budget for a while so that if there was a big downturn in the economy, we would have the ability to limit it by significant stimulus spending and tax cuts.

Buit unfortunately, we were so far in the debt ditch, that when the economy did flirt with a depression, the significant tax cuts (1/3 of the stimulus package) and stimulus spending neccesary to uplift the economy also put our future economic health in jeopardy.

The medicine to fix the economy is toxic, but tolerable if we had not built up so much debt during good times.

I would have respect for Tea Party if they had been vocal opposing the Bush tax cuts and supporting McCain as he fought against them. Undoubtedly there are some in the Tea Party movement who did oppose the Bush tax cuts and fighting two wars off budget, but as a group, they sat silent on the sidelines.

And now, they appear to refuse to really tackle the debt by both reducing spending and increasing revenue.
 
Guys, we get it. Revenue has reduced. But talking about increasing tax revenue relative to decreasing spending is akin to getting into a car wreck, sustaining internal bleeding and a broken wrist, and bitching incessantly about the wrist. Perhaps you're a wrist doctor, or some other analogy to your tax-increasing ideology. But common sense dictates in an obvious and blatant manner that spending is 90% + the problem here.
 
It's just beyond me why people keep blaming Social Security as the for the deficit. First off, it is independent from the Congressional Budget, and second, it's bringing in more receipts than expenditures as it has been every year since 1981.

Social Security Balance Sheet

The only effect it has on the deficit is Congress borrowed a huge sum of money from it ($2,608,950,000 as of 2010) and has to pay interest to service this debt ($117,498,000 in 2010). So they are trying to figure out how to convince the public that it would be appropriate to default on this debt.

Taxpayers paid into this fund under the understanding that it would be used for one purpose, a safety net for retirement income. Congress has instead used it as a personal line of credit so they could spend more than they taxed for other things like above budget wars.

Now that people are suddenly worried that we've exceeded our credit limit, Congress needs to either find a source of revenue or cut spending from within the annual budget, not rob the independent Social Security Trust Fund. Defaulting on this debt would be a complete missapropriations of these funds.
 
Great post Maryland. I agree. I think SS is just one of those hot button topics that they use to galvanize the public to support another issue.
 
dheiman - I don't pretend to be a tax policy expert, nor do I think there's any magic number or magic mix of taxes.

That being said, I think we can at least start with letting the Bush tax cuts expire. They have lowered revenues from where revenues would be, they were meant to be temporary when first enacted, and they have not provided us with the positive economic effects that were promised/espoused. Not to mention the fact that after the revenue cuts were passed, spending has not slowed down at all and we entered two unfunded wars. That is not a good recipe.

You'll never see me touting a taxes-only approach, but I think a good first step in tax policy would be to do away with temporary tax cuts that didn't have the intended effect and have actually helped dig the hole deeper. Don't you think that's a fair place to start? If not I'm curious why, sincerely.
 
JM I completely agree that our government failed all of us by continuing to increase spending even after the reduction in income due to the tax credits. I also agree that there is very little credible argument to be made that justifies most if not all of the wars we are in currently. Yes I count Libya too. I'm just not convinced that we help the debt situation though by taking more money away from tax payers.
I'm not in the top brackets and so eliminating the credits on only the super rich will not affect me directly but people budget on what they have or will have. Many of the top earners own companies and taking money away from them does not encourage them to hire.
I can agree though that just extending the credits do nothing for the economy either, but eliminating them could hurt more than the government income gains account for.
It just seems to me like the only logical solution is to drastically reduce gov spending including bowing out of wars and straight line % cuts (no figure in mind). If we need to tax, let's tax in the form of tariffs. Let other countries selling all their crap to us take on some burden.
 
Uninformed, couldn't the same arguments for the economic and fiscal effects of tax cuts versus tax hikes be made for increases and decreases in spending?

And the tax cuts in the cases of Harding-Coolidge, Kennedy and Reagan were from much higher rates, meaning the multiplier effects of the cuts would be much greater. The same effects are not realized with lower starting rates, see Bush Tax Cuts, because, it'd be at a different point on the Laffer curve.
 
Oh crap. For us simpletons k.I.s.s. Go with a flat tax, no deductions, and give us back all we have paid into SS and dump it.
Do that and we reduce IRS by what 80 %?
What I hate about the blanket "eliminate the Bush tax cuts" is the marriage penalty. It has always pissed me off that the single rate was not 1/2 of the marriage amount. But, if you eliminate ALL deductions it no longer matters.
Hookem
 
Your professorial tangent missed my point. I'm not suggesting that the stimulant effect should be the basis behind tax policy. I'm suggesting we acknowledge the fact that tax cuts can be stimulative if they are substantial enough. Further, the lower the rates, the less opportunity to have a stimulating effect.

Your point that tax policy should only be about financing government is fine, but we've been WOEFULLY short on that account. I can't take you seriously if you believe that taxes just aren't low enough, and if only they were lower we would have generated enough revenue to keep up with spending. We definitely need to curb spending, but we also have to acknowledge the fact that we've disregarded our growing debt for decades and we desperately need to bring in FAR MORE money than we pay out. The only way to pay off debt is to bring in more money than you spend. I don't believe we can do that under the current tax system without the destruction of the social contract that we've built in this country over the past 6-7 decades - which I believe is the ultimate goal of the GOP/Tea Party and why they are on this crusade against ANY talk of tax increases.

The Laffer curve is something fun to talk about with respect to economics, but there's one glaring problem - the GOP ALWAYS believes that our taxes are too high. They always believe that lower rates will be stimulative. This is a fundamental error in thinking because it's the amount of the CUT, and not the rate itself, that is stimulative. Long-term low rates have left us woefully short on revenues, led to a concentration of wealth that is disastrous to our economy, and left us with no ability to cut rates during ****** times to stimulate the economy.

I'm curious - where do you think we are on the curve right now?
 
I understand your distrust of the gov't to use excess revenue to pay off debt....but who else can pay off the debt of the US gov't other than the US gov't? Seriously....who is going to reduce our debt if it's not the US gov't? I agree we need to get people in office that will do the right things (and that's really our base problem), but financially the only entity that is going to legitimately reduce the US gov't debt is the US gov't.

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