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Thread: Were the Bush Tax Cuts Good for Growth?

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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by RightinNYC View Post
    I can't believe I'm doing this, but here.

    Imagine that the economy always grows at 3% per year, absent changes in tax law. If Bush promised that his tax cuts would increase growth and the economy continued to grow at 3%, you'd have a point.

    Now imagine that the economy tends to fluctuate, though it averaged 3%. Imagine that without a change in tax law, the economy would have only grown at 1% over a particular period. Now imagine that because of tax cuts, the growth rate increased to 2%.

    Using your logic, those tax cuts did not create growth because the economy only grew at 2%, which is less than 3%.

    Using actual logic, those tax cuts did create growth because the economy grew at 2%, which is more than the 1% it would have otherwise grown at.

    Now, it's entirely possible that these tax cuts did not actually have an effect on economic growth. However, you'd need a lot more than simplistic arguments about correlation in order to show that. Given the posts we've seen so far in this thread, I doubt we're going to make it to that level of discourse.
    Just to note


    Your example in bold can be used when discussing the stimulus package by the federal government in 2009
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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by Lord Tammerlain View Post
    A tax cut may cause the economy to grow at a faster rate then it would have otherwise, or it may have no effect at all. Plenty of factors are needed to be looked at, including were the tax cuts accompanied by spending cuts, or did the government have to run a stimulative deficit. How was the money from the tax cut spent, on foreign made goods and services, or on domestically produced items.
    100% agreed.

    Simplistic statement saying tax cuts are good for the economy are no better then simplistic comments saying tax cuts did nothing for the economy. The answer is far more complex and involves a large number of areas that would have to be looked at in order to determine if any particular tax cut was benificial, neutral or harmfull to the economy
    Which is why I didn't make a claim either way.

    Quote Originally Posted by Lord Tammerlain View Post
    Just to note


    Your example in bold can be used when discussing the stimulus package by the federal government in 2009
    Also completely true.

    I've frequently defended Obama against the criticism that he's a bad president because the economy is bad. The economy was going to be bad whether the president was Obama, McCain, or Alvin Greene. The way someone should be evaluated is not on how things turned out while they were there, but whether they made them better or worse than they otherwise would have been. As you noted, that's much harder to do than to just say "Oh, well X jobs were lost during his term so he must be a bad president!," which is why so many people prefer that to the hard thinking.
    Last edited by RightinNYC; 11-20-10 at 02:34 PM.
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    Re: Were the Bush Tax Cuts Good for Growth?

    It would be nice if we could go back and look at the promises made by those advocating such tax cuts and then measure them to what they actually produced. This would be an especially prudent thing to do before we walk down that same path again.

    this is from Wikipedia
    There was and is considerable controversy over who benefited from the tax cuts and whether or not they have been effective in spurring sufficient growth. Supporters of the proposal and proponents of lower taxes claimed that the tax cuts increased the pace of economic recovery and job creation. Further, proponents of the JGTRRA asserted that lowering taxes on all citizens, including the rich, would benefit all and would actually pry more money from the wealthiest Americans as they would avoid tax shelters for their money. The Wall Street Journal editorial page states that taxes paid by millionaire households more than doubled from $136 billion in 2003 to $274 billion in 2006 because of the JGTRRA.[5]
    Critics state that the tax cuts have failed to spur growth, while increasing the budget deficit, shifting the tax burden from the rich to the middle and working classes and further increasing already high levels of inequality.[6][7][8][9][10] Economists Peter Orszag and William Gale described the Bush tax cuts as reverse government redistribution of wealth, "[shifting] the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes."[11] Supporters countered that the tax brackets were still more progressive than the brackets from 1986 until 1992, with higher marginal rates on the upper class, and lower marginal rates on the middle class than established by either the Tax Reform Act of 1986 or the Omnibus Budget Reconciliation Act of 1990, so any apocalyptic rhetoric was exaggerated.
    The Congressional Budget Office estimated that the tax cuts would increase budget deficits by $60 billion in 2003 and by $340 billion by 2008. Supporters of President Bush argue that this analysis ignores the potential growth that the act could encourage. Supporters also argue that this would be further supported by analyzing the effect of the economic shock of the terrorist events of September 11, 2001. The terrorist fears, resulting reduction in travel and consumer expenditure, and increased security expenditures, they say, are a prime example of an economic cost shock, and they suggest that the recession of 2001 and 2002 would have been drastically worse had no attempts at promoting economic growth by reducing taxes been made, though there is no empirical evidence to support or disprove this claim (nor could there be). The lag between policy making and economic impact suggests the possibility to be remote, like any fiscal stimulus plan, most of which are fully enacted only when the recession is over.
    This is from the Wikipedia article on the subject
    Sadly the article does not have any quotes from politicians who promised certain results in return for this legislation. If anyone can produce them, that would be most interesting and helpful. We should use the promises made in both 2001 and 2003 as a rubric to test this theory.
    Last edited by haymarket; 11-20-10 at 02:41 PM.
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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by haymarket View Post
    It would be nice if we could go back and look at the promises made by those advocating such tax cuts and then measure them to what they actually produced. This would be an especially prudent thing to do before we walk down that same path again.
    If you wanted to measure them by their actual effect, adjusting for all the factors mentioned above, that would be smart.
    If you wanted to measure them by just looking at the overall economy and comparing that to past growth, that would be dumb.
    Last edited by RightinNYC; 11-20-10 at 02:36 PM.
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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by RightinNYC View Post
    100% agreed.



    Which is why I didn't make a claim either way.



    Also completely true.

    I've frequently defended Obama against the criticism that he's a bad president because the economy is bad. The economy was going to be bad whether the president was Obama, McCain, or Alvin Greene. The way someone should be evaluated is not on how things turned out while they were there, but whether they made them better or worse than they otherwise would have been. As you noted, that's much harder to do than to just say "Oh, well X jobs were lost during his term so he must be a bad president!," which is why so many people prefer that to the hard thinking.
    Here we go! This is actually where I was hoping the discussion would lead.

    Because I was hoping eventually that we would get to the point that to defend the tax cuts as being "good", you'd have to essentially prove a negative - or "it could have been worse".

    This is, of course, the trap that Obama landed in with the stimulus.

    But to a deeper question: why do so many believe that a tax cut is automatically good for the economy? I know that it means people take a little more money home and there's obviously nothing wrong with that - BUT historically the correlations with "growth" don't match up very well. Indeed, they seem to have little to no impact or reltionship to being "good for the economy".

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    Re: Were the Bush Tax Cuts Good for Growth?

    Senator Bernie Sanders of Vermont was on the Thom Hartmann radio show on Friday and he spoke about this. He advocated going back to both 2001 and 2003 and reviewing the testimony before both houses of Congress, the speeches made by members of both bodies and the public discussion at the time. He suggested we should make a list of what we were told these tax cuts would do for the economy and then compare them to what they did or did not deliver. He also said if there were reasons why they did not achieve the results promised that these whould be studied in detail.

    The point was that Senator Sanders wants a national discussion based on facts and results NOT a vote without a national discussion based on ideology. And to that I agree 100%.

    So is that NOT happening? Why is this just more of "I believe in this" or "I do not believe in this". Belief may be fine for religion or the tooth fairy but I hope we can do better when it comes to hundreds of billions of dollars.
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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by FilmFestGuy View Post
    Here we go! This is actually where I was hoping the discussion would lead.

    Because I was hoping eventually that we would get to the point that to defend the tax cuts as being "good", you'd have to essentially prove a negative - or "it could have been worse".
    You made a stupid argument in the hopes that someone would point out it was a stupid argument?



    This is, of course, the trap that Obama landed in with the stimulus.
    Yeah, like was already pointed out.

    But to a deeper question: why do so many believe that a tax cut is automatically good for the economy?.
    And that's an entirely different question than the one posed in the OP. Somehow I doubt this is what you were really getting at.

    Quote Originally Posted by haymarket View Post
    So is that NOT happening? Why is this just more of "I believe in this" or "I do not believe in this". Belief may be fine for religion or the tooth fairy but I hope we can do better when it comes to hundreds of billions of dollars.
    You realize that it was you and FilmFestGuy who were arguing the simplistic position, right?
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    Re: Were the Bush Tax Cuts Good for Growth?

    Tax cuts will always boost short-term growth. The question is whether they boost growth ENOUGH to justify the negative effect on the federal balance sheet. And in the case of the Bush tax cuts, I strongly believe that they do not.

    IMO government spending is usually a better way to stimulate demand than tax cuts...at least over the range of plausible tax rates in the United States. Once you get up to ridiculously high tax rates, it's probably true that tax cuts would be better. But we are nowhere close to that range in this country.

    And to the extent that tax cuts stimulate the economy, I think it's far more stimulative to give it to the lower- and middle-class than the wealthy. The lower- and middle-class are much more likely to spend it, since they spend a higher percentage of their income.
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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by RightinNYC View Post
    You made a stupid argument in the hopes that someone would point out it was a stupid argument?





    Yeah, like was already pointed out.



    And that's an entirely different question than the one posed in the OP. Somehow I doubt this is what you were really getting at.



    You realize that it was you and FilmFestGuy who were arguing the simplistic position, right?
    No...it isn't. I'm arguing that tax cuts have no relationship to economic growth. The question in the OP comes directly from the article that I cited.

    So, if the tax cuts were for "growth", why were the 2000s terrible for economic growth compared to previous decades (hell, even the 1970s had more growth - a lot of other major problems, but there was more growth).

    I want to get to why. What caused such slow growth in the 2000s IF you buy the argument that tax cuts are "good for the economy" (which I do not...). It seems clear that you don't believe that tax cuts are related to growth (and I agree with you), but for those who do believe it, I want to know why they think the growth failed to occur.

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    Re: Were the Bush Tax Cuts Good for Growth?

    Quote Originally Posted by FilmFestGuy View Post
    No...it isn't. I'm arguing that tax cuts have no relationship to economic growth. The question in the OP comes directly from the article that I cited.

    So, if the tax cuts were for "growth", why were the 2000s terrible for economic growth compared to previous decades (hell, even the 1970s had more growth - a lot of other major problems, but there was more growth).

    I want to get to why. What caused such slow growth in the 2000s IF you buy the argument that tax cuts are "good for the economy" (which I do not...).
    I thought we'd moved past this, but it appears that you still don't understand the point. Reread my post above.

    It seems clear that you don't believe that tax cuts are related to growth
    Where did I say this?
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