“Why America Is Going To Miss The Bush Tax Cuts”
Peter Ferrara, Forbes:
President Obama seems to have a strategy to terminate all of the Bush tax cuts, not just those for “the rich,” as he has been saying since 2008. He is offering the Republicans exactly zero concessions in the “fiscal cliff” negotiations. No spending cuts, no entitlement reform, no compromise on the rates. It is entirely my way or the highway, and if the Republicans refuse to do everything exactly as he demands, he will let the Bush tax cuts expire entirely, for the middle class and working people as well as the upper incomes, and blame the Republicans for refusing to go along with him, and for the economic results.
It is a cynical game worthy of an undeveloped, third world country, not the United States of America. But this is just one more reason, with many more to come, for the American people to regret the mistake they made on Election Day.
Well, yes and no. Only those fooled should or will regret what they did on election day. For the rest, it is precisely because they support such a cynical game, and the replacement of liberty with a command and control statist economy — or at least, the redistributionist aspects of that economy that work in their short-term economic interests — that they voted the way they did in the first place.
Because so many major media institutions, like the New York Times and the Washington Post, have been so duplicitous and dishonest in discussing the Bush tax cuts, most Americans don’t know much about them, even though they have been living with them for 10 years or more now. Indeed, most of what they think they know is not true. […]
President Bush and his Congressional Republican majorities at the time cut taxes for everyone in the 2001 and 2003 tax cuts. Indeed, they cut more for lower and middle income taxpayers than they did for “the rich,” as Obama calls the nation’s job creators, investors, and successful small businesses. The top tax rate was cut by only 13%, while the lowest rate was cut by one-third, 33%.
According to official IRS data, the top 1% of income earners paid $84 billion more in federal income taxes in 2007 than in 2000 before the Bush tax cuts were passed, 23% more. The share of total federal income taxes paid by the top 1% rose from 37% in 2000, before the Bush tax cuts, to 40% in 2007, after the tax cuts.
In contrast, the bottom half of income earners paid $6 billion less in federal income taxes in 2007 than in 2000, a decline of 16%. The share of federal income taxes paid by the bottom 50% declined from 3.9% in 2000 to 2.9% in 2007.
The Bush tax cuts also included a doubling of the child tax credit from $500 per child to $1,000 per child. Because of that, and the 33% cut in the bottom tax rate, nearly 8 million more people dropped off the federal income tax rolls entirely, paying zero federal income taxes. Indeed, under the Bush tax cuts, the bottom 40% of all income earners not only paid no federal income taxes, as a group on net. By 2009, they were being paid cash by the IRS equal to 10% of all federal income taxes.
— Which data, ironically, becomes an argument for tax reform — with a broader base of taxpayers “having skin in the game” — and against “compassionate conservatism,” which is just a GOP establishment paradigm for vote pandering, one that fails because the GOP, for all its attempts to subsidize its way out of its cartoonish depiction as the “Party of the rich,” can’t shake that label, no matter how much they give away in the form of tax credits to those who don’t pay federal income taxes to begin with. A flat, lower rate across the board and a simplified streamlined code with fewer deductions — or else a fair tax (though this would require a Constitutional amendment) — is what the GOP should be pushing. Not its own brand of wealth redistribution.
Still, the rate reductions were preferable to anything the Democrats had to offer, and the economy, as a result of the rate cuts, did quite well, “progressive” revisionist history notwithstanding.
[…] By 2007, the deficit was down to $160 billion, less than 15% of Obama’s deficits today. Total federal revenues soared from $793.7 billion in 2003, when the last of the Bush tax cuts were enacted, to $1.16 trillion in 2007, a 47% increase. Capital gains revenues had doubled by 2005, despite the 25% capital gains rate cut adopted in 2003. Federal revenues rose to 18.5% of GDP by 2007, above the long term, postwar, historical average over the prior 60 years. CBO was projecting surpluses to return indefinitely in 2012 through the end of its projection period in 2018.
Bush did increase federal spending as a percent of GDP by one-seventh, erasing the federal spending cuts enacted by the Republican Congressional majorities in the 1990s. But even with that, deficits during the Bush years averaged just 2% of GDP, one-third less than the average over the prior 50 years. President Obama’s deficits have averaged 5 times as much, at 9.1% of GDP.
The proof is in the pudding over the Bush tax cuts. They were followed by a record 52 straight months of job creation, producing 8 million new jobs, with the unemployment rate falling to 4.4%. Business investment spending, which had declined for 9 straight quarters, reversed and increased 6.7% per quarter, producing all those new jobs.
Because of that increased investment, labor productivity soared by 2.5% annually from 2003 to 2007, higher than the averages of the 1970s, 1980s, and 1990s. As a result, real after tax income per capita increased by more than 11%.
Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. After the Bush tax cuts started in 2001, quickly ending the 2001 recession, the economy continued to grow for another 73 months. From 2000 to 2007, real GDP grew by more than 17%, meaning an additional $2.1 trillion for the American people.
This was mostly the opposite of what President Obama has produced, with his neo-Marxist Obamanomics, particularly unemployment more than twice as high, declining middle class incomes, soaring poverty, weak job growth, stagnant stock market values, collapsing business investment, and negligible growth in GDP.
Of course, the Bush tax cut boom was ended by the 2008 financial crisis. But as discussed in many previous columns, that was caused by the excessive overregulation of President Clinton’s home ownership promotion policies, creating the subprime mortgage market and the housing bubble, and by President Bush’s cheap dollar monetary policies. Obama’s foolish argument that the Bush tax cuts caused the 2008-2009 recession is so dishonest that abusive propaganda alone should disqualify him from office.
Obama’s gleeful termination of the Bush tax cuts will produce just the opposite results of those tax cuts. The combination of all the tax rate increases, along with Obama’s abusive overregulation, and the Fed’s continued mischief, will throw the economy back into recession next year. Unemployment will soar back into double digits, breaking the post depression record of 10.8%. The deficit will soar to over $2 trillion, setting new all time world records. The national debt as a percent of GDP will gallop past Greece.
Middle class incomes will plummet further. Poverty will soar to new all time records.
We can’t afford the Bush tax cuts, as Obama says? We can’t afford to terminate them.
This, of course, depends on which “we” Ferrara talks of. Obama and the progressives know how this works. They know what is likely to happen. But they also know that they are expert at managing the crisis and the narrative — who and what to scapegoat, with the help of a compliant propaganda arm in the mainstream press and media — and so they feel that once they crash the system, they’ll be able to convince Americans that the rot and ills of capitalism and “income disparity” which prevented the incorporation of social justice and egalitarianism were inherent to the founding documents, which we must re-work to form a more compassionate system, one with “positive rights” and firm government control.
That is, China, without the overt communist baggage. You can hear this in the longings for totalitarianism, be it from Obama or Thomas Friedman or Paul Krugman or any of the other liberal fascists who dream of a kind of “benevolent” police state with themselves installed as the permanent ruling class and its permanent counsel.
Obama’s ploy of blaming all of this on the Republicans will not work this time. The public knows the Bush tax cuts were adopted into law by the Republicans, with complete Republican control of Congress and the White House at the time. It will be too obvious that it took President Obama and his new neo-Marxist Democrat Party to let them expire.
Enjoy the new Obama recession. You and your neighbors voted for it.
Well, I’ve tried to make this case as well, but unfortunately, the feckless cowardice of the GOP House leadership and many in the “conservative” opinion matrix who can’t see beyond their own short-term molestation by the media — and so they are in full-on surrender mode, negotiating with themselves even as Obama plays golf or travels around giving populist class warfare speeches or prepares for a tax-payer funded 20-day Hawaiian vacation — has blunted the power of the counter-narrative, which as it happens is also the truth: that Obama and the “progressives” (and Howard Dean came right out and told us this) want taxes to rise on everyone, with the result being a shrinking private sector, a depleted middle class, increased control of available revenue by the government (and the coming claim that more is needed, when revenues dip as taxes rise, which will lead to “solutions” like taking over 401ks and a VAT), and a permanent ruling class controlling the managed masses.
Having gauged the result of the November elections, the House GOP has concluded most of the American people are simply too stupid to understand the state of our economic peril. And as a result, they must begin pandering to this stupidity rather than representing those of us who haven’t been taken in by the New Left’s thinly-disguised Marxist transformation of the of country. Because if you can’t beat ‘em, join ‘em — and besides, we’ll still keep up the pretense of a two-party system, which allows those even in the “opposition” Party to come out of the deal flush and taken care of.
The ship is sinking. And Boehner has signaled that it’s every man for himself.