Just a reminder: this is a spending crisis, not a revenue crisis

posted at 12:21 pm on December 6, 2012 by Ed Morrissey

We’re hearing a lot of nostalgia for the Clinton era in this debate over the upcoming fiscal cliff.  Democrats argue that we need to return to the Clinton-era tax rates in order to get back to Clinton-era budget stability, but that argument utterly founders on the facts — and I’m not the only one to notice that.  Michael Barone points out a few inconvenient truths in today’s New York Post about revenues and tax rates from the Clinton era to show that the current fiscal crisis comes from the other side of the ledger:

Over that period of nearly three-quarters of a century, federal receipts have never exceeded 20.9 percent of gross domestic product. That was the number for the war year 1944.

The highest number since was the 20.6 percent of GDP in 2000, the climax of the dotcom boom. In the Obama years, federal receipts have hovered at 15 percent of GDP.

That’s just because tax rates are too low, Obama backers reply. Just raise the rates on high earners, and the problem will be solved.

Actually, high earners don’t make enough money to close the current budget deficit. You’d need to raise taxes on middle-income earners too.

But we have had higher income tax rates in most of the years since World War II. What history and Table B-79 show is that even much higher rates — like the 91 percent marginal rate on top earners imposed from the 1940s to the 1960s — have never produced federal receipts higher than 20 percent of GDP.

Why is that? As the late Jack Kemp liked to say, when you tax something, you get less of it. When the government took 91 percent of what the law defined as adjusted gross income over a certain amount, not many people had adjusted gross income over that amount.

Let’s say, though, that a return to Clinton-era tax rates would produce 20.6% of GDP in federal revenue.  We’d still have massive deficits, because we’re spending twenty-five percent of GDP at the federal level.  In order to return to the Clinton era, I argue in my column for The Fiscal Times, we’d have to undo the spending spree that took place in both the Bush and Obama presidencies:

In his eight years as President, Clinton reduced federal spending to 18.2 percent of GDP from 22.1 percent, thanks in large part to a Republican-controlled Congress that forced the issue.  Defense spending as a portion of GDP declined by 1.8 points, but non-defense spending dropped by 2.2 points.  Clinton and the Republicans in Congress cut spending on domestic discretionary programs as well as entitlement spending through welfare reform.

What followed afterward is instructive to the real problem of our current trillion-dollar trajectory of deficit spending.  George Bush increased federal spending as a share of GDP by 2.6 points in two terms, and it wasn’t just spent on defense; the increase was split evenly between defense and non-defense spending, a remarkable statistic considering the two wars waged in those eight years.

Barack Obama managed to hike it 3.5 points in just one term, with 3.2 points going to non-defense spending.  Under Obama, federal spending now exceeds 25 percent of GDP, and his has been the biggest increase of any of his predecessors over the last 60 years – even for two-term Presidents.

The real debate over deficits isn’t over whether to go back to Clinton-era tax rates.  It’s how to get back to Clinton-era spending levels, and then create a tax system that will adequately fund it. The 18.2 percent level of federal spending is one piece of Clinton-era nostalgia worth recalling – as well as the bipartisanship that eventually produced it.

The column should have included a link to the analysis provided by Cato’s Steve Hanke in his fact-check of the roundtable on Meet the Press this week.  Professor Hanke (Johns Hopkins University) developed this table from OMB source data, which clearly shows how, when, and where we dug ourselves into this debt and deficit trap.  Here’s a hint — it didn’t come from defense spending on wars:

George Will lays out what Clinton-era policies would look like today had they been continued, or reimposed:

Democrats insist that the manufactured unpleasantness due Jan. 1 is a crisis of insufficient revenue. But Jeffrey Dorfman, a University of Georgia economics professor, thinks arithmetic says otherwise. Writing for RealClearMarkets, he says that possible tax increases and spending cuts would reduce the current deficit by less than a third, leaving a deficit larger than any run by any president not named Obama.

At the end of the Clinton administration, when the budget was balanced (largely by revenue generated by commercialization of the Internet), annual federal spending was $1.94 trillion and revenue was $2.10 trillion. “Adjusting for inflation and population growth since the start of 2001,” Dorfman writes, “today’s equivalents would be $2.77 trillion and $3.00 trillion,” and a $230 billion surplus.

What is to blame for today’s huge imbalance? The George W. Bush tax cuts? The recession? Obama’s spending? Dorfman answers yes, yes and yes — but that “spending is the main culprit” because: Today federal revenue is $2.67 trillion (slightly less than “the Clinton equivalent”) and spending is $3.76 trillion, so we are spending $987 billion more than we would be if we had just increased Bill Clinton’s last budget for inflation and population growth.

We cannot continue to spend at this rate, not without massively confiscatory tax rates across the broad spectrum of earners.  We have to cut spending dramatically in order to even get close to balance, and reverse the free-spending trend of the last twelve years.  Nothing else will work, and massive confiscation will end up crashing the economy and making the deficit situation even worse.

If we go back to Clinton-era tax rates, we have to go back to Clinton-era spending rates too in order to solve the problem.  That means entitlement reform and serious cuts in spending now as well as in the long term.  Everything else is simply hobby-horse riding.

Will anyone get serious about addressing the real cause of the crisis?  David Harsanyi hasn’t seen any reason for optimism from either side yet:

The “fiscal cliff” deal House Republicans and President Barack Obama are debatingcan be called many things — the “avoiding a political nightmare” deal or a “Yes, Mr. Obama, may I have another” deal — but please let’s stop referring to it as a “deficit reduction” deal. We’ve yet to see a serious proposal on debt.

Actually, by proposing a tax increase for spending with no real corresponding cuts, the president has been arguing for growing deficits. And with a priority on “fairness” over prosperity, any chance of easing the $16 trillion national debt through an economic boom in the near future is improbable. …

But all of Obama’s pro-debt expansion policies don’t excuse Republicans for calling their own proposala “credible” $2.2 trillion plan on “deficit reduction.” Even if we were to concede for a moment that the plan would cut the debt, by the time we realized $2.2 trillion in savings, the Congressional Budget Office projects that debt as a share of GDP will have reached 100 percent. By 2035, we’re looking at 200 percent.

Or put it this way: The entire Republican plan would only pay down the $220 billion in net interest the United States owes on its debt every year. Well, if by some miracle that interest stayed at $220 billion. Which it won’t.

The Republicans’ offer also contains $800 billion in new “revenue” garnered from tax reform — partially from closing loopholes on the wealthy — which surrenders to the notion that “revenue” rather than “spending” drives the deficit.

I’d trade some revenue for a serious effort to solve the actual drivers of the crisis.  So far, I haven’t seen one yet, either — with the exception of Simpson-Bowles, which for all its flaws actually gets the US moving in the right direction, and the Paul Ryan plan, which has no chance of even getting another hearing in the Senate.  Republicans should present Simpson-Bowles in toto and dare Democrats to vote against it.


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I think most of us here would HAPPILY go back to Clinton-era tax rates if we’d also go back to Clinton-era spending.

I know I certainly would.

Washington Nearsider on December 6, 2012 at 12:24 PM

So the only actual solution isn’t being seriously discussed by either party? Surprise!!!

Cindy Munford on December 6, 2012 at 12:28 PM

Howard Dean: “The Truth Is Everybody Needs To Pay More Taxes, Not Just The Rich”
http://www.realclearpolitics.com/video/2012/12/06/howard_dean_the_truth_is_everybody_needs_to_pay_more_taxes_not_just_the_rich.html

HOWARD DEAN: The only problem is — and this is initially going to seem like heresy from a progressive is — the truth is everybody needs to pay more taxes, not just the rich. And it’s a good start. But we’re not going to get out of this deficit problem unless we raise taxes across the board, to go back to what Bill Clinton had and his taxes. And if we don’t do that, the problem is the pressure is going to be on spending even more.

Someone on the left lets the truth slip out.

Expect the left to want to steal what you have – it’s what they do.

Galt2009 on December 6, 2012 at 12:30 PM

A Lawyer’s Tips on Negotiating for Dummies and Congressional Republicans
http://townhall.com/columnists/kurtschlichter/2012/12/06/a_lawyers_tips_on_negotiating_for_dummies_and_congressional_republicans/page/full/

Their first step is to stop showing fear and to start counter-attacking. So America falls off the fiscal cliff? Who cares? Hell, a substantial number of the rich and sorta-rich are Democratic voters in blue states anyway. Let them put their money where their progressivism is. And if there’s another recession, awesome. We call that a teachable moment for America about what happens when its president is a spendaholic who would rather campaign than lead.

Sound a bit, well, crazy? Unreasonable? Even scary? Good, because a skilled lawyer understands the awesome power of being the craziest, most unreasonable and scariest guy at the table. Obama is hanging tough only because he thinks – he knows – the congressional Republicans are dying to fold well before he pays any kind of price.

The GOP knows the worst case scenario – rates on everyone go up and sequestration. All they have to do is be willing to take the hit for longer than Obama. The GOP has an advantage – the liberal media will screw them no matter what they do. This gives them incredible freedom.

Go off the edge and then, after the mainstream media panics and David Brooks wets himself, pass a bill dropping all the rates back and send it over to Harry Reid. Now it’s the Democrat’s problem. Thirty-three senators have to run in 2014, around 20 of them Democrats. How many are going to want to vote “No” on dropping the rates back? As the election cycle begins, I estimate the number will shrink to roughly zero.

In other words, turn the tables on the Democrats. Split them. They have the most to lose, not the GOP.

This is the final lesson. A sharp lawyer takes a tough situation and turns it to his advantage, while a hack takes an advantage and turns it into a tough situation. With a little skill, the GOP could not only get what it wants tax-wise but also turn the tables, setting the Democrats at each others’ wattled throats and neutering Obama.

After all, isn’t crushing progressive dreams really what the GOP should be all about?

Galt2009 on December 6, 2012 at 12:30 PM

May all the heads of those who use the term “revenue” instead of taxes, esplode. I’d love to see all the brains splattered all over, from the left, to the right.

Schadenfreude on December 6, 2012 at 12:31 PM

Cloward-Piven. Obama has four more years to crash the system completely. That’s plenty of time.

The Rogue Tomato on December 6, 2012 at 12:32 PM

Thank you, Ed. All the focus has been on the Obama tax increases (aka Bush tax cuts). I figure they are after me anyway, so I honestly don’t give a damn about the expiration of tax cuts. Everybody can feel my pain as far as I’m concerned. But it’s the spending that needs to be addressed and no one seems to be willing to discuss that. And there should be no compromise on taxes unless there is a discussion of spending.

I’m already making my plans for spending cuts so that I can afford the tax increases. Why shouldn’t the government be fiscally responsible too.

COgirl on December 6, 2012 at 12:33 PM

Obama has four more years to crash the system completely. That’s plenty of time.

The Rogue Tomato on December 6, 2012 at 12:32 PM

Just four? You are an incurable optimist.

Archivarix on December 6, 2012 at 12:35 PM

After all, isn’t crushing progressive dreams really what the GOP should be all about?

Galt2009 on December 6, 2012 at 12:30 PM

Yeah, if the squishes weren’t closet progressives themselves…

Kraken on December 6, 2012 at 12:35 PM

That chart has too much truth/knowledge in it…therefore it will never be discussed or brought up by any rational human being…

nextgen_repub on December 6, 2012 at 12:36 PM

May all the heads of those who use the term “revenue” instead of taxes, esplode. I’d love to see all the brains splattered all over, from the left, to the right. – Schadenfreude on December 6, 2012 at 12:31 PM

My head exploded a few decades ago when South Carolina renamed the South Carolina Tax Commission to being the South Carolina Department of Revenue. I could think of a lot better names for the Internal Revenue SERVICE, but I would be banned from HotAir.

SC.Charlie on December 6, 2012 at 12:37 PM

Hey, Were are all the trolls spouting the Commie-Leftist line about going back to the Clinton era tax rates?

Bayan? Lester?

Galt2009 on December 6, 2012 at 12:38 PM

Spending crisis? Pfft…. raise taxes on the rich
-lsm and dems

cmsinaz on December 6, 2012 at 12:39 PM

Obama will go over the cliff if he cannot get the House to let the tax cut for people making more than $250,000/year expire. Everyone knows that won’t solve anything so why not just give it to him?
Republicans should PUBLICLY accept allowing that tax hike on the “rich” but reject any spending increase or bailout.
The public will then turn against the administration and he will be forced to work out a deal.

Not doing anything will just advantage Democrats. Secretly, that’s what they want to have a chance to take back the House in 2014. People will be outraged with lesser paychecks and turn against Republicans “obstructionists”. Democrats will then propose the same tax cuts capped at $250,000 and watch Republicans either turn it down or look like cowards signing on it. Either way it will advantage Democrats.

At this point, going over the cliff is a win-win proposition for Obama, Democrats and the Lame street media. Republicans should just let the tax cut for the 2% expire and oppose everything else. In fact, the house should pass a bill that does just that and see what Obama will do about it. If anything it will take the argument that Republicans favor the richest 2%… Beat Obama on his own game.

jules on December 6, 2012 at 12:39 PM

All of this babbling “debate” is merely rearranging the deck chairs on the Titanic.

The fact is that the $200+ trillion in unfunded liabilities currently owed by the U.S. government exceeds the total world money supply. This will never be paid off without drastic (meaning virtually impossible) entitlement reform, even allowing for hyperinflation.

We are already, for all intents and purposes, insolvent — and each day we delay the inevitable without seriously acknowledging and mitigating it, the worse the eventual collapse will be for most Americans as well as much of the rest of the world …

ShainS on December 6, 2012 at 12:40 PM

After all, isn’t crushing progressive dreams really what the GOP should be all about?

Galt2009 on December 6, 2012 at 12:30 PM

Yeah, if the squishes weren’t closet progressives themselves…

Kraken on December 6, 2012 at 12:35 PM

It may be that they are just squishes afraid that the Media/Democrats will say mean things about them..

Like that’s not going to happen anyway.

Galt2009 on December 6, 2012 at 12:41 PM

Throw in a dot com boom and all will be good.

Clinton was still projecting the recovery out further and further when it hit. By 98, by 2000, by 2002…

He was kicking the ball to the next president the whole time until it hit.

tomas on December 6, 2012 at 12:44 PM

The Dan Henninger piece in the WSJ is linked on the main page, but I thought this passage well worth repetition:

While Barack Obama may think his election mandate includes the ruin of the Republican Party, Republicans seeking a strategy of self-preservation should assert their refusal to participate in the ruin of the nation.

No kidding.

IndieDogg on December 6, 2012 at 12:54 PM

The other problem with the discussion on tax increases is that the assumptions are based on a static analysis that fails to acknowledge that people will change their behavior to avoid paying more. So any assumption from Obama that the rich will add $80 billion per year needs to be cut in half. $40 billion in additional yearly tax receipts is still less than $1.3 trillion in yearly defecits. Or to summarize the chart, 20<5.

Obama keeps telling us the math doesn't add up and he is right, spending needs to take a drastic cut and if I were in the republican's shoes I would stop discussing tax rates until actual and real spending cuts are firmed up to take our spending back to the historical 18-20% of gdp level.

Then we need to slash entitlements as part of any debt ceiling deal. No entitlement deal, no more credit card. LIB.

Republicans are going to get blamed no matter what by the leftist media so I say just do the right thing for the country. Republicans need to forget about the blame game because it is already settled.

Ellis on December 6, 2012 at 1:04 PM

20<25 above. tax revenue to spending as percent of gdp.

Ellis on December 6, 2012 at 1:06 PM

Obama: “I won… again”

faraway on December 6, 2012 at 1:12 PM

I think most of us here would HAPPILY go back to Clinton-era tax rates if we’d also go back to Clinton-era spending.

I know I certainly would.

Washington Nearsider on December 6, 2012 at 12:24 PM

I’ll officially “second” that proposal.

Heck, maybe even float the Balanced Budget Amendment again as part of the deal.

JimLennon on December 6, 2012 at 1:23 PM

In his eight years as President, Clinton reduced federal spending to 18.2 percent of GDP from 22.1 percent, thanks in large part to a Republican-controlled Congress that forced the issue.

Ed, you’re off the mark here. Clinton proposed deficits ever single fiscal year.

He signed the budgets that Gingrich gave him. He didn’t reduce federal spending so much as he knew he wouldn’t be able to get away with vetoing.

DeathtotheSwiss on December 6, 2012 at 1:23 PM

Bayan? Lester?

Hellooooooo!

Were are all the trolls spouting the Commie-Leftist line about going back to the Clinton era tax rates?

Galt2009 on December 6, 2012 at 1:24 PM

May all the heads of those who use the term “revenue” instead of taxes, esplode. I’d love to see all the brains splattered all over, from the left, to the right.

Schadenfreude on December 6, 2012 at 12:31 PM

To be truthful that wouldn’t much of a mess, judging from the pea brains working in government.

Deano1952 on December 6, 2012 at 1:46 PM

Actually, high earners don’t make enough money to close the current budget deficit. You’d need to raise taxes on middle-income earners too

Actually, Ed I don’t need to demonstrate the arithmetic for you to know that even if you taxed everyone at 100% that you’d NEVER close the current deficit.Now, let’s ALL admit that if they’re serious in Washington, (which is a pipe dream) the approach would be to cut spending and reorganize entitlements. There will ALWAYS be winners and losers. It’s a fact that cannot be dismissed as part of the process of reform.

The only difference between Obama and everyone else is he wants to the be who designates who wins and who loses. Frankly, the man is a loser. He thinks he has a mandate and doesn’t. He believes that the definition of compromise is”my way or the high way”. Like his Father, he is in this for himself. He thinks that because Reid is going to go back to the original filibuster rules that somehow he’ll get his way.

Frankly, his proposal is as damaging to the middle class as for anyone. Why? The simple reason is the cost of everything will go up and the wealthy will find other areas to invest their capital while they drain more out of the lower earners below them.

What the GOP should do is to propose that the upper two tax tiers remain as is, and the rest, (the so~called 47%) should pay 20 % more in taxes for the services they use, but currently are getting in the form of a free lunch.

.

DevilsPrinciple on December 6, 2012 at 1:55 PM

Perfect timing

Schadenfreude on December 6, 2012 at 2:00 PM

In order to return to the Clinton era, I argue in my column for The Fiscal Times

Ah, I guess this explains why I’m lately getting spam from The Fiscal Times without having ever requested any. Are they related to HA/Townhall, or are you guys selling our registration info?

Midas on December 6, 2012 at 2:11 PM

I think most of us here would HAPPILY go back to Clinton-era tax rates if we’d also go back to Clinton-era spending.

I know I certainly would.

Washington Nearsider

Yes, by all means, Republicans should help the dems perpetuate the myth of the greatness of the Clinton administration while at the same time admitting finally that Republican policies and those evil Bush tax cuts for the rich are responsible for all the ills of the world, lol. No thanks, I’ll pass.

I have a better idea….let’s go back to the Clinton spending levels, and leave the tax rates alone. Heck, let’s go back to the Bush spending levels. We can start by getting rid of Obama’s so-called one time $800 billion stimulus that is actually a permanent part of the budget that gets spent every year.

xblade on December 6, 2012 at 2:18 PM

Where would spending be had the “stimulus” not become part of the new baseline year after year? Why is the GOP not demanding a return to pre-stimulus levels? Why was the stimulus allowed by the GOP to be more than a one time event? Where the HECK is all that additional new money going? It was supposed to go to infrastructure spending, right? Well, why then is Obma asking for an additional 50 billion now that he’s getting his stimulus every DARN year?

Charlemagne on December 6, 2012 at 2:19 PM

Where would spending be had the “stimulus” not become part of the new baseline year after year? Why is the GOP not demanding a return to pre-stimulus levels? Why was the stimulus allowed by the GOP to be more than a one time event? Where the HECK is all that additional new money going? It was supposed to go to infrastructure spending, right? Well, why then is Obma asking for an additional 50 billion now that he’s getting his stimulus every DARN year?

Charlemagne on December 6, 2012 at 2:19 PM

YEs, I’d very much like to know where all this f-ing money is going every year as well.

Midas on December 6, 2012 at 2:22 PM

I think most of us here would HAPPILY go back to Clinton-era tax rates if we’d also go back to Clinton-era spending.

For the life of me, I can’t figure out why the GOP doesn’t talk about this. Why are Rubio and Ryan making 2016 speeches instead of talking about this?

I guess they don’t believe in their position?

PattyJ on December 6, 2012 at 2:28 PM

In his eight years as President, Clinton reduced federal spending to 18.2 percent of GDP from 22.1 percent, thanks in large part to a Republican-controlled Congress that forced the issue.

He signed the budgets that Gingrich gave him. He didn’t reduce federal spending so much as he knew he wouldn’t be able to get away with vetoing.

DeathtotheSwiss on December 6, 2012 at 1:23 PM

Newt actually walked the walk. He actually cared about the country.

All John Bonehead cares about is getting as much money as he can from the tax payers. I mean his starting deal soaks the rich. It will cost many more Americans their jobs if enacted. He could care less about Americans only his own power and control. He is much the same as Obama.

As you said ED the Republican-controlled Congress forced the issue. But specifically Newt.

Steveangell on December 6, 2012 at 2:39 PM

One other key element that many have forgotten is that Clinton raised the top rate to 36% and then imposed a TEMPORARY

mrveritas on December 6, 2012 at 2:44 PM

Sorry for the early enter command!

One other key element than many have forgotten is that Clinton raised the top rate to 36% and then imposed a TEMPORARY 10% surcharge to pay off the deficit. Everyone, particularly the Dems seem to have forgotten that the surcharge was suppposed to go away when the deficit was paid off.

mrveritas on December 6, 2012 at 2:46 PM

Perfect timing

Schadenfreude on December 6, 2012 at 2:00 PM

Shocked I tells ya, shocked..

U.S. Unadjusted Unemployment Shoots Back Up
http://www.gallup.com/poll/159104/unadjusted-unemployment-shoots-back.aspx

WASHINGTON, D.C. — U.S. unemployment, as measured by Gallup without seasonal adjustment, was 7.8% for the month of November, up significantly from 7.0% for October. Gallup’s seasonally adjusted unemployment rate is 8.3%, nearly a one-point increase over October’s rate.

Where is this great recovery Obama promised us?

Galt2009 on December 6, 2012 at 2:55 PM

Professor Hanke (Johns Hopkins University) developed this table from OMB source data, which clearly shows how, when, and where we dug ourselves into this debt and deficit trap.

That chart looks at the data from the perpective of who held the Presidency.

I suggest that someone take that same data and look at it from the perspective of which political party held majority control of the budgeting process (i.e., which political party held 2+ out of 3 of the budget-making bodies: the House, the Senate, and the Presidency).

That paints a VERY different picture.

As I’ve said multiple times, the last Republican majority budget was passed in 2006 for FY 2007.

The FY 2007 budget featured:
(Receipts $2,568 Billion) – (Outlays $2,729 Billion) = Deficit $161 Billion

FY 2012 estimate:
(Receipts $2,469 Billion) – (Outlays $3,796 Billion) = Deficit $1,327 Billion

The FY 2012 estimated deficit was OVER EIGHT TIMES THE SIZE of the FY 2007 deficit.

Why? Not because receipts were down less than 4%, but rather because outlays were up over 39%, adding well over $1 TRILLION in additional outlays… for what?!?

Why did the Democrat majority spending $3.8 Trillion in FY 2012 when the Republican majority spent $2.7 Trillion in Fy 2007? Where does that new $1.1 Trillion ($1,100 Billion or $1.1 Million Million!) go? Who is getting that $1.1 Trillion in new spending?

The Democrats complained mightily in 2006 when the total national debt was $9 Trillion. The Democrats promised “fiscal disciplie” and “no more deficit spending”. They put those promises in writing.

Yet, the total national debt is now over $16.3 Trillion… up over $7.3 trillion from where it was when Democrats made those promises.

ITguy on December 6, 2012 at 2:55 PM

What followed afterward is instructive to the real problem of our current trillion-dollar trajectory of deficit spending. George Bush increased federal spending as a share of GDP by 2.6 points in two terms, and it wasn’t just spent on defense; the increase was split evenly between defense and non-defense spending, a remarkable statistic considering the two wars waged in those eight years.

I have to point out that this is nothing but misleading if you say, “George Bush increased federal spending in two terms.” Most of that increase came during the time when the Democrats controlled Congress. While it’s fair to say that Bush accepted/approved way too much government spending, you can’t draw a valid comparison while ignoring the huge push that came at the end of his term when Democrats played keep-away from the president with the budget specifically to prevent him from resisting their big-spending impulses.

The comparison once again assumes that the president determines the level of spending by himself. That misunderstanding leads to Clinton getting credit for the restraint forced on him by a Republican Congress, Bush getting the blame for the huge spending increase in 2008 that the Democrats pushed through, and Obama getting credit on paper for the recent spending slowdown due to gridlock when he is constantly agitating to spend more.

In short, it feeds precisely the sort of misunderstanding that makes the ill-informed think that Democrats are fiscally responsible when they haven’t passed a budget in nearly 4 years.

tom on December 6, 2012 at 3:14 PM

OBAMA: When I came into office, I inherited the biggest deficit in our history. And over the last four years, the deficit has gone up, but ninety percent of that is as a consequence of two wars that weren’t paid for, as a consequence of tax cuts that weren’t paid for, a prescription drug plan that was not paid for, and then the worst economic crisis since the Great Depression.

Obama came into office in Washington, D.C. as a U.S. Senator on January 3, 2005.

Obama became part of the majority party in Washington, D.C. when the Democrats took control of the House and Senate on January 3, 2007.

Obama and his fellow Democrats inherited a GOOD economy from the Republicans on January 3, 2007. And while revenues had gone down in FY 2001, down again in FY 2002, and down again in FY 2003, as a result of the Dot Com bust, 9/11/2001 Islamic Jihadist terrorist attacks, and two wars, the 2003 Bush Tax Cuts turned both employment and revenues around, such that by FY 2007, revenues were up an amazing 44% over FY 2003 revenues!

For employment numbers, use the Employment-population ratio: http://data.bls.gov/timeseries/LNS12300000
For Revenue numbers, use: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z1.xls

Let’s look at the Employment-population ratio in the last month of each Fiscal Year (September) from 2000 onward:

Year Employment-population ratio in September
2000 64.2
2001 63.5
2002 63.0
2003 62.0
2004 62.3
2005 62.8
2006 63.1
2007 62.9
2008 61.9
2009 58.7
2010 58.5
2011 58.4
2012 58.3 (August 2012)

And let’s look at Receipts (Revenues) from 2000 onward:

Table 1.1—SUMMARY OF RECEIPTS, OUTLAYS, AND SURPLUSES OR DEFICITS (–): 1789–2017

Year Total Receipts (in millions of dollars)
2000 2,025,191
2001 1,991,082
2002 1,853,136
2003 1,782,314
2004 1,880,114
2005 2,153,611
2006 2,406,869
2007 2,567,985
2008 2,523,991
2009 2,104,989
2010 2,162,724
2011 2,303,466
2012 2,468,599 (estimate)

Starting with Fiscal Year 2000, note how both employment and revenues went DOWN in FY 2001, DOWN again in FY 2002, and DOWN again in FY 2003. That’s the effect of the Dot Com bust and the 9/11 terrorist attacks.

But the Bush Tax Cuts turned the economy around. Note how both employment and revenues went UP in FY 2004, UP again in FY 2005, UP again in FY 2006, and while employment dropped slightly in 2007, revenues were UP again that year.

The Bush Tax Cuts improved employment and improved revenues… Revenues in FY 2007 were 44% larger than FY 2003 revenues!

It wasn’t until the Democrats took majority control of the House and Senate, in January 2007, that the economy really started to tank. The Democrats have been in majority control (holding 2+ out of 3 of the House, Senate and Presidency) for 5.5 years, and they spent the first half of that driving the economy in the ditch and the second half of that leaving the economy in the ditch.

If the Bush Tax Cuts are allowed to expire, and tax rates go up, both jobs and revenue will be lost. We will have lower employment (higher unemployment) and lower revenues.

To allow the Bush Tax Cuts to expire would be irresponsible.

And Obama cannot honestly claim that annual deficits went up “as a consequence of tax cuts that weren’t paid for”, when the truth is that revenues went UP significantly (44% in just 4 years) after the passage of the 2003 Bush Tax Cuts.

=============================================

Again according to http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z1.xls,

The worst deficit of the R-R-R House-Senate-Presidency was FY 2004, when
Total Receipts were 1.88 Trillion,
Total Outlays were 2.29 Trillion,
and Total Deficit was 0.41 Trillion
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The second part of the Bush Tax Cuts were signed in 2003, and Revenues went UP, not down, but spending under the D-D-D House-Senate-Presidency skyrocketed and by FY 2009,
Total Receipts were 2.10 Trillion,
Total Outlays were 3.51 Trillion,
and Total Deficit was 1.41 Trillion
——————————————————

In FY 2009, the Democrat majority produced the worst deficit in the history of this nation … more than 3 times the size (nearly 3.5 times the size) of the worst deficit of the Republican-majority years, FY 2004.

And while the Democrats want to blame deficits on the Bush Tax Cuts, the Bush Tax Cuts INCREASED revenue, and the FY 2009 deficit wasn’t the result of lower revenues (which even though lower than FY 2007 were still 12% larger than the FY 2004 revenues 5 years earlier).

The FY 2009 deficit was the result of spending that was 53% larger than it had been just 5 years earlier!

That outrageous explosion of deficit spending, done by the Democrat majority, led to a FY 2009 deficit that was more than triple the largest deficit of the Republican majority years!

ITguy on December 6, 2012 at 3:14 PM

I don’t buy the premise that raising tax rates on “the wealthy” will lead to higher revenue.

The 2003 Bush Tax Cuts led to HIGHER revenue in 2004, HIGHER revenue in 2005, HIGHER revenue in 2006, and HIGHER revenue in 2007. (*) Largely because employment improved, and more people were paying income taxes.

I have every reason to believe that if the Bush Tax Cuts are allowed to expire for job-creators, then we will see the exact opposite… revenues will go DOWN because more people will lose their jobs and less people will be paying income taxes.

(*)It wasn’t until the Democrat-induced Fannie/Freddie subprime crisis in 2008 that revenues went down.

ITguy on December 6, 2012 at 3:19 PM

May all the heads of those who use the term “revenue” instead of taxes, esplode. I’d love to see all the brains splattered all over, from the left, to the right.

Schadenfreude on December 6, 2012 at 12:31 PM

To be truthful that wouldn’t much of a mess, judging from the pea brains working in government.

Deano1952 on December 6, 2012 at 1:46 PM

We lost this battle when they got away with calling all spending ‘investment’.

slickwillie2001 on December 6, 2012 at 3:38 PM

The low information voters and the main stream media members who actually decide who governs our country do not read Michael Barone or George Will. They have been told they have no responsibility for our problems and do not have to do anything to fix it because it is the Daddy Warbucks of the world and the GOP that serves them that cause all the world’s problems and if we just destroy them there will be heaven on earth. We can talk to ourselves all we want but if we have no impact on the real deciders, it matters not. We have to actually talk to the often young knuckleheads who are bankrupting their own future by supporting the notion that spending 3.7 trillion and taxing 2.5 trillion is sustainable or even if not sustainable its OK somehow if we tax an extra 82 billion from Daddy Warbucks.

KW64 on December 6, 2012 at 4:21 PM

…it’s the Spending Stupid!

KOOLAID2 on December 6, 2012 at 7:12 PM