Friday, March 27, 2009

The Emperor's New Budget


Everyone is focused on the fact that the Republican counter-budget has no numbers in it, as if that were just funny. (which of course it is) But seriously, how could we have expected that the Republican plan would have credible numbers in it? Their numbers have never added up. The Republican leadership has announced that their plan is to drastically cut taxes and reduce the deficit at the same time. There is no possible way to do that unless you either slash federal discretionary spending to the point where you practically have to shut the government down, or you make massive cuts in Medicare and Medicaid. Does anybody expect that the Republican leaders are going to go on television and announce that their plan is to make huge cuts in Medicare and Medicaid? That would be political suicide.

No, the only thing they can do is recite the same old platitudes about cutting taxes, reducing the size of government, getting government regulation off our backs, etc. When they actually tried to implement that program, under both Reagan and Bush, they created unprecedented new deficits. They cannot reveal the consequences of that strategy now because that would reveal either deficits similar to what the Democrats are proposing, or unacceptable cuts in federal programs. And if their proposed deficits are not very different from what the Democrats are proposing, then they have no argument against the Democrats' budget. So they have to stand there like the emperor with no clothes, and ask people to believe that their fictitious budget actually exists.

4 comments:

  1. Your article displays an ignorance of economics that is only surpassed by your arrogance. The Kennedy tax cuts increased government revenue. Likewise the Reagan tax cuts. Likewise the Bush tax cuts, until the Dems took over Congress and messed things up. Basic truths: You can not collect more tax from people who have less income. You can not borrow your way out of debt. You can not spend your way to prosperity. Why is that so hard to understand? Unless there is some other agenda on the table.

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  2. If what you say is true, then the Republicans would have had no trouble putting numbers in their budget. The only thing they might have trouble doing is convincing people that the more you cut taxes, the more revenue will go up. At some points along the so-called Laffer curve this might be true, such as if you were to cut taxes from 100% to 90%. But we have no empirical evidence to show that if you cut the top marginal rate from say, 40% to 35%, that net revenues will increase, and it seems highly doubtful that such changes in marginal tax rates would create enough incentives to generate more income as would make up for the losses the government would sustain by cutting taxes at that level. In fact, revenues did not go up enough under either Reagan or Bush II to make up for their tax cuts, and deficits increased enormously under both administrations. That is why it is no longer possible to convince most people that cutting taxes in the ranges that we are currently talking about will increase government revenues.

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  3. in reality, we neither have to raise nor lower taxes to get more money flowing into the government's coffers -- we just have to stop giving tax breaks to big business, and go after all those shelters on (for example) the cayman islands. close those loopholes, make it retroactive, and billions of dollars will pour in. that's where the money should come from, not taking another $20/week from some welfare or medicaid recipient who already can't afford to feed their family or see a scrupulous doctor. if you have more -- whether the you is a person or a corporation (which is also a "natural person under the law) then you are MORALLY OBLIGATED to contribute more. not to squander your riches on exclusive retreats and multi-million dollar bonuses to individuals.

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  4. I like the style of your blog. It's very professional.

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