As someone who generally gets news and information on line, it becomes rather easy to spot ruling class narratives as they evolve. When the Financial Times, the Economist, the Washington Post, the New York Times and other elite publications pronounce that “everyone knows” taxes must be raised in Washington, DC to “pay for” the operations of government, it is a safe bet that just the opposite is likely.
Access to information about the macro budget numbers for the US government is as easy as eating another Cane’s chicken finger but the legacy media go out of their way to obfuscate when it serves the interest of the ruling class. The Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) have tables that my 5th grader can find on line and with this information assumptions about taxes by the legacy media can easily be countered.
As most people who follow news are aware, President Bush and the then-GOP controlled Congress passed a series of tax cuts in 2001 and 2003 that are set to expire on January 1, 2011. All the aforementioned elite media outlets wax eloquently about how we “cannot afford” to extend any of these tax cuts, which assumes static economic forecasting, a favorite of liberal media when discussing tax rates but not spending curiously.
Leaving aside how the Congress this summer passed an (permanent?) unemployment extension that will cost over $30 billion and a teacher union bailout bill that will cost at least $25 billion (on top of all the other egregious spending since TARP in late 2008, “stimulus,” health rationing, explosions in discretionary appropriations, et al), might it be useful to look at budgets over the past ten or so years to find answers about “costs?” Is it really too tough to find out these basic numbers or are the legacy media just too busy with Lindsey Lohan’s latest legal issues to be bothered?
According to figures by CBO and OMB, revenues indeed initially went down in Fiscal Year (FY) 2002 as the brief recessionary downward pressures kicked in and this continued for the next 24 months while the tax cuts were phased in. Revenues fell from $2.487 trillion in FY 2001, to $2.27 in FY 2002 and $2.134 in FY 2003. It was not until FY 2005 that revenues spiked dramatically in $2.417 trillion and peaked in FY 2007 at $2.709 trillion. How could revenues go up when tax rates went down? Might the increased economic activity as a result of the tax relief have something to do with revenues growing smartly?
Everyone knows that the economy slowed in late 2007 and tipped into a severe recession in 2008 that has carried on to this day. Revenues in FY 2010 were less than FY 2004 after all the Bush tax cuts were implemented. In fact, federal revenues have declined every year for the past three fiscal years even though tax rates have not changed since 2003. How could this be? How could revenues decline for three years in a row if taxes were not cut?
The simple answer is that our unemployment rate is now twice the rate of the George W. Bush Administration average. There are literally millions of Americans who have been out of work for two or more years, none of which are earning income and paying payroll and income taxes to the US Treasury. Recent economic history shows that when you lower taxes for businesses and investors, economic growth ensues, unemployment rates fall and revenues to the treasury grow sharply. Raising tax rates with 10% unemployment, stagnant exports, and massive new regulations across all sectors of the economy, along with bondholders getting knee capped for favored political interests, and you have a recipe for 1937-style economic disaster. One need not be a Nobel Laureate to see basic macro economic history data and come to this conclusion.
When the GOP took control of Congress in the historic 1994 mid-term elections, they worked to cut taxes (culminating in the 1997 budget agreement with President Clinton) but an arguably greater accomplishment was cutting discretionary appropriations while increasing spending for our national security. In FY 1995 the GOP Congress reduced appropriations from $765 billion to $731 billion in FY 1996 and kept it below FY 1995 levels through FY 1999, a key component in creating budget surpluses. How do I know this? Simple, CBO and OMB have the tables for anyone to see and it takes all of about 5 minutes to locate.
Let us hope the current GOP Leadership in Congress looks at the outlay side of the budget as much as the revenue side when January of 2011 rolls around. The problems exacerbated greatly by the current Congress in 2007 to the present can be overcome, all it takes is guts.