In yesterday's blog I explained why the Bush tax cuts mattered. As I said, I am not an economist, so here is an article pretty much supporting what I wrote, except written by an actual expert in the subject: William G. Gale is a senior fellow at the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center, and this article appeared in the Washington Post:
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Anonymous seems to have missed the fact that I acknowledged that the Bush Tax Cuts were not that significant in creating the massive deficits that we now have (point #4 in Gale's article). Yet, here is what I said (with emphasis on the part enclosed in asterisks).
ReplyDelete"In any case, the situation was altered radically by the speculation-induced Great Recession which started around 2008. Business did poorly and many people lost their jobs; even rich folks had diminished incomes. **The economic contraction was such that the Bush tax cuts were less significant since general income and wealth was in a severe downturn, so nearly everyone paid less taxes.** As Anonymous pointed out, things began to change after 2007."
The point is, though the Bush Tax Cuts didn't create the massive deficits we now have -- it was the Great Recession, caused by de-regulation, that did that -- they will become more and more a significant part of the deficits down the road as the economy recovers. I've said this so many times that I wonder whether Anonymous is paying attention.
I'm glad that you admit that the Bush tax cuts aren't the main factor in today's deficits. Yet you now through in another myth about "deregulation". We can debate that in a separate post to fix your misconception. The tax cuts resulted in pretty small deficits as a % of GDP in 2006 and 2007. Yet now they're going to be responsible for the huge deficits? Even if revenues got back to around 18% of GDP which is where they've been historically, our spending is way above historical levels. We need to cut spending by massive amounts to get the deficit back in line. We can raise rates too as the economy recovers, but you can't raise taxes on people when unemployment is still around 10%.
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