We are non-commercial, all volunteer and supported by our readers. Please help sustain the Dew by making a donation.
It's the Economy, Stupid
Tax Cuts Do Not Equal Increased Revenue
Let me begin this column by apologizing to my readers. Normally, in an opinion column the writer presents the highlights of an issue without needing to present, in detail, the facts underlying the issue being discussed. However, this column is going to go back and demonstrate that my opinions do not come from either pure ignorance or deceit but, instead, are informed by creditable sources. In this case, my figures are coming from the Congressional Budget Office (CBO); Office of Management and Budget (OMB). The apology is because of the data-laden presentation that may put some people to sleep. The issue being discussed is the relationship between tax cuts, deficits, and revenue.
The benchmark that will be used is a percentage of the gross domestic product (GDP). This allows one to compare relevant figures, such as revenue and spending, in relation to the overall growth of the economy and allows for apples to apples comparisons. Since Reagan lowered taxes and Clinton raised them on the top 2%, I will use these two Presidents to illustrate my points
The claim was made that Reagan tax cuts almost doubled federal revenue over the following decade. When Reagan took office in 1980, individual tax revenue stood at 9% of GDP. That fell to 8% by 1988 when he left office. Corporate tax revenue fell from 2.4% of GDP to 1.9% during the same period. Total revenues for the government fell from 19% to 18.2% of GDP. Even though GDP grew from almost $3 to $5 trillion, government debt grew from 26.1% of GDP to 41%. What actually happened was that federal debt almost doubled, not revenue. The moral of this story: A thriving economy plus tax cuts equals less revenue and increased debt.
On the other hand, Clinton raised taxes on the top 2% of the population. In 1992, individual tax revenues were 7.6% of GDP and grew to 10.2% by 2000. For corporations, it was 1.6% and 2.1% respectively. Total revenues grew from 17.5% of GDP to 20.6%. GDP grew from $6 to almost $10 trillion but total government debt dropped from 48.1% of GDP to 34.7%. Taxes went up, revenue went up, and national debt went down. A thriving economy plus tax increases equals more revenue and less debt.
Revenue is one side of the coin, spending is the other. So how do these Presidents stack up on the spending side of the equation? The charge was made that spending tripled under Reagan because of the Democrats. At first blush, you must wonder if they held a gun to Reagan’s head to force him to sign all of that spending legislation. But what do the facts tell us? Did spending increases cancel the effect of Reagan’s tax cuts? Well, discretionary spending dropped from 10.1% of GDP to 9.3% under Reagan and from 8.6% to 6.3% under Clinton. Mandatory spending dropped from 10.7% of GDP to 10.1% under Reagan and from 11.5% to 10.5% under Clinton. Total spending dropped from 21.7% of GDP to 21.3% under Reagan and from 22.1% to 18.2% under Clinton. In other words, total spending dropped under both Presidents but only under Clinton did tax increases on the top 2% produce enough revenue to reduce the national debt — significantly.
Under both Presidents there was a thriving economy as measured by GDP growth. Both Presidents reduced both discretionary and mandatory spending. One cut taxes and one raised them. One President almost doubled the national debt and one actually reduced it. One President proved that tax cuts along with spending cuts do not reduce the debt. Conservatives can continue to spout the tax cut equals increased revenue manta all they want but they lack an understanding of economic reality. They can continue to beat the drum that tax cuts coupled with reduced spending will reduce the debt but economic history is not on their side. Chambliss (R-GA) and Ryan (R-WI) are beating this drum right now. Beware.
Worthy of Comment
Also on the Dew
I was still in mourning for Bobby “Blue” Bland, who passed in 2013, when a short while ago the house lights went down for the last time on B.B. King, too. What to do, what to do? So many of our great blues singers have made their Last Road Trip, have gone on to that Great Jam Session in the Sky: Bland, King, the two Jimmys (Reed and Witherspoon), Ray Charles, Lou Rawls, Stevie Ray Vaughan, Little Milton, to name but an octet of the very best. Think what choir practice in Heaven must sound like nowadays! Thank goodness for recordings (and for You Read on →
"A new mentality is needed, and this implies above all a recovery of ancient and original wisdom. And a real contact with what is right under our noses." -- Thomas Merton, in a letter to Thich Nhat Hanh On Thursday, September 24, I saw Pope Francis with my own eyes. That's the gospel truth. Now the confession. I was attending the Interfaith Moral Action on Climate rally -- organized to support the Pope's call to action on climate change. That's me on the right of the photo. That's Doug, my Buddhist friend and climate troubadour, on the left. Attendees watched the Pope's historic Read on →
Having returned from his trip to the U.S. where he addressed Congress, Pope Francis on Tuesday issued an encyclical from the Vatican warning of "man-made Global Dumbing." "It disturbs me beyond belief the level of intelligence quotient that I encountered during my visit to the U.S., especially in the Republican-led Congress, where I'm guessing the average IQ must be in the high 70s or low 80s, at best," Francis said, through an interpreter. "That's unacceptable." Ted Josephs, a spokesman for Mensa International, the genius organization, said that the Pope's estimate means that the average Congressman may have trouble deciding which shoe goes Read on →
An old Jewish curse says, "May Your Life Be Filled With Lawyers." Better lawyers than bedpans. Unlike actors in televised medical fables, real people who work at hospitals, while sometimes angelic, are mainly natural-born Homo sapiens, just like the rest of us –- part devil, part saint, but all too human. They mostly mean well, but many days, they just do not give a flip. And some, like former President Dubya Bush, obviously chose the wrong line of work. The most frightening aspect of any serious illness is loosing control of your being to other people; creatures just like yourself. Folks who still think t Read on →