Jerry thinks that the Bush tax cuts caused the trillion dollar deficits

Democrats controlled the House and Senate in January 2007
Democrats controlled the House and Senate in January 2007

Is he right? Here’s the Wall Street Journal.

Excerpt:

Mr. Obama asserted in his January State of the Union Address that by the time he took office, “we had a one-year deficit of over $1 trillion and projected deficits of $8 trillion over the next decade. Most of this was the result of not paying for two wars, two tax cuts, and an expensive prescription drug program.”

In short, it’s all President Bush’s fault. But Mr. Obama’s assertion fails on three grounds.

First, the wars, tax cuts and the prescription drug program were implemented in the early 2000s, yet by 2007 the deficit stood at only $161 billion. How could these stable policies have suddenly caused trillion-dollar deficits beginning in 2009? (Obviously what happened was collapsing revenues from the recession along with stimulus spending.)

Second, the president’s $8 trillion figure minimizes the problem. Recent CBO data indicate a 10-year baseline deficit closer to $13 trillion if Washington maintains today’s tax-and-spend policies—whereby discretionary spending grows with the economy, war spending winds down, ObamaCare is implemented, and Congress extends all the Bush tax cuts, the Alternative Minimum Tax (AMT) patch, and the Medicare “doc fix” (i.e., no reimbursement cuts).

Under this realistic baseline, the 10-year cost of extending the Bush tax cuts ($3.2 trillion), the Medicare drug entitlement ($1 trillion), and Iraq and Afghanistan spending ($515 billion) add up to $4.7 trillion. That’s approximately one-third of the $13 trillion in baseline deficits—far from the majority the president claims.

Third and most importantly, the White House methodology is arbitrary. With Washington set to tax $33 trillion and spend $46 trillion over the next decade, how does one determine which policies “caused” the $13 trillion deficit? Mr. Obama could have just as easily singled out Social Security ($9.2 trillion over 10 years), antipoverty programs ($7 trillion), other Medicare spending ($5.4 trillion), net interest on the debt ($6.1 trillion), or nondefense discretionary spending ($7.5 trillion).

There’s no legitimate reason to single out the $4.7 trillion in tax cuts, war funding and the Medicare drug entitlement. A better methodology would focus on which programs are expanding and pushing the next decade’s deficit up.

The article notes that the real problem is that Obama is spending money like he has gone mad.

Spending—which has averaged 20.3% of GDP over the past 50 years—won’t remain as stable [as revenue]. Using the budget baseline deficit of $13 trillion for the next decade as described above, CBO figures show spending surging to a peacetime record 26.5% of GDP by 2020 and also rising steeply thereafter.

Putting this together, the budget deficit, historically 2.3% of GDP, is projected to leap to 8.3% of GDP by 2020 under current policies. This will result from Washington taxing at 0.2% of GDP above the historical average but spending 6.2% above its historical average.

Entitlements and other obligations are driving the deficits. Specifically, Social Security, Medicare, Medicaid and net interest costs are projected to rise by 5.4% of GDP between 2008 and 2020. The Bush tax cuts are a convenient scapegoat for past and future budget woes. But it is the dramatic upward arc of federal spending that is the root of the problem.

Spending is the problem, and Obama is spending like a drunken sailor.

In fact, he added more to the debt in his first 19 months than ALL the other 19 Presidents COMBINED!

And remember, the recession is almost entirely the fault of the Democrats. You can watch videos of them telling the Republicans not to regulate Fannie Mae and Freddie Mac to stop them from making mortgage loans to people who cannot afford them. The only other factor is the decision to keep interest rates low to encourage more and more borrowing – the “boom” in spending that necessarily leads to a “bust”.

17 thoughts on “Jerry thinks that the Bush tax cuts caused the trillion dollar deficits”

  1. According to the Congressional Budget Office, the total Iraq tab comes to $709 billion this month, a costly engagement in terms of treasure.

    But as Randall Hoven points out on the American Thinker Web site and in the nearby chart, the war made up just 3.2 percent of federal spending while the fight raged. Leave it to the feds to make $700 billion look like a drop in the ocean.

    And it accounts for less than 15 percent of the overall deficit since it began in 2003.

    In fact, the war is to blame for a majority of the deficit only in 2007, when the US launched its surge, a brilliant success that changed the war. (If only all federal spending were as effective.)

    Meanwhile, despite assurances that the stimulus would be “timely, targeted and temporary,” Americans will be paying for some of it well into 2019.

    Read more: http://www.nypost.com/p/news/opinion/editorials/bam_spending_spree_mjwI6uz4izAd70CMXoLmfM

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  2. Sorry to be late to the party guys and gals!

    We know immediately that your sources are incorrect and vastly under-report the problem. If we were to believe that 2007 had only a 161 billion – an amount similarly reported in most years of bush’s presidency, then how did he take a national debt that stood around 5.5 trillion when he took office to one that stood at 11.2+ trillion when he left? If we assume an even distribution (we know it’s wasn’t, but for simplicity) and take the 5.7 trillion that Bush added to the national debt and divide that by his presidency (8 years), that’s an average budget deficit of 712 billion a year.

    Bush Jr. took a budget surplus (Bill Clinton was paying down the national debt – even it was much less than I think he could have, it was a move in the right direction) upon starting office and quickly turned it into what was the largest growth of national debt and deficits.

    As with many reds, you look at only the predictions that make your arguments look correct. The Heritage foundation has posted up a blog entry that uses the correct numbers – since Bush’s presidency has ended and all the numbers tallied, we know exactly what he spent:

    http://blog.heritage.org/2010/02/05/past-deficits-vs-obamas-deficits-in-pictures/

    The picture clearly shows Obama inheriting a Trillion dollar+ deficit; NOT Obama creating it.

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  3. Jerry,

    A couple questions:
    1) Wasn’t the huge deficit spike in 09 due at large to the bailout, which Obama voted for? Granted he wasn’t president when it passed, but I think the argument can be made that it was part of his spending spree (though Bush obviously owns it from an executive standpoint). He certainly wouldn’t be able to make the argument that he was against the bailout when he voted for it.

    2) Do I understand correctly that you are basically pro tax cuts and pro spending cuts, but not just one or the other?

    I don’t understand when people argue that tax cuts “caused” a deficit. That seems like a self-refuting statement–almost as if one were to say, “I am neck high in credit card debt, but it’s not because of my spending, it’s because my boss gave me a pay cut!”

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    1. Remember that TARP was passed by a Democrat-dominated House and Senate, and that Bush’s economic advisers told him that the economy would collapse if he didn’t sign it.

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  4. I had heard that much of the money that was budgeted for the bailout hadn’t actually been spent (most of the ultra-liberal groups crying – they want more, blah, blah, blah), so I did a little searching and CNN (I know, many don’t like them) has a pretty nice break down of where the money has gone so far:
    http://money.cnn.com/news/storysupplement/economy/bailouttracker/

    looking at the numbers, one can’t seriously blame the actual ’09 deficits on the bailout – the numbers just wouldn’t add up.

    As for question #2 – I would say that simply (as in keeping it simple) sums up my position. I fully believe we need to significantly cut back on our spending – at its current levels it’s completely unsustainable…but I don’t believe we should start blindly cutting, that would be ignorant.

    As for tax cuts, they have to make sense. You hear many in the GOP talking about how our corporate tax rates are some of the highest in the world – a highly deceitful argument. While our stated tax rates are some of the highest, are realized tax rates are some of the lowest. Why? Most of the rest of the world doesn’t allow business write-offs. So if you had to spend money improving facilities in Europe, you can’t write that off your taxes. But in America, you can. So if you’re company made $100,000 in profit and you spent 50,000 in deductible expenses, you only pay taxes on the remaining $50,000. But in the rest of the world you would pay taxes on the full 100,000. So to claim we need corporate tax cuts just doesn’t make sense.

    So to continue with this example, if they want corporate tax cuts, I am fully for that, but then I would want them to remove the deductions – keep the tax code simple. companies that make $1million or less pay 12%, companies that make $1M – 10M pay $15, companies that make 10M to 100M pay 18%, etc – NO deductions allowed.

    But you can’t just blindly hand out HUGE tax cuts like Bush Jr did and not reign in spending. I bet if we dig deep enough into our budget there is more than enough junk spending that could be cut.

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    1. He did the tax cuts in 2001-2003. The deficit was ONLY 161 billion in 2007. The deficits under Obama (your snuggly bunny whom you love) are around 1.4 trillion in 2009 and 2010. And the reason is because Obama did the kind of crazy anti-business, anti-private-sector spending that I warned you about BEFORE the 2008 elections. So it’s no use to talk about cutting spending now – I showed you the fiscal ratings of McCain and Obama before the election. McCain had an A, and Obama had an F. And you said “I don’t care about stupid voting records – the people on MSNBC say that Obama will cut spending and put a unicorn in every stable!” I looked at his voting record, and I saw that he loves to raise taxes on the most productive people and spend their money on the least productive segments of society. You have to look at voting records to know what people will do. He’s a spender.

      Actually, Barack Obama is anti-prosperity, anti-security, and anti-liberty on EVERY SINGLE ISSUE. He is the worst president in the history of the country. He isn’t qualified to run a lemonade stand.

      This unemployment mess is directly caused by his anti-rich, anti-business policies rhetoric. Bash businesses enough and they will stop hiring people here and go overseas instead. Like the oil drilling company I blogged about that is going to Egypt to drill because of Obama’s bashing of oil companies. Bye-bye jobs.

      I am OK with the corporate tax cuts with no deductions allowed. But a BETTER idea is to cut off all the payroll taxes for entitlement programs and privatize Medicare, Medicaid and Social Security. That way, domestic employees go on sale, unemployment disappears, and we get back on track.

      I’m glad that you are now coming around to my view that government spending is bad. And I hope that you prefer the 161 billion dollar deficits and 4% unemployment under Bush to the 1.4 trillion deficits and 10% unemployment under Obama.

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  5. I saw that McCain voted/sided with Bush Jr. 92% of the time – he was practically a clone…that being said, I would have voted for McCain over Obama had he, an old man that multiple relapses of cancer, not chosen someone I don’t is intelligent for VP.

    I’ve always been (mostly) anti-government spending and Bush’s unemployment was only low during the first part of his presidency – as he was leaving office it was high and trending higher.

    I’m totally against privatizing social security until the 401k laws are reformed. Until companies are required to offer 401k’s that are 3(38) ERISA fiduciaries, you’ll have these substandard products they offer that do nothing but steal from participants/employees. Since they (employers) don’t have to, and refuse to, act in your best interest when offering a 401k program, they choose the one that is best for them, i.e, charges them no fees in exchange for charging the employee higher fees and substandard choices in investment vehicles (look at the 401k program that the government offers its employees – it’s the picture of 401k perfection, oddly enough for a government program). There is much more I would like to say on this topic, but I’ll cut it short.

    I do not like the trillion dollar deficits I saw under bush jr and I don’t like what I’m seeing under Obama – both stink as presidents.

    The deficits of 2009 are a direct result of the budget that Bush signed into law in 2008 and the recession he created from some of the worst fiscal policies enacted by a US president.

    The unemployment mess is a result of the recession – business is simply hesitant to rehire since they don’t think people are going to open up their wallets, here’s someone from the Christian Science Monitor: http://www.csmonitor.com/Business/Robert-Reich-s-Blog/2010/0727/Despite-profits-US-corporations-won-t-hire-American-workers)
    It has nothing to do with what Obama is saying. American’s are being more fiscally responsible and that means saving vs spending. If you don’t spend at pre-recession levels, how can you have pre-recession employment levels?

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  6. Here is an article from the Heritage foundation showing that government revenues INCREASED after Reagan cut taxes in the 1980s:

    http://www.heritage.org/research/reports/2002/12/tax-cuts-increase-federal-revenues

    Also check out the Laffer curve showing the effect of taxes on revenue:

    http://www.heritage.org/research/reports/2002/12/~/media/Images/Reports/B_1544_Chart_1lg_4.ashx

    In essence, it is not possible to raise taxes ad infinitum and expect ever increasing government revenues.

    But I completely agree with Jerry that the government spending in our democrat party dominated government is completely unsustainable. It’s remarkable that the dems have done absolutely nothing to reign this problem in. They really are addicted to spending, aren’t they?

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    1. I’m well aware of the Laffer curve, but it doesn’t say whether a given tax cut or tax increase will produce the desired affect (i.e., work). According to the Heritage foundation:

      “Revenue responses to a tax rate change will depend upon the tax system in place, the time period being considered, the ease of movement into underground activities, the level of tax rates already in place, the prevalence of legal and accounting-driven tax loopholes, and the proclivities of the productive factors.”

      The response to Reagan (and even Kennedy’s) tax cuts make sense – the tax rates before they enacted their cuts where punitively high – it would allow people to work harder or to hide less of their income.

      I think though, that you only agree with half of what I’m saying. I want the dems to dramatically cut their spending as I want the republicans to do the same. The reds seem to think it’s OK to spend much more than we have on the military industrial complex and similar programs – I don’t. That type of spending should be limited to emergency situations and re-payment should be a priority, not something left to future generations.

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  7. I am 100% against a corporate tax. Corporations do not pay taxes. People pay taxes. Extracting money from a “corporation” is government’s way of hiding the fact that they are extracting it from people. Taxing a corporation translates to a tax on the shareholders, the business/pricing model, and the amount of people they may hire.

    I don’t think anyone has any “real” idea of how much in taxes we actually pay, because most of the taxes we end up paying economically are invisible to us. Even a rate of 35%, no matter what loopholes are present in it, is misleading when you weigh in all the government regulation which results in more overhead.

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    1. I prefer the pre-WWI days when people really didn’t pay income taxes – the government’s source of income was from corporate taxes and sales taxes. I do get what you’re trying to argue/say, but I don’t agree. I think one of the best “inventions” ever is the LLC and the corporation – it’s what allowed people to take chances that they may not otherwise since it shifts the accountability from the individual to a legal entity.

      Even with no taxes, a business will not hire more if it does not need those people (hence anything over those minimal expenses is pure profit). The job of the politician is to ensure that the tax code does not venture into the territory of punitive but does tax enough to allow the country to provide the services and social structures that allows that company to function in the most efficient manner – this is what 99.9% of pure libertarians get wrong (an area I would love to discuss more, but I have to head off to a barbecue). Maybe I will write more later…

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  8. I’d like to see either the fair tax implemented or just a straight flat tax that everyone pays with no exemptions. The big thing though would have to be dramatic cuts in government spending.

    I could actually live with high taxes if the government slashed its spending, at least then we’d be heading in the direction away from national bankruptcy.

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