Tag Archives: Big Government

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Should Republicans let the Bush tax cuts expire?

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In previous posts I noted how government revenues increased when the Bush tax cuts were passed, because more money was taken out of savings and invested on enterprises, resulting in more tax revenue from profits. I also noted that the deficit was shrinking after the tax cuts – down to $160 billion in 2007. Not growing, but shrinking even though we were fighting two wars. I also noted that unemployment decreased when those tax cuts were passed, because more entrepreneurial activity means more hiring.

Take a look at some of the facts about the Bush tax cuts from Investors Business Daily.

Here’s a snippet: (links removed)

The rich paid more. Despite endless claims by critics that Bush’s tax cuts favored the rich, the fact is the rich ended up paying more in taxes after they went into effect.

In fact, IRS data show that the richest 1% paid $84 billion more in taxes in 2007 than they had in 2000 — that’s a 23% increase — even though their average tax rate went down.

What’s more, their share of the overall income tax burden grew, climbing from 37% in 2000 to 40% in 2007.

At the other end of the spectrum, the bottom half of taxpayers paid $6 billion less in income taxes in 2007 than they had seven years earlier — a 16% drop — and their share of the total income tax burden dropped from 3.9% to 2.9%.

Millions dropped from the tax rolls entirely. Another unheralded feature of the Bush tax cuts is that they pushed nearly 8 million people off the tax rolls entirely because, among other things, Bush doubled the per-child tax credit to $1,000 and lowered the bottom rate to 10%.

The Tax Foundation estimated that these changes benefited modest-income married couples with children, who were the ones most likely to fall from the tax rolls.

The tax cuts didn’t cause the massive deficits. Critics routinely blame the Bush tax cuts for turning surpluses late in the Clinton administration to huge deficits under Bush. Not true.

In August 2001, after the first round of the Bush tax cuts were in place, the CBO projected a surplus of $176 billion in fiscal year 2002, with surpluses continuing to grow in the following years.

[…]And after Bush signed the second round of tax cuts into law in 2003, federal deficits started to shrink. By 2007, the federal deficit was just $160 billion, and the CBO was again forecasting annual surpluses starting in 2012.

[…]Over the next decade… the middle class tax cuts that Obama wants to keep will cost $3.7 trillion, according to the CBO .

But tax cuts for the “rich” that Obama wants to abandon add up to just $824 billion.

That’s $824 billion over 10 years – but Obama has run the national debt up by $6 trillion in only 4 years. $824 billion over 10 years is chicken feed compared to that $6 trillion in debt in only 4 years.

Should we let the Bush tax cuts expire?

Here’s is Marc Thiessen in the liberal Washington Post to make the case that the tax cuts should be allowed to expire.

While the Bush tax cuts expire on Dec. 31, so do a lot of tax policies the Democrats support. For example:

  • The 10 percent income tax bracket would disappear, so the lowest tax rate would be 15 percent.
  • The employee share of the Social Security payroll tax would rise from 4.2 percent to 6.2 percent.
  • An estimated 33 million taxpayers — many in high-tax blue states — would be required to pay the alternative minimum tax, up from 4 million who owed it in 2011.
  • The child tax credit would be cut in half, from $1,000 today to $500, and would no longer be refundable for most.
  • Tax preferences for alternative fuels, community development and other Democratic priorities would go away.
  • And the expansions of the earned income tax credit and the dependent care credit would disappear as well.

[…]Right now, Democrats are demanding that Republicans raise taxes while Republicans are demanding that Democrats agree to cut Social Security and Medicare spending. A grand bargain this fall, then, would mean that Republicans get to raise revenue from their own supporters (small-business job creators) in exchange for cutting spending for their own supporters (seniors). Genius! Much better to wipe the slate clean, and start over with more leverage for fundamental tax reform and structural entitlement reform.

[…]During the campaign, President Obama repeatedly told us how he wants to “go back to the income tax rates we were paying under Bill Clinton — back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot.” Well if the Clinton tax rates were so great, let’s go back to all of the Clinton rates and relive the booming ’90s.

At least going back to the Clinton rates would put more people on the tax rolls, and give more Americans a stake in constraining government spending. It would also force all Americans — including the middle class — to pay for growing government services, instead of borrowing the money from China and passing the costs on to the next generation.

Americans had a choice this November, and they voted for bigger government. Rather shielding voters from the consequences of their decisions, let them pay for it.

His point is that if we do nothing, then the Democrats will be tarred with having to pay for the trillions of spending that they have incurred in the last 4 years. Obama complained and complained about them, and when we repeal them and it wrecks economy, he will take the blame.

The people who voted for them have been insulated from paying for all of his spending, because it is all been passed on to children, born and unborn. Taxes have not been raised enough to pay for all the spending, it’s just been added to the debt. Maybe we should make the beneficiaries of that spending foot the bill, so that they will understand how they need to vote next time. Republicans aren’t voting for tax increases. They are just letting them expire, exactly as Obama wants.  He will take the blame for this, and then people will have a real choice to make in 2016. Let the people who voted for bigger government pay the bill for bigger government.

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Foster children removed from UK family because of political beliefs

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Joyce Thacker, the face of fascism
Joyce Thacker, the face of fascism

Melanie Phillips writes about it in the UK Daily Mail.

Excerpt:

The story sounds just too idiotic and outrageous to be true. A Rotherham couple, by all accounts exemplary foster parents for nearly seven years, took on two children and a baby in an emergency placement.

Eight weeks later, social workers came and took the children away — despite the fact that they were thriving — on the grounds that because the couple belonged to the UK Independence Party this was not ‘the right cultural match’.

Astonishingly, the official in charge is still unrepentant. Joyce Thacker, the council’s director of children and young people’s services, has said that the children, who were from ‘EU migrant backgrounds’, had been removed to protect their ‘cultural and ethnic needs’ from UKIP’s ‘strong views’ and apparent ‘opposition to multiculturalism’.

[…]The clear implication is that they were racists. But there is nothing racist about opposing multiculturalism. Indeed, many immigrants themselves oppose it. To damn this couple in this way is an appalling smear.

[…]Ms Thacker said: ‘I have to think about how sensitive I am being to those children.’ Is this woman for real? Clearly, she is actually doing them harm by putting ideological dogma above the children’s own needs.

[…]In the early Nineties, I unearthed what, it is no exaggeration to say, was a climate of totalitarianism in social-work training.

Anti-racist zealots had captured the social workers’ training body, and built into the social-work diploma the explicit assumption that society was fundamentally racist and oppressive.

[…]As a result, the needs of vulnerable children and other social-work clients have been junked in favour of the overriding requirement to impose an ideological view of the world in which minorities can do no wrong while the majority can do no right.

Over the years, this has given rise to one horror story after another. Twelve years ago, an eight-year-old Ivorian child, Victoria Climbié, was tortured and murdered by her guardians under the noses of social workers who believed such behaviour had to be respected as part of African culture.

In the early Nineties, Islington council was revealed to have ignored the systematic sexual abuse and prostitution of children in its care because it was terrified of being called racist or homophobic if it disciplined black or gay staff perpetrating such crimes.

[…]In Rotherham itself, the sickening sexual enslavement of under-age white girls by organised prostitution and pimping rings was largely ignored for more than two decades, in part because the abusers came overwhelmingly from Pakistani Muslim backgrounds.

And for years, would-be adoptive parents have been turned down by social workers because they are deemed to be too white, too middle class or in some other way fall foul of the politically correct inquisition.

And don’t go calling me racist – I’m a visible minority, with darker skin than Obama. Half my family is Muslim, and the other half is Hindu and Catholic.

And here’s another interesting and related story:

An unusual custody battle involving a surrogate mother and two Houston men is playing out in a Harris County courtroom.Cindy Close,  48, gave birth to twins at Texas Children’s Medical Center in July, but on the night of their birth she was visited by a social worker. “She told me we had a surrogacy situation,” Close said. “I looked at her and said ‘I’m not a surrogate, what are you talking about?’” Close said that she had been duped by Marvin McMurrey, a man who she said had pretended to be her friend and allegedly promised to be a partner in raising the children. He had paid for her in vitro fertilization using his sperm and a donor egg. When the children were born, he claimed custody with his partner.

Close said they were not in a romantic relationship and that she never even knew he was gay. “We didn’t have everything nailed down because it was based on trust,” Close said. “There was never any contract and no money was exchanged.”The twins had been born  prematurely and spent weeks at the hospital. It was during that time a suit was filed challenging the mother-child relationship. Since Close is not linked to the children genetically, it alleged they were not hers. All she has now are visitation rights for two hours a day, six days a week.

Notice that in both cases we are dealing with social workers. I think that social workers tend to be more liberal and less inclined towards objective standards of morality. In practice, that means calling good evil, and evil good, and then subsidizing the evil with money taken from the good through taxes. They call this “compasssion” and “fairness”. They also like to use the power of the state to force those around them to agree with their view. I call that fascism.

When Obama legalizes gay marriage, I would expect to see things like this – children being taken away from families that oppose gay marriage and given to gay couples. It starts with stories like this.

News

Harvard economist explains why spending cuts are better than tax increases

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From Investors Business Daily, an editorial by Dr. Alberto Alesina of Harvard University, that explains which approach to reducing debt and deficits works best. Is it cutting spending and reducing regulation? Or is it continuing to borrow and spend, and raising taxes?

Let’s see what Dr. Alesina says:

The evidence speaks loud and clear: When governments reduce deficits by raising taxes, they are indeed likely to witness deep, prolonged recessions. But when governments attack deficits by cutting spending, the results are very different.

In 2011, the International Monetary Fund identified episodes from 1980 to 2005 in which 17 developed countries had aggressively reduced deficits. The IMF classified each episode as either “expenditure-based” or “tax-based,” depending on whether the government had mainly cut spending or hiked taxes.

When Carlo Favero, Francesco Giavazzi and I studied the results, it turned out that the two kinds of deficit reduction had starkly different effects: cutting spending resulted in very small, short-lived — if any — recessions, and raising taxes resulted in prolonged recessions.

[…]The obvious economic challenge to our contention is: What keeps an economy from slumping when government spending, a major component of aggregate demand, goes down? That is, if the economy doesn’t enter recession, some other component of aggregate demand must necessarily be rising to make up for the reduced government spending — and what is it? The answer: private investment.

Our research found that private-sector capital accumulation rose after the spending-cut deficit reductions, with firms investing more in productive activities — for example, buying machinery and opening new plants. After the tax-hike deficit reductions, capital accumulation dropped.

The reason may involve business confidence, which, we found, plummeted during the tax-based adjustments and rose (or at least didn’t fall) during the expenditure-based ones. When governments cut spending, they may signal that tax rates won’t have to rise in the future, thus spurring investors (and possibly consumers) to be more active.

Our findings on business confidence are consistent with the broader argument that American firms, though profitable, aren’t investing or hiring as much as they might right now because they’re uncertain about future fiscal policy, taxation and regulation.

But there’s a second reason that private investment rises when governments cut spending: the cuts are often just part of a larger reform package that includes other pro-growth measures.

In another study, Silvia Ardagna and I showed that the deficit reductions that successfully lower debt-to-GDP ratios without sparking recessions are those that combine spending reductions with such measures as deregulation, the liberalization of labor markets (including, in some cases, explicit agreement with unions for more moderate wages) and tax reforms that increase labor participation.

Let’s be clear: This body of evidence doesn’t mean that cutting government spending always leads to economic booms. Rather, it shows that spending cuts are much less costly for the economy than tax hikes and that a carefully designed deficit-reduction plan, based on spending cuts and pro-growth policies, may completely eliminate the output loss that you’d expect from such cuts. Tax-based deficit reduction, by contrast, is always recessionary.

UPDATE: George Mason University economists agree: debt is wrecking the economy and the right way to stop it is with spending cuts, not tax increases. In order to grow the economy we need a balanced approach of spending cuts and tax cuts.

Excerpt:

The United States’ high levels of debt are already contributing to slower economic growth and decreased competitiveness. These impacts will worsen if the nation’s debt-to-GDP levels continue to rise, as is currently projected.

[…]High levels of government debt undermine U.S. competitiveness in several ways, including crowding out private investment, raising costs to private businesses, and contributing to both real and perceived macroeconomic instability.

[…]Carmen Reinhart and Kenneth Rogoff examine historical data from 40 countries over 200 years and find that when a nation’s gross national debt exceeds 90% of GDP, real growth was cut by one percent in mild cases and by half in the most extreme cases. This result was found in both developing and advanced economies.

Similarly, a Bank for International Settlements study finds that when government debt in OECD countries exceeds about 85% of GDP, economic growth slows.

[…]While fundamental tax reform is required to correct a host of structural inefficiencies, policymakers can quickly reduce the U.S. statutory rate of 35% to the OECD average rate of 26% or less.

That’s what research tells us. But that’s not what we are doing, because we voted for Barack Obama.