Tag Archives: Tax Cuts

News

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

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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”.

News

How are big companies responding to Obamacare?

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Caterpillar and John Deere. (H/T Hot Air via ECM)

Excerpt:

Caterpillar Inc. said Wednesday it will take a $100 million charge to earnings this quarter to reflect additional taxes stemming from newly enacted U.S. health-care legislation.

[…]The charge is expected to be a one-time cost, but Caterpillar has argued that higher taxes and other potential cost increases related to insurance coverage mandates in the legislation will hinder the company’s recovery this year after a 75% plunge in income during 2009.

“From our point of view, a tax increase like this cannot come at a worse time,” said Jim Dugan, a Caterpillar spokesman.

[…]Farm equipment maker Deere expects after-tax expenses to rise by $150 million this year as a result of the health care reform law President Barack Obama signed this week.

Most of the higher expense will come in Deere’s second quarter, the company said on Thursday. The expense was not included in the company’s earlier 2010 forecast, which called for net income of about $1.3 billion.

The law could raise expenses for large U.S. employers. Industrial companies, which typically have large numbers of retirees, may be among those facing the biggest bill. Caterpillar had argued before the legislation passed that health reform would put it at a disadvantage against global competitors.

And National Review reports on Verizon. (H/T ECM)

Excerpt:

Yesterday I posted a memo that Verizon sent to its employees concerning its view that the Democrats’ health-care bill would probably cause its costs to go up. Specifically, the memo keyed in on a change in the tax treatment of the Medicare Part D retiree drug subsidy. This is a subsidy that the government pays to employers that offer prescription-drug coverage to their retirees; it was created as part of the Medicare prescription-drug entitlement to encourage employers not to dump their retirees into the public system. As the Wall Street Journal editorial board reports today, the subsidy costs taxpayers $665 per person, “while the same Medicare coverage would cost $1,209.”

As part of their effort to keep their health-care bill deficit-neutral, the Democrats changed the law and exposed the subsidy to the 35 percent corporate income tax rate, adding $5.4 billion in revenue to the bill. In its memo to employees, Verizon warned that this tax change would make the subsidy “less valuable to employers, like Verizon, and as a result, may have significant implications for both retirees and employers.” This is a clear sign that Verizon and other employers will probably drop their retiree prescription-drug coverage, leaving Medicare Part D to pick up the slack.

UPDATE: More from National Review. (H/T ECM)

Excerpt:

AK Steele Holding Corp., “the third largest U.S. steelmaker by sales, said it will record a non-cash charge of about $31 million resulting from the health-care overhaul signed into law by President Barack Obama. The charge will be recorded in the first quarter of 2010.”

Valero Energy “will take a $15 million to $20 million charge to second-quarter earnings for the same reason.”

Medical-device maker Medtronic “warned that new taxes on its products could force it to lay off a thousand workers.”

And more from National Review. (H/T ECM)

Excerpt:

Wow: “U.S. companies employed 3.9 million fewer workers in January 2010 than they did one year earlier.”

If you will recall, when touting the stimulus, President Obama and his team declared that “a package in the range that the President-Elect has discussed is expected to create between three and four million jobs by the end of 2010 . . . More than 90 percent of the jobs created are likely to be in the private sector.”

90 percent of three million jobs would be 2.7 million jobs. Yet we’re 3.9 million lower than when we started.

To meet the goal by the deadline, the country would have to create 6.6 million jobs in the next nine months. or more than 733,000 jobs per month for three quarters of the year.

UPDATE 2: Now Business Week reports that AT&T is screwed.

Excerpt:

AT&T Inc. will book $1 billion in first-quarter costs related to the health-care law signed this week by President Barack Obama, the most of any U.S. company so far.

A change in the tax treatment of Medicare subsidies triggered the non-cash expense, and the company will consider changes to the benefits it offers current and retired workers, Dallas-based AT&T said today in a regulatory filing.

Hey! Do you know what causes outsourcing of jobs? DEMOCRATS. Democrats cause jobs to be shipped overseas. Democrats hate companies. Companies hire people. Democrats cause American manufacturing jobs to be shipped overseas. Democrats cause unemployment. That’s why the unemployment rate is double what it was under Ronald Reagan and George W. Bush. Democrats cause unemployment.

How do jobs get created, anyway?

Do you know what really works to create jobs?

I mean – do you know what actually has worked in the past to create jobs?

The Heritage Foundation reports:

President Ronald Reagan’s record includes sweeping economic reforms and deep across-the-board tax cuts, market deregulation, and sound monetary policies to contain inflation. His policies resulted in the largest peacetime economic boom in American history and nearly 35 million more jobs.

See:

That’s what actually worked.

Free. Market. Capitalism. Works.

News

Moderate George Will loves Paul Ryan’s plan for economic recovery

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Rep. Paul Ryan

Editorial from the Press Telegram. (H/T ECM)

Excerpt:

Ryan would eliminate taxes on interest, capital gains, dividends and death.The corporate income tax, the world’s second highest, would be replaced by an 8.5 percent business consumption tax. Because this would be about half the average tax burden that other nations place on corporations, U.S. companies would instantly become more competitive – and more able and eager to hire.

Medicare and Social Security would be preserved for those currently receiving benefits, or becoming eligible in the next 10 years (those 55 and older today). Both programs would be made permanently solvent.

Universal access to affordable health care would be guaranteed by refundable tax credits ($2,300 for individuals, $5,700 for families) for purchasing portable coverage in any state. As persons under 55 became Medicare eligible, they would receive payments averaging $11,000 a year, indexed to inflation and pegged to income, with low-income people receiving more support.

Ryan’s plan would fund medical savings accounts from which low-income people would pay minor out-of-pocket medical expenses. All Americans, regardless of income, would be allowed to establish MSAs – tax-preferred accounts for paying such expenses.

Ryan’s plan would allow workers under 55 the choice of investing more than one-third of their current Social Security taxes in personal retirement accounts similar to the Thrift Savings Plan long available to, and immensely popular with, federal employees. This investment would be inheritable property, guaranteeing that individuals will never lose the ability to dispose every dollar they put into these accounts.

Ryan would raise the retirement age. If, when Congress created Social Security in 1935, it had indexed the retirement age (then 65) to life expectancy, today the age would be in the mid-70s. The system was never intended to do what it is doing – subsidizing retirements that extend from one-third to one-half of retirees’ adult lives.

My last post on George Will is here: Moderate George Will lauds the virtues of Michele Bachmann. He’s actually quite moderate, not at all a conservative, so this is very interesting.

ECM also send me this article from the American Spectator.

Excerpt:

Ever since his back and forth with President Obama during last week’s question time at the Republican retreat, Rep. Paul Ryan’s “Roadmap for America’s Future” has been gaining attention as a plan that the Congressional Budget Office has projected would actually solve our nation’s long-term entitlement crisis.

[…]“The lower budget deficits under your proposal would result in much less federal debt than under the alternative fiscal scenario and thereby a much more favorable macroeconomic outlook,” CBO writes in page 14 of its analysis of the Ryan plan.

CBO projects “real gross national product per person would be about 70 percent higher in 2058 under the proposal.” But after 2058, the CBO’s model completely breaks down when trying to project current trends, “because deficits become so large and unsustainable that the model cannot calculate their effects.” By contrast, the model shows the Ryan plan continuing to achieve economic growth in the decades that follow. This is demonstrated by the CBO chart below.

So the CBO is backing up Ryan’s calculations.