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July 11, 2010

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The linked news article quotes Brendan as asserting that participants were given mock news stories, each of which contained a provably false...claim... [one of which was]that the Bush tax cuts increased government revenues (revenues actually fell)

In fact, federal income tax collected fell then rose dramatically. Here are the actual numbers. (source http://www.usgovernmentrevenue.com/yearrev2001_0.html#usgs302 )

Federal Income Tax by Fiscal Year ($ billion)

2001.....1145
2002.....1006
2003......926
2004......998
2005.....1206
2006.....1398
2007.....1534
2008.....1450

Bush had two major tax cuts, one in 2001 and the other in 2003. Not only did tax revenue increase in 2004, it sharply increased in the next few years. (Total federal revenue also increased from 2003 to 2004.) There's no way to prove whether Bush's tax cuts were responsible for the increased revenue, but it's just false to claim that "revenues actually fell."

Brendan may have implicitly assumed that if tax cuts were to increase revenue, that increase would take place immediately. That's wrong. Tax cuts might increase tax revenue by encouraging additional economic expansion. This economic expansion will naturally occur over a period of years. It could take a more than a year before the increased economic activity more than offsets the lower tax rates.

This sloppiness may help explain why conservative opinion wasn't changed after being given a "correction."

David, before accusing me of sloppiness, please read the actual research. The text of the article is in the appendix. We correctly state that (a) revenue was well short of previous projections and (b) it fell to a very low level relative to GDP.

Brendan, your point (b) is true, but irrelevant to proving whether the tax cuts increased GNP. Tax rate cuts automatically reduce the ratio of tax revenues to GDP. The way tax rate cuts might increase total tax revenue would be by increasing GDP enough to offset the lower ratio of Tax Revenue/GDP.

Point (a) is accurate in your article, but it's misleading as stated above. In 2005, it was known that federal tax revenue had gone down in FYs 2002 and 2003 and had barely recovered in FY 2004. Today we also know that revenue sky-rocketed in FY 2005 - 2007. I think it's misleading now to state point (a) without specifying in which years the tax revenues were below projection and without mentioning the very good years that followed.

Also, you were not quoted in the Globe as saying "revenue was short of projections," but rather that "revenues actually fell." This statement was not quite true in 2005, since revenues increased slightly in FY 2004. And, it's totally misleading today, since it ignores the huge jump in revenues in the next 3 years.

Final point: You seem to believe that a comparison between projection and actual is a fair measure of the impact of the President's economic policy. Then what do you make of the Obama team's forecast that without their "stimulus", the unemployment rate would rise to 8%? Since the actual rate has been in the 9.5% to 10% range, do you believe that the "stimulus" made unemployment worse instead of better? Certainly the comparison of projected to actual unemployment should lead you to reject the Obama team's claim that the "stimulus" added millions of jobs. However, I don't recall posts where you complained about wrong-headed liberals who continue to believe the myth that Obama's policies added jobs.

There's extensive discussion of the Boston Globe article about Brendan's research at a conservative blog: http://justoneminute.typepad.com/main/2010/07/backfire-or-digging-in-when-the-facts-are-against-you.html#comments

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