« Twitter roundup | Main | Who would be blamed for a debt default? »

July 15, 2011


It ain't braggin' if you can back it up. -- Dizzy Dean.

George Bush backed up his claim that his tax rate cuts would lead to increases in taxes collected. After those tax cuts were in force, tax revenues rose sharply in 2005, in 2006, and again in 2007.

It's particularly silly to fault comments made by Bush and Cheney in 2006 about tax revenues soaring; by then the tax revenues had actually soared. Brendan's standard of accuracy seems to be based less on actual results than on forecasts by certain economists -- forecasts that turned out to be wrong.

I wish President Obama had increased tax revenues the way Bush did. Then we wouldn't be facing a debt crisis.

I heard this question (does cutting taxes increase revenues?) put to Alan Greenspan, Ben Bernanke, Hank Paulson and some economist from the Reagan cabinet. They all had the same answer, a simple "NO."

Between 2001 and 2010, the Bush tax cuts added $2.6 trillion to the national debt. But they did make the rich richer and that's all the GOP cares about.

You want to talk about results, here you go. In 2000, GDP was 9.821 trillion and individual income tax revenue was 1.004 trillion while corporate tax receipts were 207.28 billion. In 2010, GDP was 14.508 trillion while individual income tax receipts were 898.5 billion and corporate tax receipts were 191.4 billion. The economy is 47% larger yet income tax receipts are more than 10% lower.

You can also look at revenue as a percentage of GDP. At the peak of the business cycle in 2000, tax revenue was 20.6% of GDP. At the peak of the business cycle in 2007, tax revenue was 18.5% of GDP. The tax cuts reduced revenue by 2% of GDP.

You can check that by taking the 2000 nominal number and adjusting for inflation and population growth. From 2000 to 2007, inflation was 2.69% and pop growth was 0.96%. Now compound that for 7 years and multiply that by 2.025 trillion and you get 2.6 trillion. Tax revenue in 2007 was 2.568 trillion. Per capita GDP grew 1.40% during that time so taking into consideration that most of the benefits of that growth went to the people who pay taxes, you can see that reducing revenue by about 2% of GDP is accurate assessment.

Just to finish this up, let's compare economic growth from 2003 - 2007 (the Bush boom years) to growth from 1950 to 2000. The economy grew much slower under the best years of Bush than it had historically.

US 2003 to 2007
Consumer Price Index 3.03%
Unskilled Wage 1.64%
Nominal GDP 5.99%
Real GDP 2.81%
GDP Deflator 3.09%
Nominal GDP per capita 5.00%
Real GDP per capita 1.85%
S&P Composite 14.03%
Population (millions) 0.95%

US 1950 to 2000
Consumer Price Index 4.01%
Unskilled Wage 5.00%
Nominal GDP 7.30%
Real GDP 3.50%
GDP Deflator 3.67%
Nominal GDP per capita 5.97%
Real GDP per capita 2.23%
S&P Composite 13.25%
Population (millions) 1.25%

The comments to this entry are closed.