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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Kenneth E. Phillipps who wrote (479421)	10/21/2003 2:58:34 PM
From: Bald Eagle	Read Replies (2) \| Respond to of 769667

Since you are a guy who thinks a 40% increase is "almost double", why should we pay attention to any of your numbers?

To: Kenneth E. Phillipps who wrote (479421)	10/21/2003 3:38:28 PM
From: Original Mad Dog	Read Replies (2) \| Respond to of 769667

American Spirit said that in the past it was a "100 percent" lie for Rush Limbaugh to say that past tax cuts have led to revenue increases. I presented him or her with several examples where tax cuts did in fact precede revenue increases. In most cases there is a slight initial decline and then economic growth causes revenues to go up even though the rate is lower. In one case, the Kennedy tax cuts from the early 1960's, there was no decline in revenues at all. In another case, Reagan's, federal revenues were significantly higher within a few years. Limbaugh's statement was not about what has already happened with Bush tax cuts, but about what happened in the past with other tax cuts. It was an attempt to analogize to Bush's situation and contend that tax cuts over time do not lead to lasting revenue declines. Limbaugh was apparently (I say "apparently" because I don't listen to what he says and AS didn't quote it) trying to argue that Bush's tax cuts would not lead to lasting declines in federal revenues because past tax cuts had not done so. The factual predicate for Limbaugh's argument was not false, and American Spirit's attempt to label it as false was what I was responding to. Whether Limbaugh's argument itself was correct is entirely a different matter (on that, more below). Under Rush's argument, the revenue increase from the Bush tax cuts, if there is one, would show up in the next 1-3 years. You are correct that it has not shown up yet. The government's projections are that it will show up beginning next year or the year after, but projections are often biased and I will believe that when I see it, not before. As for the past three years declines in revenues, a significant contributing factor was the downward trend of the economy which Bush inherited from Clinton and which was not helped by the September 2001 events. Here is a link to a chart which shows percentage changes in real (i.e., inflation adjusted) GDP for each quarter for the past four years: bea.gov (select Table 7 on the worksheet to see the data I am about to cite) 1999Q3 4.2 1999Q4 4.3 2000Q1 4.2 2000Q2 4.9 2000Q3 3.7 2000Q4 2.3 2001Q1 1.5 (Bush takes office during above quarter) 2001Q2 -0.1 2001Q3 -0.4 2001Q4 0.1 2002Q1 1.4 2002Q2 2.2 2002Q3 3.3 2002Q4 2.9 2003Q1 2.0 (later revised to 1.4) 2003Q2 2.5 (later revised to 3.3) (EDIT: Revision press release at bea.gov It looks to me like most of the decline from real GDP growth of 4-5 percent to a situation of near zero growth took place during 2000 and early 2001 (Consecutive quarterly growth rates of 4.9, 3.7, 2.3 and 1.5 during Clinton's last four quarters, then slight negative growth during Bush's first two full quarters before he had had any real opportunity to implement any policies or tax cuts). The first tax cut took place during that second negative quarter (I would have to look up the date, but I think it was in the third quarter). Most of that tax cut was not programmed to take effect until later years. The decline in revenue in 2001 was largely due to (1) a huge decline in profitable stock option exercises due to the deflation of the Nasdaq bubble (the majority of which occurred while Clinton was still President -- the Nasdaq is currently about 3300 points below its all time high, and about 70 percent of that 3300 point decline took place before January 20, 2001); and (2) the slowdown of growth from the previous 4 percent or higher level to virtually nothing, again something the majority of which occurred before Bush took office. Revenues in 2001 and 2002 would have declined anyway, regardless of the beginnings of a tax cut, as revenues declined in many if not most states during those years. Will the Bush tax cut, like Kennedy's and Reagan's tax cuts, result in a long term increase in government revenue? Maybe, maybe not. I for one have my doubts. The main difference this time is that the reduction in marginal rates may not be significant enough to affect income earning or income avoiding behavior. Reagan cut some marginal rates from 50 percent to below 30 percent. That made a huge difference in tax avoidance and extra work strategies for people in those brackets. Bush, in contrast, has only cut the top rate from the high 30's to the low to mid 30's. Is that really going to make a difference in people's behavior with respect to tax strategies? My own view is that the impact will not be significant, and that the only positive revenue effect from the tax cuts will be the increased economic growth. Some of that growth already seems to be occurring. Since Bush's policies began to be implemented, growth has occurred in seven consecutive quarters. It has not been steadily increasing, though, and it has not been strong growth with the exception of a couple of quarters at 3.3, which is moderate growth. It is too early to tell how much impact the significant tax cuts implemented this year will have on growth (and hence, on revenues in the long term). So the jury is still out on whether the medium to long term impact of Bush's tax cuts on federal revenues will be positive or negative. But to say that it is a "100 percent lie" that past tax cuts have led to revenue increases is, well, a 100 percent lie. And now that American Spirit knows that, as an honorable person (s)he should refrain from saying that.