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

To: TimF who wrote (746961)	8/4/2006 10:59:25 AM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769670

Re: "You can't ever know precisely. [Where you are on the Laffer Curve]" Well, if you can't at least pin it down to a general area of the curve... then it is useless to you when it comes to making policy prescriptions! (And, yes, you CAN know fairly precisely --- because the effects of tax changes can be tracked and measured... to the extent that ANYTHING in economics can actually be 'measured', I guess. :-) THIS is WHAT THE US TREASURY DEPARTMENT JUST DID.) Re: "The Laffer curve is more of a short term effect." No, it's not. Re: "If I understand it correctly the dynamic analysis is about extra economic growth in the short to mid term." No. 'Dynamic analysis' simply means that they ASSUME 'Laffer Curve effects' are true, i.e. that reducing taxes ALWAYS increases the incentive to work, to produce... and thus increases the potential rate of economic growth, CEUTERUS PARIBUS! (That means: all other things being held equal.) Re: "Over a few years, perhaps since Bush's tax cuts took effect. That may well have gained back 10% of the revenue that was lost to lower rates. But growth compounds. Its not a one time effect." Yes, they KNOW THAT. It was factored into the Treasury Department analysis. Unfortunately, DEBT also reduces the economy's growth rate. So, when SPENDING stays high (& is financed by debt), while REVENUE is reduced because of lowered tax rates --- the beneficial effects of the lowered rates are soon SWAMPED by the negative effects of the also-compounding DEBT. :-( Re: "In other words, they DO project SOME 'Laffer Curve benefits' from the tax cuts." Correct. From this particular 'odd' mix of tax changes they determined that about 10% of the revenue that was lost to the government was 'regained' - at least in the short-to-mid-term - by extra growth. Still, that left 90% of the forgone revenue that was NOT regained through faster growth... and, since government spending was NOT REDUCED by that amount (but, sadly, spending actually increased dramatically), this 'lost revenue' was added directly to the national debt --- where it continues COMPOUNDING and REDUCING the ECONOMY'S GROWTH RATE. The extra debt is depressing growth more then the 'Laffer Curve effect' is raising growth.... ALL the studies (Treasury's, C.B.O.'s, O.M.B.'s, Trend Macrolytic's) came to the same conclusion: without DRASTIC cuts in spending to cover that forgone revenue... then by the end of this decade, and on into the future, we are SIGIFICANTLY WORSE OFF then if we'd made no changes at all to the tax codes. (Clearly, the best-of-all-world's solution would be to reduce and simplify taxes... AND to slash government spending and run balanced budgets. Unfortunately, that ain't happening.) Re: "The Laffer curve benefits happen even if spending is not cut." True. But ALL the studies (including the WH one now) show that the NEGATIVE EFFECTS of the rising debt (caused by failing to cut spending) OVERWHELM all of the Laffer-effect benefits, and THEN SOME! There IS NO 'FREE LUNCH'. Re: "Apparently the treasure report calculated only a 0.04% extra growth rate which is minuscule. Others might say its higher, but it does seem that much of the positive effect of lower taxes is countered by the negative effects of the borrowing." Yes. ALL countered and then a LOT MORE. They show (as predicted also by all the earlier reports) that we are already into the area of LOWER GROWTH then would have happened sans-changes.

To: TimF who wrote (746961)	8/4/2006 11:25:45 AM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769670

CONCORD COALITION SAYS TAX CUTS AND NEW SPENDING PROGRAMS IN "TRIFECTA" BILL SHOULD NOT BE DEBT-FINANCED WASHINGTON - With the Senate expected to vote this week on the so-called "Trifecta" bill, which includes a permanent reduction in the estate tax, temporary extension of several expiring tax provisions and a new mandatory spending program for mine reclamation along with an increase in the minimum wage, The Concord Coalition reiterated the importance of offsetting the deficit impact of all tax cuts and spending increases. "The real 'trifecta' here is fiscal myopia, budgetary gimmicks and legislative logrolling," Bixby said. "This bill will increase the deficit by $310 billion through 2016, with 83 percent of that coming after 2011 when the budget will be strained by rising entitlement costs. Moreover, the bill continues a pattern of hiding long-term costs by pretending that a number of popular tax breaks will expire after 2007. Then, as an inducement for passing the estate tax reduction which would probably not pass as a stand-alone measure, the bill tacks on an increase in the minimum wage and an assortment of targeted provisions such as a new mandatory spending program for mine reclamation," Bixby said. The centerpiece of the bill is a permanent reduction in the estate tax, which by 2016 will drain more than $62 billion per year in revenues. In an issue brief on the estate tax released before the Senate voted on legislation making estate tax repeal permanent, Concord stated, "Legislation with a lasting impact on revenues, such as permanently repealing or reducing the estate tax, must be considered within the context of future spending obligations. Projected entitlement benefits far exceed the revenues dedicated to pay for them over the long-term. Unless Congress enacts major reforms slowing the growth of entitlement spending, revenues will need to increase well above current levels to meet these obligations. In light of the costs associated with the baby boomers' retirement and health care costs, Congress should defer action on the estate tax and extension of other expiring tax cuts until reforms controlling the growth of entitlement spending are enacted. Doing the opposite puts the cart before the horse." "The refusal of the Senate to permanently eliminate the estate tax should have sent a message about the need to deal with our looming fiscal problems first," said Concord Coalition Policy Director Ed Lorenzen. "Instead, the Congressional leadership is attempting to buy support for their budget strategy by adding other debt-financed tax cuts and a new mandatory spending program with costs well in excess of the new revenues dedicated to the program. This may be a clever legislative strategy, but it is an irresponsible fiscal policy." "Not only has Congress failed to adopt a budget resolution for this year, but passage of the 'trifecta' bill would exceed by about $12 billion the remaining budgetary limits for tax cuts and entitlement increases imposed by last year's budget resolution, " added Bixby. "Budgeting is about making choices among competing priorities, but this Congress appears incapable of making choices or setting priorities." A recent report issued by the Treasury Department providing a dynamic analysis of proposals to permanently extend the 2001 and 2003 tax cuts illustrate the importance of offsetting the revenue loss from tax cuts. Advocates of reducing the estate tax argue that it will increase economic growth by encouraging savings and increasing capital stock (though the Treasury report acknowledges the evidence on this is uncertain). However, the report noted that "when lower taxes on capital income are financed initially by issuing government debt, private investment is crowded out by an increase in government borrowing," limiting the economic benefit from the tax cuts. "The Treasury report demonstrates that the pay-as-you-go principle is not simply a matter of bookkeeping, but a key element of sound economic policymaking," said Lorenzen. "Unfortunately, the estate tax bill currently being considered by the Senate ignores this lesson and further undercuts any potential economic benefit by adding debt-financed spending and tax cuts to the proposal." The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.