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given right back with additional tax cuts?

but it kind of takes the air out of "fiscal responsibility."

to the wrong guy. I'm not a Fiscon. I don't believe a balanced budget means diddly so long as you keep the deficit around 3% of GDP and I don't believe debt means anything so long as you can service it.

So my outrage meter is not quivering much less in the red here.

First, I'm not sure about the answer to your question, but for the purposes of argument, let's presume that it's "yes."

Are you contending that the Democrats are excused from curbing wasteful spending on the basis that said money might potentially be used for tax cuts?

That's another argument I sincerely hope they make loudly and often in 2006.

fiscal irresponsibility over the past five years?  I think we`ve out-spent the Dems easily.  How easily when we assume the reins we become just like those we detest!

While I'm sure that it must feel nice for Republicans to be able to point fingers at Democrats over this it seem that this is a pretty hollow victory.

This seems like nothing more than a token victory in which the Republicans can tell their base that they are getting tough with deadbeats and Democrats can tell their base that they tried to fight the "heartless" Republicans from ripping dinners away from 10 year old Timmy.  

You know what would impress me?  If one of the parties made cuts to politically POPULAR programs like Medicare.  But they won't do that because the AARP would rip them to shreds.

The title really has nothing to do with the post, but I love how the allusion drives Donks batty.

Sorry for the diversion, but I meant to ask whether you've noticed that we've been trumpeting every spending cut measure that's come down the pipe recently. Sure, we'd all like to see more, but you've got to start somewhere.

By the way, regardless of whether this actually WAS a cut to Medicare, you can sure bet the Donks will call it that, and the media will help them (as they already are).

one can only do what one can as an individual in the face of fiscal irresponsibility and impending doom.  Stand up,set an example,give your tax cuts back to Mother Government.  Er BTW, why shouldn't savings be returned to the people, that is, the folks who are the economy?

and I must admit that I haven't read the bill or any serious analysis of it yet it seems that the cuts were directed mostly at Medicaid and not Medicare.  Big difference.  Medicaid helps poor non-influential  people. Medicare helps powerful seniors.  

I respect that many people here are pushing for all sorts of cuts.  That's great.  But most of the cuts being presented don't amount to a hill of beans.  The Bridge to Nowhere may have been pointless and probably should have been cut but it was "only" 150 mill.  In a budge of 2+ trillion dollars that really doesn't mean much.   That would be like the Millionair saying he's going to cut back his spending by not buying a cup of coffee in the morning.

DoD and Entitlements take up the lion's share of our budget.  After that we have personal and corporate welfare programs.  Much of the personal welfare programs were severely cut in 96.  That leaves the corporate welfare programs.  Good luck trying to get those cut.   I have a hard time getting exciting about a nominal cut to Medicaid when Archer Daniels Midland still receives hundreds of millions of dollars in ethanol subsidies.

if you prefer lower taxes and a high budget deficit.  I think that was his/her point.

  I haven't been particularly pleased with some of the spending, however, as with the Medicare bill, what the Republicans have spent pales in comparison to what the Democrats would spend if given the chance.

  If the party would enforce a two-term limit to each position, it is possible that there would be less incentive on the part of those already in office to seek pork for thier state.

You have to start somewhere. Sure, we'd like to trim the fat all at once, but that's not going to happen. So what you do is, you start with the most egregious pork and make some inroads, and progress from there.

That was the whole point of the Bridge to Nowhere debacle - it was to point out that, if anything can be cut from the federal budget, surely it can be this. The Coburn Amendment shone the light into the dark corners of the Senate, because it demonstrated that a vast majority of Senators were willing to defend an indefensible piece of wasteful spending, simply because it was pork that was earmarked by a fellow Senator.

The point, flyerhawk, is that the culture has got to change. And cultures don't change overnight. Look at the civil rights movement, for instance. Rosa Parks refusing to move from her seat on a bus? Really no big deal whatsoever, in the grand scheme of the universe. But it's often symbolic gestures like that that have an emboldening effect for wider change.

...the student loan part.  Say what you will about Medicare or Medicaid, but it seems like student loans for college and graduate programs would give you at least a dollar-for-dollar return when you look at the big picture in terms of the national economy.  

After all the yacking about globalization, immigration, corporate outsourcing, and everything else, the single biggest longterm drag on America's economy is the lack of skilled/educated workers.  We hear a lot of talk a lot about giving tax incentives to American businesses who hire American workers, but what are these companies supposed to do when there aren't enough qualified Americans?  Providing subsidized student loans is a direct investment in the American marketplace.  

I'm all for cutting the budget, but with all the money pits in the federal government, it makes no sense for Congress to cut a program with such a clear, definitive return.  Studen loans are, by definition, merit-based (you must be accepted into a program to get them).  The money isn't being flushed down the toilet.

only if tax cuts didn't generate more revenue.

but I don't see how you're changing the culture by saying "Democrats like to tax and spend but not Republicans".  You're giving your own party a free ride when they have shown themselves to be the other side of the same coin on this.

I'm actually not giving anybody a free ride. Just because I applaud someone for doing the right thing in this particular instance, does not mean that I excuse them from all past wrongdoing. I raked the Republican squishes over the coals over HR 4241 AND the Coburn Amendment.

My point, however, remains true. While there is about 10% of the House Republican Caucus who can't be trusted to hold the line on spending, 100% of  the Democrat caucus is guilty of the same. And, while Republicans didn't exactly cover themselves with glory in the Coburn Amendment fight, exactly four (four!) Democrats joined in the fight against a particularly offensive and egregious piece of pork.

Which part of this spending don't they like? Which part of it should go?

I think it's always been pretty clear that the Democrats would prefer to reverse the recent tax cuts rather than cut major spending programs (and that includes both entitlements and defense). That's obviously not the decision that most people here would make, but it is no less fiscally responsible than a strategy of jointly cutting taxes and spending. Either one would certainly be better than the current model of raising spending while cutting taxes.

I'll agree with you that the Democrats have also been making noise about repealing the Bush tax cuts. But they've also started making noise over the last year about the level of spending.

If they really don't care about spending, that's fine and they can just moan about tax increases. I encourage them to do so. What I don't like is this dishonest pretense they're making about disliking the amount of spending that's going on in Washington - they don't.

an absolute truism, or anything close to one.  

Sometimes tax cuts create more revenue.  Sometimes they create less revenue.  

Apparently, spending is out of control under the Bush administration. Which part of this spending don't they like? Which part of it should go?

Here's a hint: they don't think its being wasted on student loans and free school lunches for poor elementary school students

Two places they don't like the spending:

1. Iraq War (the merits of the war notwithstanding, much of the money and planning has clearly been mismanaged)
   
   
2. Tax Cuts

The republicans rolling back social programs to say "hey we're cutting spending" is like chasing away mice despite the two gigantic elephants in the room.

Here's a hint: they don't think its being wasted on student loans and free school lunches for poor elementary school students

That actually is not an answer to my question, as I already conceded that they don't like THESE cuts, which are not cuts at all.

I do appreciate hearing the one about how the Republicans want to starve the poor schoolkids, though. It never gets old, seriously.

(FYI, they've sent home the "sign up for free lunches, please!" sheet with my kid about five times so far this year)

Two places they don't like the spending:

Iraq War (the merits of the war notwithstanding, much of the money and planning has clearly been mismanaged)

So, military spending. Again, I think I already conceded this.

Tax Cuts

That's not spending, that's earning. And, like I already said, if they want to run on tax hikes, run on tax hikes. Just don't pretend like you're running on cutting spending, because you're not. Unless it's military spending. It's okay to cut that spending. Because it's wasteful and mismanaged (whereas school lunch programs and Medicare are NOT).

If you mismanage spending in the school lunch program, some third grader gets away with a free tray of chicken nuggets

If you mismanage military spending, Halliburton brings in gigantic quartily profits while our troops have to pay for their own body armor

When in doubt, "Halliburton!" will do in a pinch for every argument.

not some board for the tinfoil hat brigade.

Problem solved.

I was wondering what was going to push old cd6 onto The Pile™, if in fact that's where he now resides.

Talk about going out on a whimper...

...but when did tax cuts create less revenue? And what is the "sometimes more/sometimes less" ratio?  50/50?  90/10? 10/90?  Or maybe total revenues gained/total revenues lost.  I'm not a money guy, and I would like some perspective.  I was under the impression that tax cuts almost always resulted in increased revenues.  Hep me, y'all.  

I move that we rename Talking Points (like these) to Whining Points.

Interest payments on the debt take up between 10 and 13% of the budget, and of course, this is mandatory spending.  Obviously the debt does matter because it ties the hands of our lawmakers to enact new programs, address emergencies (Katrina), and even cut taxes (or at least it used to).  

in the past we've let you get by with crap like this . Our bad. We apologize. It has been unfair to those reading this site, for the obvious reason that it is just stupid, and now you will be able to claim to others we were unfair to you in your obligatory "I was banned from RedState diary."

There was a pretty good diary here at Redstate that i can't seem to track down (I'm terrible at using the search engine here) that discussed federal subsidies for student loans.

The basic point of the diary was that the effect of federal subsidies is to raise the price of college way above and beyond inflation rates, as college administrators realize that they can raise tuition and fees 15% a year because the banks will lend to students with the federal subsidy and guarantee.  Schools have zero incentive to be competitive on price, which really hurts students and their families ultimately.  (The federal government pays some fees and guarantees the loan in the event of a default, but the borrower is still responsible for that $250,000 student loan, and it goes on his/her credit report.)

So it isn't as clear cut as you seem to think.

-TS

My grandmother, God rest her soul, worked for first ever Republican Governor of Tennessee in the administration of food stamps.  She was an ardent Republican, but she also supported important social programs like food stamps, Medicaid, childrens healthcare and student loans.

Why is it that our leaders are giving away the house to those who don't need it (see the Energy bill & Transportation bill pork products) while steadily eroding the foundation for those who are most in need of assistance?  

I guess the 'old guard' of the Republican party has all but passed away.

This seems to be degenerating fast. The bill as passed modified some of the earlier proposed cuts, including with respect to eligibility for free lunches, in order to get enough moderate Republicans to sign on. At the same time, there is a lot of wasteful military spending that neither party, but particularly the GOP, wants to address because of the politics involved. There are obsolete bases that should be closed, and useless weapons programs that should be defunded. We're all happy to cut the stuff we have political or ideological objections to, but genuine fiscal responsibility entails sacrificing some of our own sacred cows too.

responding to your first sentence that the GOP was showing fiscal responsibility by cutting spending.  In my mind "fiscal responsibility" means spending less and decreasing the deficit, but there's no deficit reduction here with the tax cuts that are in a separate bill.

Don't get me wrong, ideally I would like (a) a lot less spending and (b) tax cuts, but I would like (a) to outweigh (b) by enough to significantly decrease the deficit.

Obviously the debt does matter because it ties the hands of our lawmakers to enact new programs

of streiff's comment.  And I happen to think that's a very salutary effect of serviceable levels of debt.

-TS

That way when some troll wants to bring up Halliburton, they can just say "number 47!" Will save a lot of time.

Is the issue that the money should not be spent at all, or that the money should be more efficiently allocated? Body armor for the troops, and all?

with this notion.

The biggest problem is determining whether tax cuts/raises had ANY impact on revenues.  How can we determine if tax cuts/raises caused a change or if it was just the economy shifting?  

And of course politics comes into play.  If you're willing to wait long enough you can prove anything.  Someone posted here at Redstate, just yesterday, that the 1993 tax rate increases caused the 2001 recession.  Well if you're willing to wait 8 years to achieve your desired objective you can prove just about anything you want.  Or we can  look to President Bush's tax cuts.  We didn't see a return to 2001 tax receipt levels until last year.  Does that mean that it took 3 years for the tax cuts to kick in or does it mean that the economy simply turned around?  Tough question to answer.

As for coming up for a ratio, no one has been able to do this.  The main reason being that it is a moving target.  A different times the optimal tax rate is different.  We can all agree that 100% tax rate would bring in zero revenues and a 0% tax rate would bring in zero revenues.  The rest is all just guesswork.  

If you graph the increase in federal spending on student loan subsidies against the increase in college tuition, it's almost identical.

It reveals Republican priorities:  Tax cuts for Trillionaires more important than food for children.  THis is New Orleans II.

it doesn't matter so long as you can service it and so long as the government's hands are tied my life, libery, and property are a little more secure.

(since I'm assuming that's the "us" you're referring to) can rest easy that you are no longer part of the "us" that is RedState.

This diary maybe?

My comment on the thread was similar to what you are saying:

Let me try on another frame.  Picture universities as Big Rich Education.  They hike up prices much faster than inflation knowing that their product is worth a lot (especially top schools or ones with name recognition).  They then let parents complain to government while also lobbying the government to "help" them cover costs.  They do this while amassing multi-billion dollar endowments.  If these entities didn't have "education" to hide behind, this would be called Corporate Welfare.  We are subsidizing very profitable organizations that have impressive fundraising abilities.

I've also done a calculation that I found interesting.  Harvard with its $18 billion endowment could afford to pay the full cost of every undergraduate with less than 10% of the interest from their endowment.

6000 students * $30,000 a year = $180,000,000/year

That's 1% of the total endowment and presuming a 10% long run growth (which is a low ball if you look at their past performance), then the cost is below 10% of just the interest on the endowment.

But they have no incentive to do so because it would be passing up massive injections of federal government money.  I don't know the correct solution, but something is out of whack.

non-profit so all funds received are generally tax-free.  Not to mention the exemption from state property taxes that I believe they usually get.

Good comment.

is really a bit of a red herring here. Efficiency is good, but most of the money that IMO should be actually cut is tied up in making fancy gizmos. I did a very brief internship with United Defense in MN in high school, and they were very excited about the Paladin at the time. These are the companies and people who would be primarily hurt by the sort of cuts I'm suggesting. People with PhDs in physics and engineering, people in associated manufacturing, and so on -- good people, who do important work, but are essentially getting paid by the government to build stuff for which we don't currently have a pressing need. Streiff can probably give more specifics than I could off the top of my head.

I'm not talking theory here, flyerhawk.

The most compelling evidence comes from the latest Congressional Budget Office monthly report, which shows the totals for the first eight months of fiscal 2005 and tells us most of the story for the whole year. The most notable figure in the CBO report is that corporate income tax receipts are up a stunning 47.5 percent this year. Individual income taxes are also up sharply this year, leaping 20.5 percent over last year.

This is powerful evidence that the investment tax cuts - lowering the tax rate on dividends and capital gains and allowing an increase in the amount of investment spending that businesses may write off in the first year - breathed life back into financial markets, drove a broad revival of American business and increased personal income......Tax revenues have grown by an average of more than 6 percent annually since the 2003 tax cut, compared to falling tax collections after the 2001 tax cut [my emphasis]

Don't believe the Liberal hype.  Tax cuts work.

Defense never needs to be cut because there is always something that needs to be purchased but we should always look to cut welfare.

I can understand this reasoning but if you are going to be sincere in saying that you want to cut spending you can't always look to the other side's ideological sacred cows.  Sometimes you have to look at your own, if you want to be truly responsible.

is at least something actually enumerated in the Constitution.

is that the health of the economy drives tax receipts in any given year, that the health of the economy is only marginally affected by tax cuts.

And increasing write-offs is a terrible idea if you want businesses to spend wisely.

because if you stop paying them to build stealth fighters and you close the factory you lose the expertise and at some future date you're going to need it.

This is why when given the choice between a smaller military and a smaller procurement budget the Pentagon opts for widgets over people every time.

Well so is welfare but I'm not sure how that is relevant.

of the comments that were made here a few months ago about those closings, right?

"Congress shall have Power To lay and collect Taxes . . . to pay the Debts and provide for the common Defence and general Welfare of the United States."

What's your point?

that "common defense" pretty much still means today what it meant in 1792 - while "general welfare" certainly does not.

Just saying.

Don't believe the hype from either side.

So while the economies was stalled in 2001 and 2002 the tax cuts had a neglible effect but when the economy was growing the tax cuts caused an increase in tax revenues.  Ok.  

As I said it took 3 years to get back to 2001 tax receipt levels, that's in nominal dollars.

Let me ask you this.  If we were to cut taxes by 50% do you think we would recoup the lost tax receipts with increased growth and how long would it take?

Can you explain how the country experienced one it's greatest booms immediately following the largest tax HIKES of the past 25 years?

For example, some of the revenue is from companies taking advantage of one-time-only lower rates on overseas earnings. WaPo.

Clearly the economy has improved, and so tax income is up, which is a good thing across the board, but the cause and effect relationships are seldom as simple as we'd like to believe.  

I must commend the WaPo since they changed their headline to "House OKs Spending Cuts" which is more descriptive than what I say earlier... something along the lines of their sub-heading now: "Sweeping five-year plan squeezes programs for poor, college students and farmers. Senate passes bill extending some tax measures."

This I think is another example of unintentional media bias which I think is far more common and less diabolical than Rather-style bias.  The sub-heading is not a lie, but it could just as easily read "Republicans narrow the deficit, Democrats support higher spending" and be just as accurate.  The choice of what to emphasize or "put above the fold" or in a headline is one of the most common biases and one of the hardest to fight.  You have to put something at the top, but what you choose is probably a reflection of how you, the writer, sees the situation.

Another point on that bias.  Spending is not actually being cut.  The growth in spending is being cut.  There is a substantial difference that seems to be lost on many journalists.

The beginning of the Constitution states that the general welfare of the US is promoted by the creation of the Constitution itself.

Article 8 simple makes a specific statement about allowing tax collection for that same purpose.

"General Welfare" was never meant to be an open ended grab bag of goodies that it has now become.

Dont believe me? How about the people who were there. In Federalist 41 Madison addresses that very question by saying:

"For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power?"

Actually in Hamilton made somewhat of the same point. he didnt want a bill of rights because his thinking was that if it isnt specifically listed in the Constitution, it is obviously unconstitutional and adding prohibitions to goverment would confuse the matter.

So, no, welfare is not in the Constution. Thats my point.

that "common defense" pretty much still means today what it meant in 1792

Lets Hope thats not true, cause if our military amounts to scrappy volenteers with musketts we might be in a bit of trouble.

You have to be kidding, right?

OK, let me spell it out just in case you're not.  "Common defense" still means "common defense" - which means that the nation as a whole pulls together and defends itself, not the individual states on their own (that little bit about the dissolution of the Union notwithstanding) - and the Federal Government is empowered to levy taxes for said purpose.

"General Welfare" certainly did not mean in 1792 that the Federal Government would levy taxes so as to allow people to avoid working (or starving to death for lack of so doing) for their entire lives.

See the difference?

Let's not get stuck on stupid here, amigo.

Cheers.

was meant to mean project force and influence across the world much like contemporary England or do you think think it meant "Defend our borders and citizens"?

The framers weren't exactly keen on a standing army.

war as a nation was against France on the high seas, our second against the Barbary pirates (you know, "shores of Tripoli"), our third a baldfaced attempt to annex Canada, and in between we were busily evicting Indians from the Old Northwest I think the conclusion is pretty obvious, don't you?

protecting our borders and intrests.  They were pretty keen on the Navy, after all.

Are you attempting to make the case that the definition of "common defense" has evolved the same way has "general welfare"?

Because I would pay cash-money to hear that argument made convincingly.

Not really trying to make that argument.  I'm just pointing out that nothing is clear-cut.  

Although I may think about it for a while and give it a try to make that argument. :)

The goal is effective fiscal policy.

Wow that comment is exactly the argument I heard the liberal side use about voucher program (seriously, this is not a troll).

This bill made me sad. This bill made me mad. This bill will rile up a lot of students.

They will quit school full time and get more low paying jobs to support themselves.

I already have two jobs to support myself through college. I guess its time now to get a 3rd one. I mean 4-5 hours of sleep I currently get daily is way too much.

I think what the evidence shows,

is that the health of the economy drives tax receipts in any given year, that the health of the economy is only marginally affected by tax cuts

Where's this evidence you speak of? It doesn't exist, because tax rates have a profound effect on the economy. Increase the marginal rates to 80% and see what would happen. Why do you think Ireland is doing so much better than the rest of the EU? Because of the fantastic weather? Taxes and regulation are the reason.

And increasing write-offs is a terrible idea if you want businesses to spend wisely.

Not really. It still costs them money to buy things. Money they would otherwise be able to keep. So what would be the point in throwing it away on worthless stuff they didn't need? In any case, why do you care if a business decides to waste it's money?

I'm an engineer, not an economist, so I don't know all the intricacies, but numbers don't lie.  The 'boom' from the tax hike was temporal at best;  and it was the positive effect of tax cuts that minimized recession.

The point is, the more you invest, the greater the dividend.  And I certainly don't view investment as expense.  Tax cuts generate economic growth, which generates more tax revenue.  

Thank you Adam for digging it up.  My search skills on redstate truly are horrid.

I'm not saying we should slash and burn student loans -- Lord knows I would never have gotten through my studies without them.  All I wanted to point out was that it really isn't as simple as some liberals want to portray it: Big Bad Republicans Want To Impoverish Students!!!

Even our universities are subject to market forces, and massive government subsidies are definitely having an effect.  And that effect is usually the opposite of what well-meaning liberals intend: economic relief for poor/middle class students and families.

-TS

Why do you need two jobs to support yourself through college?  I'm being serious -- I think I had it pretty rough, but I'd like to find out in some detail why you need to do this.

Pell grants + federally guaranteed student loans met nearly all of my needs (except for my extra spending cash, which I earned through one part-time work).  Are you supporting a family while going to school?  Was your financial aid package inadequate?  Is it maybe that you don't want to take on debt, so you're working instead?  Did your school raise tuitions on you dramatically?

Again, forgive my ignorance -- it has been a lot of years since college -- but I went to one of the most expensive schools in the country, and managed with just one part-time, 10-hours a week, job (plus hefty amounts of debt).  What's making you have to do what you have to do?

-TS

I give you credit for implying that economists might know something about the issue.  But hard-core supply-siders usually don't because they know the overwhelming consesus among economists is that at current tax levels, tax cuts do not pay for themselves.

See for example here from some quotes from conservative economists on the subject: http://www.cbpp.org/3-19-04tax.htm

that food stamps are 'overfunded' and that half of the program isn't even used. If true and cut at the appropriate level.. this won't hurt a soul.

The Democratic goal to roll back the Bush tax cuts exceeds the spending cuts we are talking about here by more than an order of magnitude.

The Republicans are in the process of proving that can not pay for their tax cuts - until they show otherwise they should abandon them.

I also believe some weight should be put on actual behavior as opposed to complaints.  As far as actual behavior goes, it looks to me like a Democratic president and a Republican congress is the best bet.

Tom

Not everything is paid for by loans. :-/ The recent tuition increases (two of them in the last couple of years) made me go more in debt though I personally do not consider it to be debt, but an investment in my future, the main reason for the jobs is much higher cost of living (no dorm room for me :-/). Pelgrant has already been cut  earlier. I just got an response denying me state grants because they think I made too much last year (an amount which just barely covered normal living expenses, and which afforded me no savings).

Maybe I am just some kinda shmuck. But hey I sent out 24 resumes in the last two weeks. No response yet though.

Making active voters a bit more happy about fiscal responsibility is dumb?

The price? Unnerving people that 99% of the time wouldn't dream of voting for a Republican/Conservative?

What they did could be considered cowardly (avoid any cuts to senior programs) but it wasn't dumb.

Well explain to me why the boom from the tax hike was temporal.  

Tax cuts generate economic growth.  This much is true.  However there is ABSOLUTELY a breaking point in which greater tax cuts reduce tax receipts.  I can't believe anyone would argue with this.  

If you cut taxes to 0% how much tax revenue would you receive?

And of course this ignores the impact of increasing the amount of liquidity in the market by reducing taxes.  This can have an upward effect on inflation which can, in turn, have a negative impact on real tax receipts.

A Recession is really going to make everything all better... good advice!

The Democrats ONLY talk about reducing the deficit when they aren't in charge of growing it.

this argument most definitely IS that clear cut.  There was a military in the late 18th century, there was force projection (perhaps the Indians might refresh your memory), there were external enemies.  

There was no HHS, SSA, and whatever other letters that deal with Welfare you care to bring up.  The organizations that did exist to help those in need, overwhelmingly the Church, are now being shut out by our friends on the left.

And as an MBA from Columbia (84) there are all sorts of numbers that prove tax cuts do generate revenue in the near and long term.  I dont need to hear about how you can get numbers to sit up and bark for a biscuit; that trivializes serious research.  As for the recession of '01, more powerful arguments than not say it was lessened by the tax cuts.

Perhaps we should go back to the 90% tax brackets?  Under Dem theory we should be awash in revenue.  If raising tax rates were all that it took, why take half measures?  If you are willing to concede the economic theory of diminishing returns (yes, it works for individuals also), then there is a point where it becomes counter productive- both ways.  Too low will diminish revenue.  40% tax bracket to lot of smart people, smarter than me and you in economics, is the cap where people start channeling their activity to non-economic pursuits, i.e. sitting around watching the Simpsons.

Yes, at some point, lowering taxes would have a reduced stimulis, but, if you are talking about the boon during the Clinton years then I would guess that the explosion of the Internet (Al Gore's evil invention) and dot coms had something to do with that. Considering financial analysts were joking that P/E ratios should be called P/Feelgood ratios for these companies, I would say it was a pretty obvious bubble. The best was that Clinton was taking credit for it and saying: "We've invented the end of the business cycle" (or something like that).

The bubble grew in spite of tax hikes, but by your logic, tax hikes spur growth. That makes no sense.

Great.  So now all you have to do is show actual evidence to support your claim.

Maybe the tax hikes had no impact whatsoever.  Maybe the only reason for the 90s boom was the dot com bubble*.  Maybe the tax hikes slowed growth.  All possibilities.  But until you show some sort of evidence to support your claim they are meritless.  

The bubble grew in spite of tax hikes, but by your logic, tax hikes spur growth. That makes no sense.

Please show me where I provided any "logic" that said that tax hikes spurred growth.  I would love to see it.

* - IT productivity improvements had a far greater impact on the economy than the dot com bubble.  They enabled the country to run with virtually zero unemployment without suffering any wage inflation.  

There was no HHS, SSA, and whatever other letters that deal with Welfare you care to bring up.  The organizations that did exist to help those in need, overwhelmingly the Church, are now being shut out by our friends on the left

Well there was no Air Force either so perhaps funding the Air Force is unconstitutional.  

And as an MBA from Columbia (84) there are all sorts of numbers that prove tax cuts do generate revenue in the near and long term.  I dont need to hear about how you can get numbers to sit up and bark for a biscuit; that trivializes serious research.  As for the recession of '01, more powerful arguments than not say it was lessened by the tax cuts

Congratulations on the MBA.  Very impressive.  As for the recssion of '01 all sorts of things contributed to our turnaround.   To suggest that tax cuts were the primary cause of the turnover is sophistry.

Perhaps we should go back to the 90% tax brackets?  Under Dem theory we should be awash in revenue.  If raising tax rates were all that it took, why take half measures?  If you are willing to concede the economic theory of diminishing returns (yes, it works for individuals also), then there is a point where it becomes counter productive- both ways.

Have you actually read what I wrote because if you did you would see where I said exactly that.  You might also note that I have not one time advocated for higher taxes.  My entire argument has been that you cannot say, as an absolute, that lower taxes equals higher tax revenues.  I did also say that the OPITMAL tax rate is an ever changing value that is dependent on other economic factors.

Since the bill technically curbs the increase in spending ONLY, it either forces less coverage per person or restricts access to the programs, or both. Thus, a cut.

Food stamp and medical costs are escalating at a rate faster than the overall budget due to the rise in food costs and medical care, and due to the increasing number of people in poverty, NOT because it is easier to take advantage of these programs, and NOT because benefits per person are increasing. Is it really more important to follow through on the $200 billion subsidy to the oil companies for exploration than to maintain subsistance living for poor people?

that in 1997 capital gains taxes were cut, which did quite a bit to fuel the boom. Did the bulk of the nineties boom happen before or after 1997?

Is it really more important to follow through on the $200 billion subsidy to the oil companies for exploration than to maintain subsistance living for poor people?

What are you referring to?

If I get a 3% raise this year but my expenses go up 4% my company cut my pay.  Intriguing theory, that.

As an aside, I sincerely hope you guys chose to run on a platform calling for increases in food stamps and (I assume all) other entitlement programs (because it's all about - cue violins - maintain(ing) subsistance (sic) living for poor people) at the same time you're screaming about budget deficits.  Makes me wax nostalgic for those good-old-days of the late 1970's.  Good times, those.

Great. So now all you have to do is show actual evidence to support your claim.


You asked to explain the growth, I offer an explanation, do you really need evidence that there was a dot com bubble?

Please show me where I provided any "logic" that said that tax hikes spurred growth. I would love to see it.

"Can you explain how the country experienced one it's greatest booms immediately following the largest tax HIKES of the past 25 years?" An endorsement made by inference. The sentence creates a cause and effect scenario.

virtually zero unemployment

What is "virtually"?

increasing write offs is a bad idea is that it causes businesses to make lousy investments that they can nevertheless make a profit on, solely because of the tax code.  That is, the code distorts their decisions, leading to inefficiency and lower standards of living.  The code should be neutral as much as possible.

I agree that if, tomorrow, the top marginal rate went from 35 percent to 80 percent that that might have a significant effect on the economy.  From 35 to 40 percent?  Not so much.

Also there are two ways an increase in marginal rates can affect worker behavior.  The one most often cited is that it decreases the incentive to work because now you only get to keep, say, 65 cents on every dollar rather than 70 cents.  So you work less and spend more time on leisure.  However, some people will actually work more, because they have been used to making $X per year, and whereas they could make that before a tax hike by working, say, 2000 hours a year, after a hike they will need to work 2100 hours a year to make $X, and they will do so.  People have good reason to do this, it's not like the house payment and other living expenses go down when there is a tax hike.

it is the economic concept of real income. When we look at changes over time we look at the increases vs inflation, real changes not nominal changes. So yes, if your salary does not keep upwith inlfation your employer is reducing your salary over time.

You didn't offer an explanation.  You offered speculation based on your own biases and pre-conceived notions.

An endorsement made by inference. The sentence creates a cause and effect scenario

Well you may have inferred that but I certainly did not imply that.  My comment was made as a counter-example to the claim that lower taxes raise revenues and higher taxes lower growth.

Sometimes tax rate changes have no effect at all.  

was well on its way by that time.  The cap gains cut certainly added to the stock market boom but it could be argued it also aided the creation of the bubble in the market.  

The boom started around 94 and ended in late 00, IIRC.  Of course those dates are somewhat arbitrary.  

I think that is a catchy campaign slogan! :-)

To assume that there is a linear relationship between taxes and gdp (or any other two macroeconomic indicators) is fairly naive. There are many complex interactions and feedback effects at work that make relationships non-linear. One cannot look a change in taxes one day, change in economy the next and in isolation make any conclusion as to casue and effect.

when analysis looks at effects of tax chagnes to gdp historically, it appears that marginal chagnes in tax code have little or no long term affect on gdp (of course a dramatic change probably would).

$2 billion for exploration, plus $6 billion for nuclear design. Still, just like that we're down to $42 billion, aren't we?

Sometimes tax code changes do have a positve/negative impact but it is rarely as significant as advocates would have you believe.

I would prefer lower taxes to higher.  I was just pointing out that increasing or decreasing marginal rates doesn't always affect people they way they think it will.

a cut in the capital gains taxes should cause a decline in the stock market, at least temporarily, as it decreases the cost of selling stocks with unrealized gains.  

was already heading downhill in early 2000.  The reason we forget this is that the former administration creatively talked-up the economy in an attempt to assist Algore in his quest for the Presidency.

with theories, haha!

Aval is correct. And, by the way, you can argue whether those benefits should or shouldn't be cut, but being cut they are.

That is a pretty big difference... and those are one time expenditures, not entitlements that automatically grow and are automatically spent year after year. The savings on these cuts continues beyond the quoted 5 year numbers.

And I agree with your excellent analysis of the laffer curve, but let me suggest two things that I didn't see mentioned in the thread so far:

1. This info is Woodward's "Agenda": The 1993 tax hikes were suggested by Greespan in a Whitehouse meeting at the White House as a way to get interest rates down due to the sugnal of serious deficit reduction it would send to the bond markets. Clinton had a furious temper tantrum about not going to Washington to appease bond traders. But it worked, even if more psychologically than any other way. Interest rates came down.
   
2. Clinton agreed to tax cuts before the late 90's boon and during.

Did you major in econ as I did? Our view of the 90's which we have discussed before is identical.

great minds.... or

ignorance is....

I always felt that Rubin was Clinton's best cabinet appointee.  He had a good relationship with the street and he was able to soothe their fears when it was necessary.

As I am not the only one doing that, i guess we'll call it even.

Anyhoo, you can argue that a raise and fall in tax rates have no effect. I just am speculating based on experience that you would have to throw out logic to do so.

Speculation based on experience is invaluable, empirical analysis is indisputable. A marginal change in tax rates has limited effect on the overall economy and that effect is easily washed out by the myriad of other variables at work. A raise for everyone in the economy also has limited effect as it tends to increase inflation in an equal amount to the raise, but that is a completely differnt topic...

empirical evidence may be indisputable...or maybe not. It depends on what data the study you favor leaves in or out.

What is the empirical evidence you are referring to? I am not being sarcastic either, I am not an economist and information is a beautiful thing.

Perhaps you missed the last couple of decades, raise taxes, cut taxes, the economy grows about the same.  Clinton's tax increase did not cause a recession, nor did the Social Security increases under Reagan.  

... that our military has more aircraft than individual combat squads. If true, now I know why.  

I take it that your financial aid package failed to take into account actual living expenses.  Unfortunately, this is something I do remember.

I went to law school in NYC, and from what I vaguely recall, I think the budget the school drew up for purposes of financial aid had living expenses at something like $12,000 a year... in a city where the average rent for a studio apartment was $1,500 a month, nevermind the food, transportation, and so on.

I recall eating lots of canned beans.  I covered it all with more loans, so again, I'm torn on the issue of cutting funding for student loans.

However, it seems to me that the problem is in the formula that schools use to calculate living expenses, rather than in the amount of money spent by the Federal government to guarantee student loans.  In fact, if the cuts to the federal guarantees means that schools start slowing tuition hikes or (gasp) cutting tuition, that may ultimately end up being better for the students and their families who have to contend with living expenses as well as tuition and fees.

-TS

to think that just because congress' "hands are tied" that they won't continue to spend money.  They'll be busy writing checks with their hands tied behind their backs.  The idea that debt keeps government spending in check seems to have been disproved by our current congress.  IMHO if the democrats hadn't been making such an issue out of the budget (along with the principled fiscons), Delay & Co. would have kept right on churning with the aprop and spending bills.

I believe everybody here is a little bit right. A tax cut will decrease tax revenues in the short term, but will stimulate growth in the economy over the next few years, thereby increasing the tax base and tax revenues.

A tax hike will increase tax revenues in the short term, but will depress the economy over the next few years, thereby decreasing the tax base and tax revenues.

Tax-and-spend liberals deliberately ignore the long-term effect of tax changes on the economy and the tax base, and do a simplified calculation based on a stagnant, static economy: a tax cut loses revenue based on the previous year's tax base, and a tax hike raises revenue based on the previous year's tax base. Since they LIKE higher taxes, they deliberately overstate the benefits of tax hikes, and overstate the losses from tax cuts, trying to scare people away from tax cuts. The problem is, it's an easy calculation to make, and easily convinces short-sighted voters who don't consider the long-term macro-economic effects.

The real effect of a tax hike or tax cut is less than what a static calculation would show, but the calculation is more difficult to make. Any high school graduate could multiply the current tax base by some percentages and calculate the difference, but even the best economists have trouble predicting HOW MUCH the economy expands due to a tax cut, or HOW MUCH is sags due a tax hike. There are many unexpected extraneous factors that can influence the economy, such as new technology, oil shortages, wars, fluctuation in the value of overseas currency, 9/11, and the Three Ugly Storm Sisters--Katrina, Rita, and Wilma. So when a tax cut is proposed, we can argue that the loss in tax revenues will be LESS than that predicted by a static calculation, but it's hard to predict HOW MUCH LESS.

The overall effect of a tax cut is not limited to changes in government revenue. Tax cuts also tend to stimulate jobs and lower unemployment, and reduce welfare payments, and tax hikes have the opposite effect. Lower government revenues mean higher deficits and higher interest rates, which can effect the housing market. Higher government revenues allow more spending on government services, but the demand for them is higher during recessions than during booms. All this must be balanced by those proposing a tax change.

Neither extreme is desirable: if your tax rate is zero, you shut down the government; if your tax rate is 100%, you have communism and slavery. The optimum is somewhere in between, and depends on what people want. High taxes mean more government services but higher unemployment; low taxes mean more jobs and higher take-home pay, but less government services.

We've all heard about the Laffer curve, but has anyone put some numbers on the axes? Has anyone done a study of how tax revenues varied one, two, three, four years after a tax cut, or tax hike, and calculated an average? If such a study could be performed over all tax hikes and tax cuts from the past 50 years, and we had NUMBERS to prove how much a tax cut stimulated the economy in the past, it would be much easier to get tax cuts through Congress.  

There have been some analysis of those effects from apst tax cuts and like I said they tend to show minimal effect one way or the other. However, by the time those studies move from academic journals to the myirad of 'think tanks', 'journalists' and 'politicians' it becomes terribly misitnerpreted and/or attacked.

Beyond that though there are some itneresting developing analytical tools being worked on applying complexity theory to economics that may give more meaningful predictions of tax policy effects. The problem still is that they are, by nature of the mathematics, statistical predictions and not useful in any one instance.

That was the whole point of the Bridge to Nowhere debacle - it was to point out that, if anything can be cut from the federal budget, surely it can be this. The Coburn Amendment shone the light into the dark corners of the Senate, because it demonstrated that a vast majority of Senators were willing to defend an indefensible piece of wasteful spending, simply because it was pork that was earmarked by a fellow Senator.

From what I read (and this could be completely wrong b/c I didn't pay a lot of attention to it), the money for the bridge to nowhere wasn't really "cut" from the budget.  Instead, that project was cut and the funds were shifted to other projects or into some other fund.  A phyrric victory at best.

oops, my faux-pas.

an "earmark" (it must be spent on the bridge) to general funds (where Alaska could spend it wherever it wanted, guess where?).

Flyerhawk,  today's secret is this;  tax cuts do not,cannot cause deficits.  Spending causes deficits,you have to spend to create deficits.  Repeat after me, etc.  You mistake your preferences for iron fiscal law, but the second secret of today is, they are only your prefernces, nothing iron about them.  Now for an insight into the inner workings of yours truly, a moment that you have doubtless yearned for.  I AM fiscally responsible, so responsible that I regard our representatives in Washington as being our agents and nothing else. As our agents they do not have a duty to spend our money.  Rather they have a duty to watch,be prudent with, and carefully manage the money they grasp with their dirty little claws.  I am so responsible that I even consider the impact of taxes on my neighbors, and for that matter on the nation and the people within it.  So that when I vote paramount in my mind is not grubby, bait and switch, rob Peter to pay Paul,class bribery, programs that allow people I wouldn't allow on my doorstep to announce they are doing me a favor and  helping me. Rather it is the finacial state of people like myself and for that matter you to retain what they can from what they earned and labored for with, you'll forgive an old expression, the sweat of their brows.  Now, don't you feel better?  If not, follow my advice to Reddstaty and dash a check off to the IRS tonight. First class mail will do.

We must look at opportunity costs when talking about the deficit.  Regardless of what you may think, not every new government program is inherently bad. The fact is, if we did not have interest payments on the debt, we could cut taxes, revamp our infrastructure, not make cuts to student aid which affect indigent graduate students such as myself, and do a whole host of other things.  From an opportunity cost perspective, a sizable debt is not a good thing in the long run.   Now onto intergenerational equity. It is simply not fair to pass the costs of our irresponsible spending onto future generations, period.  

Then I take it you are against the $50 billion cut in that it loosens the ropes on Congress' hands.

Look, I am a Fiscon.  I am no fan of deficits.  However, regardless of what you may think, I believe that the true fiscal conservatives has as his goal the minimizing of government confiscation of property, i.e., taxes.  The preferred way is to cut spending; but if it must be done, debt isn't a horrible thing like increased taxation is.

As streiff said, as long as we can service the debt and roll it over, who cares how big it is?  Sovereign governments are most definitely not like you and I in that regard.  Intergenerational equity is a red herring as a result.  Sovereign debt just keeps on getting rolled over.

As to opportunity cost, you see, I personally don't want the government to do a "whole host of other things".  I want the government to just the few things that are inherently governmental: defense, law enforcement & justice, currency, treaty-making, and so on.  And get out of everything else that isn't inherently governmental.  So at this point in our history, I tend to believe that virtually every new government program is in fact inherently bad.  If we run across a new program that is actually worth doing, we can take the money allocated to existing bad programs and fund it.  For instance, border security is a necessity, a requirement of a sovereign nation.  We should fund it fully.  Getting rid of the prescription drug entitlement would probably pay for that.

So you see the burden of debt service as a bug in the program; I see it as a feature.  Vive la difference!

-TS

This is.......interesting.....logic.

So you want lower taxes but are ok with a high debt level because that keeps the government from doing other things?  

Do you max out your credit cards to prevent yourself from buying other stuff?  

I can understand why you would a smaller government.  I can understand why you would fewer taxes.  Heck I can agree with that to an extent.  But I CAN'T understand why you would want a government that CANNOT lower taxes because of debt service and must increase in size because of that debt.  

This line of reasoning would ultimately lead us to   a scenario in which our government is doing nothing more than debt service and cannot even pay for the services that are necessary.  This happens all the time.  Mexico and Argentina come to mind immediately.

my point has been missed again.

"tax cuts pay for themselves"?.....since when is keeping my own money an expense?

As for tax cuts not increasing tax revenue via stimulated economy, please explain why evidence contradicts your assertion.

if taking one aspirin will ease my headache, taking 10 aspirins will knock it out quicker.  0%?.....Your argument is just good-old-fashioned-dumb, and you know it.

Temporal?.....uh, how about that recent recession thingy?

The intent of those who actually argue for HIGHER TAXES will never cease to amaze me.

you should find someone arguing for higher taxes.

is that the United States is not Mexico, not Argentina, not even Russia.  It isn't an individual with credit cards.  It isn't a corporation.  It is the most powerful economy in the world, and the most important sovereign nation at the present time.

All that matters is that we can service the debt, which we can.

To make things even clearer, let me put it this way.  My order of priorities for dealing with fiscal problems:

1.  Cut spending
   
   
2.  Borrow Money
   
   
3.  Raise Taxes

This is in contrast to liberal/democrat 'deficit hawks', whose priorities, as far as I can tell, go like this:

1.  Raise Taxes
   
   
2.  Borrow Money
   
   
3.  Cut Spending

All the gnashing of teeth about the deficit is just a pretext to raise taxes, instead of making cuts in government programs and tackling the unions.  Or have the Democrats proposed cutting spending in order to reduce borrowing that I'm not aware of?

-TS