"Republicans can't do math," I told my friend. "How do they think government revenues are going to go up when they keep wanting to cut taxes? It doesn't add up."
"I don't know, Matt," he replied, "revenues were on their way up in 2006 after all of those tax cuts, just before Nancy and the democrats took over congress! Then the deficit went wayy up!"
I was a bit taken aback. I was unaware of this, but my republican friend was right. This time, his claim could be backed up by the Congressional Budget Office, i.e. the chart below.
The data is indisputable. Government revenue went up as the economy expanded in the 1990s and, as my friend suggested, was on its way up again in 2006.
My friend is not the first to try to make the point that tax cuts lead to increased revenue. However, as Lori Robertson from Annenberg Fact Check points out,the rules of simple mathematics still prevail. Tax cuts don't lead to increased revenues. Revenues went up in spite of the tax cuts, not because of them.
The reason revenues increased was that corporate profits were up, because the economy was good, or at least expanding in a bubble.
As of this writing, Ed Brilling's National Debt Clock set each individual's share of government debt at $44,367.63. Others set it around $35K. Still, my friend's questions stand: "what are you going to do when the time comes to pay that back? What is going to happen to this country when foreign governments like China decide we are too much of a liability to lend money to?"
I am not an economist, but I can read a chart. Under President Clinton, House Speaker Gingrich and a "dot com" bubble, the rich paid more in income taxes. Revenues climbed to their highest point since 1980.
Under President Bush and a republican congress, revenues began to climb again, but did not reach their Clinton/Gingrich peak before the housing bubble burst.
Simply put, The Chart tells me that the way to increase government revenue so that we might pay down our debt is to foster a strong, stable economy. Whether individual income taxes rise or fall is less of an issue. The Bill & Newt era suggests that the more responsible thing is to keep taxes on the rich high, but the main goal must be a strong economy.
You can't claim to have a strong economy when unemployment is high, and if the private sector isn't hiring, government should step in and provide a boost. Government will employ individuals; government will employ the services of the private sector; government will help to keep the economy stable during precarious times. Government will prevent catastrophe.
There is more to learn from The Chart. One is that the republicans aren't fooling anybody. Remember the recessions of 1981, 1991 and 2001? Under three republican presidents, which direction do the outlays go in The Chart? Republicans know as well as democrats that spending helps to bolster the economy, even if that spending creates debt.
They might blame congress, even when they themselves controlled one or more of its houses, but there is one very important vote congress needs to pass any budget, and that person's vote comes neither from the House of Representatives nor the US Senate.
Finally, even though the greatest, most consistent disparity between revenues and outlays occurred during the hallowed Reagan administration, they also appear to have been much more stable than the roller coaster ride that has since followed. Perhaps this stability was brought about because the rules and regulations that kept the economy relatively stable, even overly expansive, from World War II up until that time were just then being dismantled.
I want to believe that a steady, growing economy is preferable to the bubble/pop cycle of the post Reagan/Bush era, where even under President Clinton the rules continued to loosen, even as the politicians continued to line their pockets with corporate graft so they might terrorize the television-viewing populace with fear-driven advertising.
The greatest tragedy of this election is not that the republicans gained seats. The worst, most disheartening, most disappointing news is that the American people voted out Russ Feingold and Alan Grayson while elevating the all-time Champion of Graft, Mitch McConnell, to almost the highest level of power.
We have to make eliminating the corrupt elements of government a top priority if we want to ensure any kind of economic strength or stability -- or make any other gain. This has always struck me as nonpartisan; who likes corruption? Besides Mitch McConnell and his Kentucky constituency, that is.
We have to turn off our television sets, walk away from fear, and start thinking with our brains about how we're going to fix things. "The only thing we have to fear is fear itself." Once again in difficult economic times, FDR's words ring truer than ever.
My republican friends know about the theory of Keynesian economics. They shrug it off. We have to keep repeating until they get it. And then when things are stable, we have to live up to its promise. I have no doubt we will.
As for debt, well, yeah. I hate it as much as anyone. That's why I always vote for democrats. I mean, duh.