Over substantial Democratic opposition, Bush and a Republican-controlled Congress have cut taxes significantly over the past six years. The problem is that -- with plenty of cooperation from Democrats -- they have also greatly increased spending.
From fiscal 2001 to 2006, federal outlays shot up 42 percent, more than double the 19 percent increase over the previous five years.
In the short run, you can cut taxes and spend more. In the long run, as Nobel laureate economist Milton Friedman has potently argued, to spend is to tax.
In that vein, economist V.V. Chari of the University of Minnesota explained at a conference for journalists on Oct. 17, ``The true burden of government is what it spends today and in the future.'' When a politician brags, ``I cut your taxes,'' that's not what really matters, he said.
No matter how you describe it, Bush's tax cuts
(90% of which went to the top 10% of income earners) are really tax deferrals. The reason is simple:
THE FISCALLY CONSERVATIVE REPUBLICAN MAJORITY SPENDS FAR WORSE THAN "TAX AND SPEND" LIBERALS.
According to the Congressional Budget Office, discretionary spending increased from $649 billion in 2001 to $947 billion in 2005. Over the same period, discretionary spending increased as a percentage of GDP from 6.5% to 7.9%. Over the same period, the Bush "individual tax revenue miracle" is actually near stagnant. According to the same source and over the same time period, tax revenue from individuals decreased from $994 billion to $927 billion. Individual income tax receipts as a percentage of GDP decreased from 9.9% in 2001 to 7.5% in 2005. The bottom line is simple: revenues decreased and spending increased.
This means the total net amount of debt issued had to increase, and the record indicates it certainly did. According to the Bureau of Public Debt, the US Treasury has issued over $550 billion dollars in debt each year for the last 4 years. This indicates the deficit is nowhere near under control.
When a government spends money, it commands resources that are no longer available for use by the private sector. If it chooses to borrow the money rather than levying taxes to finance transfer payments and the purchase of goods and services, the government is only postponing the inevitable taxes, Chari said.
I want to give special kudos to John Berry - the article's author - for the following paragraph. Notice how he mentions the White Houses deliberate obfuscation of the real story of individual tax revenue.
A good example of such obfuscation is a White House fact sheet about the fiscal 2006 budget results released on Oct. 11.
The fact sheet said the Bush tax cuts ``have helped fuel economic activity that has produced two years of record revenue growth,'' 14.5 percent and 11.8 percent in fiscal 2005 and 2006, respectively.
It conveniently overlooks the fact that revenue in 2004 was lower than back in 2001. So while spending was going up 42 percent from 2001 to 2006, revenue was up only 21 percent, half as much.
One result of spending rising twice as fast as revenue was that the budget swung from surplus to deficit in a big way. The inevitable consequence was a large increase in the sale of Treasury securities to the public.
So - here's the real story. At some point one or a combination of two things has to happen. Either:
1.) Taxes have to increase and/or
2.) Spending has to decrease
There is no way to get around the fact.
The Republican noise machine is selling a false bill of goods (funny, I almost wrote "goofs" instead which would probably be far more accurate.) Different people have labeled Republican economic theory in different ways. Kash at Angry Bear calls it the "free lunch" crowd. Stirling Newberry calls it "borrow and squander". I call it "you can have your cake and eat it to". However, all of us are saying the same thing.
It's a false bill of goods. There is only so long you can charge growth on the national credit card before you hit your limit.