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President Obama seems to have a strategy to terminate all of the Bush tax cuts, not just those for “the rich,” as he has been saying since 2008. He is offering the Republicans exactly zero concessions in the “fiscal cliff” negotiations. No spending cuts, no entitlement reform, no compromise on the rates. It is entirely my way or the highway, and if the Republicans refuse to do everything exactly as he demands, he will let the Bush tax cuts expire entirely, for the middle class and working people as well as the upper incomes, and blame the Republicans for refusing to go along with him, and for the economic results.
It is a cynical game worthy of an undeveloped, third world country, not the United States of America. But this is just one more reason, with many more to come, for the American people to regret the mistake they made on Election Day.
Policies Meant To Achieve Equality Are Very Unfair To The Least Equal Peter FerraraContributor
For The Republicans There's An Opportunity At The Fiscal Cliff Peter FerraraContributor
Economic Growth, Not Redistribution, Most Benefits The Poor, Working People, And The Middle Class Peter FerraraContributor
Obama's Real Unemployment Rate Is 14.7%, And A Recession's On The Way Peter FerraraContributor
Because so many major media institutions, like the New York Times and the Washington Post, have been so duplicitous and dishonest in discussing the Bush tax cuts, most Americans don’t know much about them, even though they have been living with them for 10 years or more now. Indeed, most of what they think they know is not true. But the American people will understand them better, when they see what life is like without them.
President Bush and his Congressional Republican majorities at the time cut taxes for everyone in the 2001 and 2003 tax cuts. Indeed, they cut more for lower and middle income taxpayers than they did for “the rich,” as Obama calls the nation’s job creators, investors, and successful small businesses. The top tax rate was cut by only 13%, while the lowest rate was cut by one-third, 33%.
According to official IRS data, the top 1% of income earners paid $84 billion more in federal income taxes in 2007 than in 2000 before the Bush tax cuts were passed, 23% more. The share of total federal income taxes paid by the top 1% rose from 37% in 2000, before the Bush tax cuts, to 40% in 2007, after the tax cuts.
In contrast, the bottom half of income earners paid $6 billion less in federal income taxes in 2007 than in 2000, a decline of 16%. The share of federal income taxes paid by the bottom 50% declined from 3.9% in 2000 to 2.9% in 2007.
The Bush tax cuts also included a doubling of the child tax credit from $500 per child to $1,000 per child. Because of that, and the 33% cut in the bottom tax rate, nearly 8 million more people dropped off the federal income tax rolls entirely, paying zero federal income taxes. Indeed, under the Bush tax cuts, the bottom 40% of all income earners not only paid no federal income taxes, as a group on net. By 2009, they were being paid cash by the IRS equal to 10% of all federal income taxes.
These Bush tax cuts did not explode the deficit, as Obama and his echo chamber have alleged. By 2007, the deficit was down to $160 billion, less than 15% of Obama’s deficits today. Total federal revenues soared from $793.7 billion in 2003, when the last of the Bush tax cuts were enacted, to $1.16 trillion in 2007, a 47% increase. Capital gains revenues had doubled by 2005, despite the 25% capital gains rate cut adopted in 2003. Federal revenues rose to 18.5% of GDP by 2007, above the long term, postwar, historical average over the prior 60 years. CBO was projecting surpluses to return indefinitely in 2012 through the end of its projection period in 2018.
Bush did increase federal spending as a percent of GDP by one-seventh, erasing the federal spending cuts enacted by the Republican Congressional majorities in the 1990s. But even with that, deficits during the Bush years averaged just 2% of GDP, one-third less than the average over the prior 50 years. President Obama’s deficits have averaged 5 times as much, at 9.1% of GDP.
The proof is in the pudding over the Bush tax cuts. They were followed by a record 52 straight months of job creation, producing 8 million new jobs, with the unemployment rate falling to 4.4%. Business investment spending, which had declined for 9 straight quarters, reversed and increased 6.7% per quarter, producing all those new jobs.
Because of that increased investment, labor productivity soared by 2.5% annually from 2003 to 2007, higher than the averages of the 1970s, 1980s, and 1990s. As a result, real after tax income per capita increased by more than 11%.
Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. After the Bush tax cuts started in 2001, quickly ending the 2001 recession, the economy continued to grow for another 73 months. From 2000 to 2007, real GDP grew by more than 17%, meaning an additional $2.1 trillion for the American people.
This was mostly the opposite of what President Obama has produced, with his neo-Marxist Obamanomics, particularly unemployment more than twice as high, declining middle class incomes, soaring poverty, weak job growth, stagnant stock market values, collapsing business investment, and negligible growth in GDP.
Of course, the Bush tax cut boom was ended by the 2008 financial crisis. But as discussed in many previous columns, that was caused by the excessive overregulation of President Clinton’s home ownership promotion policies, creating the subprime mortgage market and the housing bubble, and by President Bush’s cheap dollar monetary policies. Obama’s foolish argument that the Bush tax cuts caused the 2008-2009 recession is so dishonest that abusive propaganda alone should disqualify him from office.
Obama’s gleeful termination of the Bush tax cuts will produce just the opposite results of those tax cuts. The combination of all the tax rate increases, along with Obama’s abusive overregulation, and the Fed’s continued mischief, will throw the economy back into recession next year. Unemployment will soar back into double digits, breaking the post depression record of 10.8%. The deficit will soar to over $2 trillion, setting new all time world records. The national debt as a percent of GDP will gallop past Greece.
Middle class incomes will plummet further. Poverty will soar to new all time records.
We can’t afford the Bush tax cuts, as Obama says? We can’t afford to terminate them. Over the past 45 years, every time the capital gains tax rate has been increased, capital gains revenues have declined rather than increased. Obama’s nearly 60% increase in that rate will have the same effect. After the Bush cut in taxes on dividends, dividends paid soared, and so did taxes paid on those dividends. Obama’s near tripling of that tax will have the opposite effect as well. Indeed, if the economy declines back into renewed recession, total federal revenues will decline rather than increase.
Obama’s ploy of blaming all of this on the Republicans will not work this time. The public knows the Bush tax cuts were adopted into law by the Republicans, with complete Republican control of Congress and the White House at the time. It will be too obvious that it took President Obama and his new neo-Marxist Democrat Party to let them expire.
Latest Activity: Dec 20, 2012 at 9:29 AM
Part I:
I've got another cut and paste, which I consider relevant to the basic blog post and more interesting. It has to do with WHY the "Bush tax cuts" were enacted. IMHO - the reason almost belongs in the category of "Believe It Or Not." It's from an article by Glenn Kessler, published yesterday in The Washington Post. Here are the operative parts:
"We’ve noted this history before, but many people have forgotten it. Given that the dispute over whether to extend all of the Bush tax cuts has now led the nation to the edge of the “fiscal cliff,” let’s take a trip back in time to recall why the Bush tax cuts were enacted in the first place."
"Oddly, a key reason the tax cut became reality was because of a fear the United States soon would have zero debt."
"With federal revenue soaring in 2000, generating budget surpluses, there was pent-up desire for a tax cut, especially among Republicans."
"George W. Bush had just been elected on a pledge to cut taxes, but his plan did not get much traction among Democrats until then-Federal Reserve chairman Alan Greenspan warned Congress of a dangerous new specter — that the government would pay down the national debt, and there would be no place to park excess funds."
“At zero debt, the continuing unified budget surpluses currently projected imply a major accumulation of private assets by the federal government,” he declared."
"Yep, you read that right. The perceived danger was — believe it or not — that there would be no national debt left."
"Greenspan, however, offered caveats and warnings that were largely ignored by Congress. In fact, he said that any tax cuts should have triggers that would halt them “if specified targets for the budget surplus and federal debt were not satisfied.”
"In other words, the tax cuts would have been terminated or reduced, depending on the nation’s economic circumstances — precisely the tactic Republicans said was a non-starter in the 2011 debt-ceiling debate."
“We need to resist those policies that could readily resurrect the deficits of the past and the fiscal imbalances that followed in their wake,” Greenspan said, back when the federal debt was $5.7 trillion. (It is $16.3 trillion today.)"
"Yet almost 13 years later, the Bush tax cut has become sacrosanct. The Club for Growth on Wednesday warned Republicans not to vote for House Speaker John Boehner’s “Plan B” proposal to raise taxes only on people making more than $1 million a year."
Part II:
It's human nature to want to have more money in your own pocket; and hope that any "sacrifice" to fix a problem is at the expense of somebody else. However, now we're ALL in a financial fix, and to try to pin the "pain" on everybody else while protecting one's own fiefdom is an exercise in futility. It will not get the job done. I say:
End the tax cuts for everyone; cut entitlements; cut defense; balance the federal budget and make a real effort to pay down the federal debt to zero in 10 years. It's strong medicine (some would call it "draconian"), but IMHO it's the only way we'll solve the problem.
It is highly unlikely that we'll be able to "grow" our way out of our problems as some have suggested, because according to estimates I've seen we'd need very high sustained economic growth (in the area of 6-8% or higher) over a long period. Given the current state of our economy and the manufacturing base, it is unreaasonable to to expect this.
Part III: Note especially in my quoted cut-and-paste the part which reads:
"George W. Bush had just been elected on a pledge to cut taxes, but his plan did not get much traction among Democrats until then-Federal Reserve chairman Alan Greenspan warned Congress of a dangerous new specter — that the government would pay down the national debt, and there would be no place to park excess funds."
Therein - IMHO - lies the "danger" and the reality in the way our elected officials think about our money. GOD FORBID that they would have "no place to park excess funds" and that they would have to lower taxes because the money was actually NOT NEEDED. NOOOOOOOOOOOOOOO - they want to squeeze every penny out of us and keep on squeezing until we demand that they stop. Now instead of having "excess funds," we have a mountain of debt that both sides are playing chicken about - at OUR expense.
We may have the "best free system in the world," but the way this thing has played out absolutely STINKS.
....and USATODAY - not reputed to be a "conservative" publication - makes my point in an editorial today:
Well, fellas, tomorrow the world comes to an end and all this crying and whining will come to an end and nothing will matter. The Mayans say so.
Yes Sebe, we are. Back to the debate.
It's beginning to look like a Thelma and Louise ending, I heard someone say. You remember the part where rather than go back to face their reality they joined hands and drove off the cliff.
The Big Hurt may now happen. House Republicans couldn't agree on Boenhers Plan B. and stopped the vote. If the Republicans cannot agree amongst themselves, then they sure will not be in any agreement with BHO.
We will now very likely all hang together on this one.
If they cannot reduce spending then let it roll off of the cliff.
If the Republicans refuse to approve additional taxes I applaud them.
If we can't manage to live within our means then we should have our credit rating reduced.
Obama is the leader and I wish that he would attempt to do exactly that.
Lead
"The Big Hurt may now happen."
Jimmy: You said the magic words. As to the fiscal cliff - the closer we get the better it looks. I think both sides see it as the least of all evils now, since cuts will occur and each side can blame the other for them. It would be the easiest way for them to try to weasel out of responsiblity for causing our pain.
As to the magic words - "The Big Hurt": he has already happened. That would be Frank Edward Thomas, Junior. Born and raised in Columbus, GA. Played baseball and football at Auburn University. Selected by my beloved Chicago White Sox with the seventh pick in the first round of the June 1989 Major League Baseball Draft. Thomas is the only player in MLB history to have seven consecutive seasons of a .300 average and at least 100 walks, 100 runs scored, 100 runs batted in, and 20 home runs. (The only other player to have more than five consecutive seasons accomplishing this feat was Ted Williams with six.) Additionally, there are only five other players in MLB history who have both hit more home runs and have a higher career batting average than Thomas: Babe Ruth, Hank Aaron, Jimmie Foxx, Willie Mays, and Manny Ramirez. On August 29, 2010, the White Sox retired Thomas' number 35, and they unveiled a life-sized bronze statue of him at U.S. Cellular Field in Chicago on July 31, 2011. Nicknamed "The Big Hurt" - presumably for the pain he caused to the baseball when he made contact - Thomas is almost universally expected to be a first ballot MLB Hall of Fame electee when he becomes eligible in 2014.
(P.S. Thomas' accomplishments are all the more impressive in that he performed in what is now commonly called MLB's "Steroid Era," and there has not been even a "whiff" of a scandal or suspicion that Thomas used peformance enhancing substances. It is particularly noteworthy that Thomas' credibility on this issue has never been questioned - given the "witch-hunt-for-PED-abuse"-type atmosphere that has surrounded MLB over the past 10 years.)
It’s a fact that the main problem of the Federal Government is that it spends more revenue than it receives. Can anyone give me a credible reason why Leviathan should receive more revenue to spend and waste without passing a balanced budget amendment to the US Constitution beforehand? Raising taxes on any American first will not solve the problem, you have to balance the budget first before increasing revenue through taxation otherwise in a downturn /recession let the current tax rates remain in place and sustain certainty to free market solutions. Leviathan cannot create wealth; however it can support it by enforcing laws on the books and getting out of the way when not needed. Great post gacpl; however I don’t understand how our fellow American Patriots support ant-capitalism as espoused by President Obama, why didn’t anyone other than President George W. Bush adhere or even listen to Peter Schiff. GWB warned Congress over 17 times about the subprime loans and Progressive liberals didn’t support or acknowledge to, see Schiff here:
http://www.youtube.com/watch?v=huHMcB...
As I’ve posted time and again with democrat apathy to facts the congressional hearings of 2004, where Democrats block legislation to curtail/regulate the subprime mortgage crisis that eventually happened in 2008 after the December 2007 recession with Nancy Pelosi and Harry Reid in charge of Congress though January 3, 2011.
http://www.youtube.com/watch?v=hxMInS...
Why don’t patriots that are progressive’s liberals acknowledge these facts of our history?
Peter Schiff was on point and correct what happened to the progressive Democrats and Republicans opposing Schiff with 0% credibility!
Funkentelecky and gacpl This is thought provking I appreciate the remarks.
Will comment later.
Merry Christmas to both of you and to all others who visit this site.
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