Views from elsewhere: Can we still afford Bush-era tax cuts?

Back in 2001 and 2003, when Congress enacted the tax cuts sought by President George W. Bush, the changes were put in place only through 2010.

That allowed future budgets to appear to be balanced. (Never mind that since the tax cuts passed, the country has waged two wars, passed a drug benefit for senior citizens that wasn't fully funded and, most recently, undergone the worst economic crisis since the Depression.)

Bush had campaigned on a tax cut, a return to taxpayers of part of what they were contributing to the then annual surplus in the federal budget. At that point, surpluses were forecast into the indefinite future; Bush also said some of those surpluses would go to paying down the national debt and to Social Security.

The tax cuts, as Congress passed them, became more generous as the years marched toward 2010 — an example is the complete disappearance of the estate tax this year, and only this year — which made them even more unsustainable for the long haul.

As accustomed as taxpayers may be to the current tables in their IRS booklets, the rates cannot support the kind of spending the U.S. has been doing, let alone bring the accumulation of debt closer to a level the country can live with.

That argues for letting all the Bush tax cuts expire, or at least the great bulk of them. Taxpayers in the lowest brackets, who generally spend every penny they can hang onto, perhaps should be spared in these tough economic times.

But most people got by just fine in the late 1990s under the tax rates generally known as Bill Clinton's plan to get the deficit he had inherited under control.

Meanwhile, the country is now a decade closer to the payouts promised to baby boomers for their retirements. The money that Social Security has "lent" to general government will gradually need to be returned to that program.

The boomers' retirements have a snowball effect, as a ready source of borrowing first disappears and then has to be repaid. Meanwhile, interest due on the debt also grows.

Those budget facts were exactly why the tax cuts of the early 2000s were written with sunsets. A country that needs to get its deficit spending under control would be wise to accept that fact, and let most or all of the cuts expire.

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Comments

jalbrecht's picture
verified

Tea Party

Let's at least acknowledge that the Tea Partiers left the Republican Party because of the Bush fiscal irresponsibility. Then let's acknowledge that their political principles are self-contradictory because they neither understand the constitution nor American History. You can't be for small government, low taxes, and at the same time say that you support the Constitution. Its was the anti-Federalists, the people opposed to the Constitution, like Thomas Jefferson who supported small government and low taxes even at the Founding..

jalbrecht's picture
verified

Read history not Beck

The Reagan tax cuts in 1981 had nothing to do with the recovery. Volker forced the economy into recession in 1981 and the foreign policy situation had changed and its his steps that helped the recovery generate some power. If Reagan's Tax Cuts of 1981 helped the economy recover then why didn't the Reagan Tax Increase of 1983 not drop the economy into recession? Because neither had much effect on economic growth.

jalbrecht's picture
verified

Bush Tax Cut failure

Read the article from Bloomberg that appeared yesterday on MSNBC's website, "The wisdom and folly of the Bush Tax Cuts". Buried in the story is a critical fact - from 2001 through 2006 economic growth in the US averaged 2.3%. That's the worst in post-Depression history. Why? Bush's Tax Cuts had unbalanced the budget. The US went from surplus to deficit in one year. As the article explained, the Tax Cuts were not designed to stimulate the economy but to change the incentives for savings and investment. Trillions of dollars that should have gone to consumption instead went in large part to finance the housing bubble. Merged with trillions more that were invested in securities backed up by fradulent mortgages and sold to Fannie May, Freddie Mack, and insured by AIG or sold to foreign investors, inflated a market that had to collapse. Trillions were diverted from productive investments into non-productive gambling and undermined the US economy. At 2.3% growth the economy was hemorrhaging jobs long before the Bush recession of 2007.

SSDD's picture

Tax cuts have never done any good

They simply swell the size of the deficit when what should be done with any surplus money is shore up Social Security and Medicaid and get to work on the huge backlog of deteriorating public infrastructure in this country. In the 1950's taxes for the richest of Americans was 90% and they still were able to live the high life. If you earn more than $250,000 you should pay 50% in taxes and be grateful you live in a country where the system is such that you can earn that kind of money. The rich are a cancer to the country's future.

Pirate's picture
verified

Tax cuts swell the size of

Tax cuts swell the size of the deficit for one reason only; the morons in D.C. don't curtail any of their spending. We shouldn't be "shoring" up SSI and Medicare unless we can get a commitment from the elected money spenders to stop raiding the funds and pay back what they've already taken out of them.
So, if SSDD ever wins $6 million in a lottery, you're gonna tear up the ticket, right? Otherwise, that would make you one of the rich cancers to our country's future wouldn't it? I think you need to WALK THE PLANK!! on this one, my friend. AARRGHH!!!

SonOfTron's picture

obviously very young

ssdd, you are obviously not old enough to remember the bad economic times at the end of the 1970's. when reagan cut taxes in the early 80's the economy recovered and revenue doubled during his time in office. the problem was when the dems saw the increase in revenue, they started adding all kinds of social programs which ballooned the deficits. bush's tax cuts came after we were attacked and helped stabilize the economy. when bush was president and the republicans were in charge of congress, unemployment was near or below 5%. once the dems took over, you saw unemployment go up, and up and up and is closing in on 10%. one of the reasons, business are scared to spend money, because they know the dems are coming after it.

you claim the "rich are a cancer on the country's future", hate to break this to you, but without the rich, this country has no future. the rich are the one who create jobs and pay the taxes, if you get rid of them or take all their money, who is going to pay the taxes?

SSDD's picture

History fail

Reagan enacted massive tax cuts when first in office and then had to raise taxes shortly thereafter because of the deleterious effects on the delivery of government services.

A question for all you right wingers on here: are any of you even high school graduates and if so do any of you work in a non hourly job? Your stupidity and poor memories are shocking, but I guess it is because of things like that that the country finds itself in the situation it is in. Just a reminder for you dumb as post idiots - the economy practically collapsed in the fall of 2008 when your poster boy for fail george the shrub bush was still in office.

Pirate's picture
verified

Nice to see ssdd didn't

Nice to see ssdd didn't resort to name calling. If he's a college graduate, it's a great example of one being educated beyond one's level of intelligence. No?...read his posts.

Lil's picture
verified

double triple

Doubled revenues? Okay... Tripled the deficit, yes.

SonOfTron's picture

makes no sense

the deficit did not increase because revenue went up. the deficit increased because the dems SPENT it and then some.

for example, if you make $50,000 per year, but are spending $60,000 per year you have a $10,000 deficit. now, let us say we double your income to $100,000 per year but you now instead of keeping spending in check, you spend $130,000. you now have a $30,000 deficit. yes, your revenue doubled, but you increased spending by more than two times.

again, it is not the increase in revenue that is the problem, but the SPENDING. it was and is the spending of the social programs that is going to destroy this country.

thinkingman's picture

What an idiotic comment -

What an idiotic comment - lets tax you more because you have more....exactly who do you think made this country what it is? it sure as heck isn't the people who sit on their backsides all day...its those who work, earn money and try to better themselves. get a clue before you lose your gravy train!

WideStanceRepublican's picture

You ask stupid questions you get simple answers

"exactly who do you think made this country what it is?"

The middle class you idiot. The massive upward transfer of wealth that has gone on in the country is the reason we will soon no longer have a middle class. The rich are parasites on society and simply hoard more than they need to the detriment of the country. Just look at the state of education, health care, the economy, environmental issues - all can be traced directly to the greed of the wealthy.

Guess I shouldn't expect much reasoning from some dumb as a post unemployed putz who calls himself thinkingman when he is anything but.

drew's picture

God and the Founding Fathers

"exactly who do you think made this country what it is?"

God and the Founding Fathers through the Constitution. Which has allowed the most moral system of economics ever devised by man to prosper, that being CAPITALISM!

K0NPHL1C7's picture

So when the tax cuts expire

So when the tax cuts expire and wealthy business owners are forced to pay in a ridiculous percent of their yearly earnings, who do you think will end up hurting? Higher taxes will lead to, among other things, outsourcing, lay-offs and higher prices on goods and services.

tron's picture

When HP CEO Mark Hurd, just got fired

his severance package is approximately $28 million, and the hundreds of thousands of people HE fired, are getting unemployment checks courtesy of the US taxpayer. Mr. Hurd should pay the 'ridiculous percent.'

thinkingman's picture

trn, this may be a tough

trn, this may be a tough question for you, but just where do you think that money comes from? Many companies negotiate for severance and bonuses and good executives negotiate what they want PLUS the cost of the tax they will owe on the entire amount - thus they might ask for much more to cover taxes - and that ENTIRE amount is simply passed on to consumers thorugh higher prices on goods, so next time you purchase something from HP - please remember YOU paid for his severance package, not the stockholders.

tron's picture

boob, I don't buy anything from HP

their quality sucks, as well as their business practices

thinkingman's picture

Geez do i have to spell it

Geez do i have to spell it out for you....regardless of which company you buy from, issues such as these, or increasing the taxes they pay (like poland Springs) eventually IS passed on to the consumer - eventually all it does is hits your wallet - course all your money is government issued, you do nothing to earn a living so i guess it doesn't really matter to you.

frnchmn's picture

Cranky...hasn't your doctors

Cranky...hasn't your doctors backed you're dose down yet? You level of paranoia is scary. Also have you figured out yet that no matter how many times you write "CON" it doesn't make you sound any more intelligent than the early mammal who craled from the primordial ooze.

In a down turned economy you DON'T raise taxes since 50% of the people don't pay any more and the top 1% who pay 60% of the bill will find ANYWAY they can to not pay. When the top weathly don't have reason to invest in the US economy they look elsewhere. This is serious economic lesson 101. But yet again cranky and his merry band of government robbers (robbers of freedom and money) want to give everyone else's money to the feds.

lawntobemowed's picture

Great Editorial

Keep up the good work! Exactly the type of editorial I expect to read in a newspaper.

SonOfTron's picture

when revenues drop

so when the tax cuts expire next year, i predict the following, higher unemployment (over 10%), lower revenues, increase spending (because the dems are thinking more money will be coming in) increased deficits.

the dems have accused the republicans of driving the economy over a cliff, the problem is the dems still have their foot on the accelerator pushing it further down the cliff.

thinkingman's picture

Just wait til the liberals

Just wait til the liberals realize that some of these expiring Bush tax cuts also helped them and will be gone - oh the humanity! For example - child tax credit currently needs only a few thousand in income to qualify for the credit, now you'll need much higher income if it expires, so the low income will get the shaft from their President and liberal congress. oh well, its not really a tax credit anyway - just like Earned income credits - you get them whether you owe tax or not, thus to call it a credit is wrong!

joe public's picture

Half the counrty is on

Half the counrty is on welfare now so if we had a Health care plan that was free for all wouldnt it be alright ? Maybe then and only then the people that are causing the problem would have to rethink their policies, over charing ect ! The Health care rip off they get government monies to build new wings and Hospitals with taxpayer money do or did you see a savings last time you went to the ER ??? just go accross the boarder to Canada buy your meds there and see the savings,if t Canada can provide meds at a fraction of the cost why cannt the greatest country in the world do the same ??? I tell you why GREED, give all workers a 10% cut in pay let everyone feel the pain things would change !

cranky yankee's picture

Gary52 said: "He has it, I

Gary52 said: "He has it, I want it. Great mentality!" And that's been the Republi-CON operating mantra since the split with Teddy Roosevelt. The Republi-CONS seeks a return to the caste system in this country where those with money can control those without. Besides the Bush tax cuts (which never seemed to make it to my pocket), Bush did not put his war funding in the federal budget in an effort to hide, or at least disguise, it's real cost and thus keep his record deficit spending from becoming too apparent. The Republi-CONS and their T-Party cronies are constantly complaining about the "tax and spend" Democrats. Where in the H-E-double hockey sitcks were they when Bush pushed us into his war of hubris causing not only record spending, but 4000 military and hundreds of thousands of civilian lives? Where were they when Bush pushed through his underfunded medicare prescription plan? Republi-CONS are H-Y-P-O-C-R-I-T-E-S.

Mac antSaior's picture
verified

No matter... in this economy

No matter... in this economy the answer is to further reign in government, not turn the screws on the working class. Raising taxes is never the answer and the sooner both parties figure that out, the better.

Gary52's picture
verified

He has it, I want it. Great

He has it, I want it. Great mentality!

veritas's picture
verified

That's what makes Capitalism work..... ;)

Greed, I tell ya, Greed.....

verified

expiring tax cuts

Hats off to the editorial boar, you hit he nail on this one, and to al those GOP right wing zealots moaning about Democrat/ Obama Care spending, lease remember that the lasttime, we had single year surpluss was under Bill Clinton, and if you watched 60 minutes tonight, they stated that unless we get health care spending under control, that will bank rupt us, yet Bush's medicare prescription bill made it illegal to negotiate with the pharamaceutical giants for lower prices; what is the logic behind that, yes I'ma Democrat, and proud of it!

tron's picture

If the Bush tax cuts had ever lived up to its hype,

then we could reasonably expect to renew them. However, they have been a dismal failure. And the lunatic right will not acknowledge that. In fact, they are campaigning that President Obama is going to raise taxes, just to scare people. The fact is, if taxes go up it will be entirely the Republicans fault, they wrote and passed the original bill in 2001. The US Treasury is going to lose 3 BILLION dollars on the estate of George Steinbrenner alone.
I hear his kids are going to send bush a thank you card.

Pirate's picture
verified

Heard that on Fox News, did

Heard that on Fox News, did ya?

K0NPHL1C7's picture

The US Treasury should never

The US Treasury should never have had rights to Steinbrenner’s estate to begin with. The Estate Tax is yet another redistribution of wealth that the lazy left has used as a crutch for too long.

tron's picture

In fact, Steinbrenner NEVER paid taxes

on a majority of his estate, that is unfair.

Pirate's picture
verified

Unfair because.........If he

Unfair because.........If he and his accountants found ways not to pay taxes, more power to 'em. When did the confiscatory taking of one's wealth by government for the sole purpose of transferring it to another, who did nothing to earn it, become a good thing for America?

thinkingman's picture

Two sides to every coin

While the ESTATE may not pay taxes through the simple fact that he passed away in 2010 vs 2009 or 2011, there is a swing side to the issue. One of the loopholes in the estate tax is that his heirs will NOT be allowed the step up in value normally allowed. In any other year your inheritance is based no the value at time of death (and estate taxes imposed), but in this year the step up is disallowed thus the value of the inheritance in what it was worth prior, not at time of death so the inheritors will eventually pay a greater tax either through a capital gain if they sell or an estate tax if they die....thus while the estate did not pay any tax - eventually someone will pay a tax on that gain and it could be greater than what would have been paid at this time, or it could be less, as no one can predict what the future law will be. Tron as someone who previously professed to do taxes for folks, you should have known this!

tron's picture

The people I help with government forms are

the elderly, who really don't have billion dollar estates. I leave those people to you, so you can gouge them outrageous amounts. Anyways, you seem to support letting rich people escape from paying any taxes, since you said Mr. Steinbrenners sons can escape taxes as long as they own the team. Guess to you that seem equitable, but it is unfair. I got into helping the elderly with their forms, when your hero bush decided to give stimulus money to everyone, but only those who filed a tax return. Most of the people I helped had not filed in years, and while they weren't complicated, they bewildered the elderly. So instead of having them go to you and charge them $100 to fill out a form so they could get $250, I did it for free. Yeah, I could have charged them, BUT they needed it even more than I did.

thinkingman's picture

Glad to see you still have no

Glad to see you still have no clue and just spread falsehoods here...first No one escapes the tax man, they only avoid the tax at the current time, but either through sale or death the Steinbrenners's will eventually pay the tax and it will most likely be more expensive given the direction our country is headed, regardless of which party is in power. Second, you have no clue what I charge my clients, and frankly, you have no clue how many i also do for free - the difference is i know the tax laws and you simply due simpleton forms and try to act like you know what you're doing. Allow me 2 hours viewing your returns and i guarentee i can find more money for those you prepared, and I still won;t charge as i have NEVER charged the low income or elderly. But as long as people like you prepare forms and make errors, there will be plenty of work for me to correct!

thinkingman's picture

Dismal failure? You mean like

Dismal failure? You mean like the child tax credits they received that will now be gone for lower incomes? I'll take that dismal failure any day of the week, further proof of you not really doing tax returns for people as you claimed in prior postings...

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