US rivals clash on banking crisis

[rjd970]

1. The different approaches to corporate taxation will most certainly impact economic growth differently. As a result, the TPC analysis misses the mark in alleging the deficit/debt impact....I could see a compromise between the 2 plans but as they stand now, I prefer the McCain approach (though my taxes would likely be lower under Obama's).

I still think your wrong here and being disengenous about the historical evidence. I can agree that the two approaches will impact economic growth differently, but the end result is the same. Look at the net economic growth numbers under Clinton and Bush Jr adminstrations as an excercise. They are near identical. The difference, is the Clinton plan (which was very similar to Reagan with regard to corporate tax rates) started with a slow build in economic growth culminating with with it's peak in the late 90's before bottoming out. Bush Jr tax plans acted as more of a shot of adrenaline, starting out with strong economic growth numbers but steadily declining economic growth.

http://www.ers.usda.gov/Data/macroeconomics/Data/HistoricalRealGDPValues.xls

Thus, the short term effect of the tax cuts beneficial but not conducive to long-term economic health. Obama's plan is the better compromise because he is not going to repeal the 2001 and 2003 tax cuts immediately, in effect giving the economy the shot it needs, but he is not going to make them permanent in the interest of long run economic health. I agree with you that tax cuts are good, but they should only be used in a corrective manner.

The administration has credited the tax cuts with the drop in the fiscal year 2007 deficit to “only” $162 billion, but the 2007 budget would have been in surplus were it not for the tax cuts. Based on Joint Committee on Taxation estimates, the total 2007 cost of tax cuts enacted since January 2001 was $300 billion (taking into account the increased interest costs on the debt that have resulted from the deficit financing of the tax cuts). This means that even with the spending for the wars in Iraq and Afghanistan, the federal budget would have been in surplus in 2007 if the tax cuts had not been enacted, or if their costs had been offset.

The simple truth here is that when adjusted for population growth and inflation the Clinton economic plan resulted in short term revenue neutrality and long term revenue growth. With the Bush Jr. tax cuts, it resulted in short term revenue growth, and as we have all seen, is finishing in neutral revenue growth and growing deficits. I think Obama's is the better compromise, and when people paint him as some dogmatic economic socialist they miss the mark. His plan is the better combination of Reagan, Clinton, and Bush Jr...although you will never hear him admit that because his base doesn't want to admit that Reagan and Bush Jr., at least in part, knew what they were talking about.

 

[volinbham]

I still think your wrong here and being disengenous about the historical evidence. I can agree that the two approaches will impact economic growth differently, but the end result is the same. Look at the net economic growth numbers under Clinton and Bush Jr adminstrations as an excercise. They are near identical. The difference, is the Clinton plan (which was very similar to Reagan with regard to corporate tax rates) started with a slow build in economic growth culminating with with it's peak in the late 90's before bottoming out. Bush Jr tax plans acted as more of a shot of adrenaline, starting out with strong economic growth numbers but steadily declining economic growth.

http://www.ers.usda.gov/Data/macroeconomics/Data/HistoricalRealGDPValues.xls

Thus, the short term effect of the tax cuts beneficial but not conducive to long-term economic health. Obama's plan is the better compromise because he is not going to repeal the 2001 and 2003 tax cuts immediately, in effect giving the economy the shot it needs, but he is not going to make them permanent in the interest of long run economic health. I agree with you that tax cuts are good, but they should only be used in a corrective manner.

The administration has credited the tax cuts with the drop in the fiscal year 2007 deficit to “only” $162 billion, but the 2007 budget would have been in surplus were it not for the tax cuts. Based on Joint Committee on Taxation estimates, the total 2007 cost of tax cuts enacted since January 2001 was $300 billion (taking into account the increased interest costs on the debt that have resulted from the deficit financing of the tax cuts). This means that even with the spending for the wars in Iraq and Afghanistan, the federal budget would have been in surplus in 2007 if the tax cuts had not been enacted, or if their costs had been offset.

The simple truth here is that when adjusted for population growth and inflation the Clinton economic plan resulted in short term revenue neutrality and long term revenue growth. With the Bush Jr. tax cuts, it resulted in short term revenue growth, and as we have all seen, is finishing in neutral revenue growth and growing deficits. I think Obama's is the better compromise, and when people paint him as some dogmatic economic socialist they miss the mark. His plan is the better combination of Reagan, Clinton, and Bush Jr...although you will never hear him admit that because his base doesn't want to admit that Reagan and Bush Jr., at least in part, knew what they were talking about.

This analysis across the terms assumes that economic growth is driven solely by tax policy. That's simply not true.

The pattern from the late 90's to through 2001 have much more to do with the Tech boom/bust cycle than tax policy does.

In other words, claiming that Clinton's tax policy resulted in short-term revenue neutrality followed by long-term growth is confusing correlation with causation.

Here's some evidence - Bush did not change Clinton tax policy until well into 2001 but economic growth plummeted - was that the result of Clinton tax policy? Still believe Clinton tax policy resulted in long term economic growth?

Clinton's tax policy runs from late 1993 through 2001.

 

[volinbham]

The administration has credited the tax cuts with the drop in the fiscal year 2007 deficit to “only” $162 billion, but the 2007 budget would have been in surplus were it not for the tax cuts. Based on Joint Committee on Taxation estimates, the total 2007 cost of tax cuts enacted since January 2001 was $300 billion (taking into account the increased interest costs on the debt that have resulted from the deficit financing of the tax cuts). This means that even with the spending for the wars in Iraq and Afghanistan, the federal budget would have been in surplus in 2007 if the tax cuts had not been enacted, or if their costs had been offset.

Isn't this based on an assumption that economic growth would have been the same regardless of the tax rates?

 

[rjd970]

This analysis across the terms assumes that economic growth is driven solely by tax policy. That's simply not true.

The pattern from the late 90's to through 2001 have much more to do with the Tech boom/bust cycle than tax policy does.

But tax policy is a significant factor, just as you and all your buddies have been arguing this entire thread. This is getting ridiculous. You can't have it both ways...Let me remind you of what you have said in this very thread:

Additionally, it is off for McCain relative to Obama on deficit impact because it fails to recognize that McCain's could generate more economic growth (thus more revenue) and assumes spending would be equal between the two (which underestimates the deficit effect of Obama's).

How's this for some mean regressing

Corporate taxes and economic growth

The Tax Foundation - Do Corporate Taxes Impede Economic Growth?

Alternatively, reducing business taxes alone could spur economic growth in the next few years. Growth rate is but one part of the picture - the base on which the growth occurs is also important. If Obama's policies slow or reverse growth, future growth could be coming off a reduced base.

Again, this is based on a key assumption that his tax plan will not negatively affect economic growth

That last quote is especially poignant with your new argument.

So we assume tax policy will negatively affect economic growth with Obama, but market bubbles and dynamics are to blame when we talk about anybody else? This is (or should be) devastating to your TPC flawed assumption argument because if we are talking about tech bubbles being the primary cause of the economic downturn in the late 90's and early 2000's, then you have to concede the TPC study at least holds some merit with its basic assumption that you previously disagreed with. You, in fact, would have to say Clinton was doing a pretty good job managing the economy and was the victim of unfortunate market circumstances the same way Bush has been with the mortgage meltdown. Trends are the canary in coal mine for how tax policy affects economic growth, and sudden drops or increases can happen for a variety of reasons.

This is Tom Foolery on your part. Fundamental Captalism, Tax Cuts, and Deregulation are the answer, but when the free market fails they aren't to blame.

I'm all for capitalism (for all of you that think I am a socialist), but I am not for fundamental capitalism. I'm all for making money and tax breaks, but when the market needs to be corrected then it is better for all involved for an interjection....and it should be done proactively, not through after-the-fact bail-out's for those responsible.

I agree with Obama, now is not the time for his tax plan, we need the tax cuts to stimulate the economy, but making them permanent will lead us right back here again.

 

[rjd970]

If anything, even with your "other market forces" argument, the analysis suggest the Bush tax cuts stimulate economic growth and the Obama plan will sustain it.

I'm going to bed for the night and heading to Knoxville for the game tomorrow. This is a worthwhile debate and I will pick it up Sunday when I get back.

Go Vols!

 

[volinbham]

That last quote is especially poignant with your new argument.

So we assume tax policy will negatively affect economic growth with Obama, but market bubbles and dynamics are to blame when we talk about anybody else? This is (or should be) devastating to your TPC flawed assumption argument because if we are talking about tech bubbles being the primary cause of the economic downturn in the late 90's and early 2000's, then you have to concede the TPC study at least holds some merit with its basic assumption that you previously disagreed with. You, in fact, would have to say Clinton was doing a pretty good job managing the economy and was the victim of unfortunate market circumstances the same way Bush has been with the mortgage meltdown. Trends are the canary in coal mine for how tax policy affects economic growth, and sudden drops or increases can happen for a variety of reasons.

So how can you argue that Clinton's tax policy somehow resulted in better long-term growth? Also, are you factoring in the drop in capital gains taxes that Clinton initiated? My point (explained further below) is that tax policy impacts the short-term much more so than the long-term.

This is Tom Foolery on your part. Fundamental Captalism, Tax Cuts, and Deregulation are the answer, but when the free market fails they aren't to blame.

Please show me where I've made or suggested as much.

I'm all for capitalism (for all of you that think I am a socialist), but I am not for fundamental capitalism. I'm all for making money and tax breaks, but when the market needs to be corrected then it is better for all involved for an interjection....and it should be done proactively, not through after-the-fact bail-out's for those responsible.

I agree with Obama, now is not the time for his tax plan, we need the tax cuts to stimulate the economy, but making them permanent will lead us right back here again.

You are missing my point on a number of levels:


You accuse me of tom foolery but you are jumping on both sides of the argument with a claim of tax policy on long-term trends. If the Clinton plan led to long-term revenue growth as you suggest, you cannot ignore the precipitous drop in 2000-2001 that occurred with those tax policies in place. The vast majority of economists credit the Bush tax cuts in 2001 with lessening the recession and jump starting the economy. Without that tax-based stimulus, the Clinton level taxes would have lead to BIGGER deficits. So we see, simply looking at growth across the long-term doesn't tell us much about the impact of tax policy on long-term growth.

What I am arguing is that tax policy can impact economic growth in the short-term as described below.

a. when the economy is stalling, raising corporate taxes is unlikely to stimulate growth and is likely to further stall growth.

b. conversely, lowering corporate taxes is likely to provide a boost.

c. tax policy in and off itself doesn't explain economic cycles but can be used to nudge the economy in different directions.

It is over the first several years that the tax policy will have it's greatest impact. The TPC report doesn't acknowledge this initial impact on economic growth. Further it doesn't:

a. acknowledge the "tax-effect" of raising vs. lowering corporate taxes. Obama's plan will have effectively raise taxes via a pass-through effect while McCain's will lower them (this is across income groups). It may be that Obama's still nets out a bit lower for the middle class but the analysis doesn't acknowledge the true "difference in disposable income" effect of the two plans.

b. acknowledge the initial impact on the economic growth will have on short-term tax revenues and long-term revenues. This last point addresses the issue of "what would 2007 revenues have been without the tax cuts". Without the initial growth impact of the tax cuts, the base of the economy on with the latter growth occurred would be smaller. Thus, the tax base in 2007 would arguably be smaller (all else being equal) because the overall size of the economy would have been smaller. To argue that the old tax rates would have yielded $300 billion more revenue assumes that the economy would have been at the same size in 2007 if the earlier tax cuts had not occurred. Clearly that is a tenuous assumption since earlier growth was pivotal in reaching the 2007 size.

 

[rjd970]

You accuse me of tom foolery but you are jumping on both sides of the argument with a claim of tax policy on long-term trends. If the Clinton plan led to long-term revenue growth as you suggest, you cannot ignore the precipitous drop in 2000-2001 that occurred with those tax policies in place.

No, all I have said is the Clinton plan resulted in long-term revenue growth, but inevitably - just as with the Bush plan - it will fail at some point and tax cuts will be needed to kick start it again. No matter how you cut it, either plan is not good for the extreme long-term. My point all along has been the Clinton plan works to sustain, and something like the Bush tax cuts are periodically needed to correct inevitable drops. If it makes you feel better, I can put it like the Bush tax cuts are best, but a Clintonesque plan is needed periodically to correct the inevitable drops. Just let me know how you want the fur off this cat.

We can discuss if the tech bubble burst in the early 2000's had anything to do with the revenue drop, but it doesn't matter at this point because we both agree spending is the more significant factor and spending has done nonething but increase every year under Bush. Under Clinton he at least had a couple of years where spending was neutral. These are the facts:

Change in average Revenue
Clinton: +35%
Bush Jr.: +10%

Change in average Spending
Clinton: +9%
Bush Jr.: +25%

Government Spending Grew Faster Than Revenues for Most Administrations

If we are playing the tax policy effect on revenues how does this support long-term advocacy to the Bush tax cuts? Clinton on average spent less and took in more than the current administration has.

The vast majority of economists credit the Bush tax cuts in 2001 with lessening the recession and jump starting the economy. Without that tax-based stimulus, the Clinton level taxes would have lead to BIGGER deficits.

I agree.

when the economy is stalling, raising corporate taxes is unlikely to stimulate growth and is likely to further stall growth.

Agree, again....if we are talking short term.

conversely, lowering corporate taxes is likely to provide a boost.

Agree again.

tax policy in and off itself doesn't explain economic cycles but can be used to nudge the economy in different directions.

I agree....to a point. The Bush tax cuts worked very well with boosting a down economy, I don't think anybody is going to argue that. No one can argue that the Bush tax cuts gave a significant nudge after the recession inherited from Clinton. But when the economy is booming, they simply aren't conducive to generating revenue and healthy economic growth.

acknowledge the initial impact on the economic growth will have on short-term tax revenues and long-term revenues. This last point addresses the issue of "what would 2007 revenues have been without the tax cuts".

I read this as the growth resulting from the '01 and '03 tax cuts were included, and if repealed to 1990's levels sometime between 2005-2006, we would have seen a surplus. Whether or not the TPC report is saying this, it is the way I see the numbers. The point I have been trying to drive home is I am not discounting the Bush tax cuts out-of-hand...on the contrary...I see the utility of them. But continuing them indefinitely will simply dig the hole deeper.

To argue that the old tax rates would have yielded $300 billion more revenue assumes that the economy would have been at the same size in 2007 if the earlier tax cuts had not occurred. Clearly that is a tenuous assumption since earlier growth was pivotal in reaching the 2007 size.

Where in the report is this assumption spelled out? I didn't see it, but it may have been. Regardless, I am not assuming this when I look at the raw data that went into the report.





You have been much more engaging to talk to about this. But the neo-con's on this board that call me communist, socialist, etc..are being silly because they are not taking the time to investigate Obama's actual argument with this issue. All they see is "Obama?" "He's a socialist and so is anybody that supports him". I am all for the Obama plan of a partial extension of the Bush Tax cuts to get things going again. But making them permanent as McCain wants to do is economic suicide. While there are obvious differences, there are striking similarities with Obama's tax policies to that of Reagan.

Are you a Bush supporter? Everything I have seen on this board is being argued again as being in the best interest of this country. I only ask because the Republicans had the presidency and rubber stamp congress for 6 of the last 8 years. They have gotten exactly what they wanted...ideological religious-based foreign policy, government secrecy, legislative morality, invasion of privacy, fundamental capitalism, de-regulation, and a hostility to science. It is not that there is even anything wrong with some of these policies, but this administration has taken them to the extreme in every case. Look at where it has got us.

This very well could be the first election I vote democratic. All I am proposing is a little bit of reasonableness, and because I see Obama as the one that is doing this, I am being labled a socialist and communist by the peanut gallery here.

 

[BigPapaVol]

No, all I have said is the Clinton plan resulted in long-term revenue growth.

your cause and effect here couldn't be any more incorrect. Clinton's tax plan had nothing to do with the explosion in tax revenues.

We can discuss if the tech bubble burst in the early 2000's had anything to do with the revenue drop

surely you'll agree that the tech bubble nearly 100% drove the revenue increase, just as it was the reason for the decrease.
Change in average Revenue
Clinton: +35%
Bush Jr.: +10%

Change in average Spending
Clinton: +9%
Bush Jr.: +25%

there is no debate that this administration failed us miserably in its spending. That said, it appears to me that any period of complete control of the legislature and WH will result in unchecked spending well beyond our means.




I agree....to a point. The Bush tax cuts worked very well with boosting a down economy, I don't think anybody is going to argue that. No one can argue that the Bush tax cuts gave a significant nudge after the recession inherited from Clinton. But when the economy is booming, they simply aren't conducive to generating revenue and healthy economic growth.

how does this last sentence make any sense? Increased taxation would simply be a brake for any economy. Again, the tax bill is about the investors that drive our economy more than anyone else.



I read this as the growth resulting from the '01 and '03 tax cuts were included, and if repealed to 1990's levels sometime between 2005-2006, we would have seen a surplus. Whether or not the TPC report is saying this, it is the way I see the numbers. The point I have been trying to drive home is I am not discounting the Bush tax cuts out-of-hand...on the contrary...I see the utility of them. But continuing them indefinitely will simply dig the hole deeper.

Again, the spending, as you pointed out previously was the problem, not the tax policy.




You have been much more engaging to talk to about this. But the neo-con's on this board that call me communist, socialist, etc..are being silly because they are not taking the time to investigate Obama's actual argument with this issue. All they see is "Obama?" "He's a socialist and so is anybody that supports him". I am all for the Obama plan of a partial extension of the Bush Tax cuts to get things going again. But making them permanent as McCain wants to do is economic suicide. While there are obvious differences, there are striking similarities with Obama's tax policies to that of Reagan.

this entire paragraph is virtually nonsensical.

Are you a Bush supporter? Everything I have seen on this board is being argued again as being in the best interest of this country. I only ask because the Republicans had the presidency and rubber stamp congress for 6 of the last 8 years. They have gotten exactly what they wanted...ideological religious-based foreign policy, government secrecy, legislative morality, invasion of privacy, fundamental capitalism, de-regulation, and a hostility to science. It is not that there is even anything wrong with some of these policies, but this administration has taken them to the extreme in every case. Look at where it has got us.

sweet dem talking point paragraph.

This very well could be the first election I vote democratic. All I am proposing is a little bit of reasonableness, and because I see Obama as the one that is doing this, I am being labled a socialist and communist by the peanut gallery here.

if you buy any of the economic plan that Obama is pretending to advocate, then you deserve what you get in voting for him.

That's not neo-con. That's the reality of him being who he is and talking about plans of which he knows nothing. He can call it ignorance after the fact, as the Clintons did with their UHC lie.