Monday, November 22, 2010

Higher Taxes Won't Reduce the Deficit

From yesterday's Wall Street Journal:
History shows that when Congress gets more revenue, the pols spend it.
The draft recommendations of the president's commission on deficit reduction call for closing popular tax deductions, higher gas taxes and other revenue raisers to drive tax collections up to 21% of GDP from the historical norm of about 18.5%. Another plan, proposed last week by commission member and former Congressional Budget Office director Alice Rivlin, would impose a 6.5% national sales tax on consumers.

The claim here, echoed by endless purveyors of conventional wisdom in Washington, is that these added revenues—potentially a half-trillion dollars a year—will be used to reduce the $8 trillion to $10 trillion deficits in the coming decade. If history is any guide, however, that won't happen. Instead, Congress will simply spend the money.

In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio University co-authored a often-cited research paper for the congressional Joint Economic Committee (known as the $1.58 study) that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Subsequent revisions of the study over the next decade found similar results.

We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.


  1. Ummm....So, let's say your family puts a bunch of stuff on credit card. What is the solution? You still owe the bank money. Cutting spending won't reduce the deficit either. You need to pay the bank.

    That's what happened in the Bush years: The government quit taking in as much money (consider that like a reduction in your family's income), AND started two wars which were put on credit.

    NEVER in the history of the world has an empire lowered the money in their coffers and waged war. It is simple math.

    Higher Taxes won't reduce the deficit, then how are you going to pay back the bank for the two wars?
    OH, that's right, just cut anything that has to do with poor people. They're lazy anyway.

    So, when you end up poor because of trickle up taxation codes, don't look for any help. The plutocracy you guys defend doesn't care about you and you are happy to give them a pass. Thanks for the hard work.

  2. Anonymous Liberals LIENovember 24, 2010 at 10:17 AM

    "That's what happened in the Bush years: The government quit taking in as much money..."

    QUIT LYING anonymous liberal tax-hiker-
    Revenue to the federal government increased dramatically following the Bush tax cuts. Take your failed class warfare philosophies back to HuffPost where you don't have to worry about being proven wrong.
    "But the real jolt for tax-cutting opponents was that the 03 Bush tax cuts also generated a MASSIVE INCREASE IN FEDERAL TAX RECEIPTS. From 2004 to 2007, federal tax revenues INCREASED BY $785 BILLION, the largest four-year increase in American history. According to the Treasury Department, individual and corporate income tax receipts were up 40 percent in the three years following the Bush tax cuts. And (bonus) the rich paid an even higher percentage of the total tax burden than they had at any time in at least the previous 40 years. This was news to theNew York Times, whose astonished editorial board could only describe the gains as a "surprise windfall."

  3. Yo Mr Atlas Shrugged wannabe corporate stooge. Quit quoting the Washington Times, that is owned by the head of the Moonies. I guess you didn't even look at COAST's handy graphic for this post. From 2000 to 2010 the lines for revenue only bumps in the middle, the rest is like a cliff pointing straight down. And I do believe the supply side economics was in effect the whole time, No? Don't cherry pick data and then say I can't handle the truth. Government spending (Republican lead) increased steadily while net gain of revenues was neglible. And that article talking about people's net worth increase? If Bill Gates doubles his income, the net gain for the people of Seattle is huge, but everyone else isn't seeing it. That too, is called cherry picking. The disparity between rich and poor in this country is insane. It just must not bother you to let your government do their bidding and give them the bailouts. That's cool, just keep teabagging your way through life thinking you and the uber wealthy share a similar work ethic. They own you and you play the little puppet so well.

  4. Anonymous Liberals WHINENovember 25, 2010 at 7:30 PM

    When all else fails, resort to class warfare. When that fails, attack the motives of the supplier of the statistics that prove you wrong. When that fails, sit home and cry about your recent elections beatdown and anonymously whine about people who have better lives than you on an adverary's blog.

    Some things never change.

  5. You still haven't looked at the graph provided by COAST that shows zero net gain in revenues from Bush tax cuts, you just cherry picked the years you wanted to. How is that class warfare? The data shows all Americans do better under Democrats than under Republicans, that is statistical fact as well. The top 1% fair better under Republican rule. How is voting for your own best interest class warfare? It's a free country, No? You are a pawn of a plutocracy that is dumping millions into PR campaigns to make you think healthcare can't be as well run as the military and that if you think millionaires who made their money by gambling with your retirement should pay a greater proportion of taxes that is somehow class warfare. It's a far cry from it.
    Your 10% is worth more to you than their 10%. And don't worry I probably make more than you do and want to pay more in taxes so we all have decent schools and roads and parks and police. I don't mind carrying your water, so you don't even have to thank me.

  6. Dear Anonymous Liberals Lie:

    When all else fails, yell class warfare. We haven't heard that one before.
    Then, when Bush's record turns out to be a disaster in the numbers, bring up Reagan. Another great period that did great for boosting the bottom line for the top 1% and creating a bigger divide between these "classes". Funny that public policy can stack the cards in favor of the extremely wealthy and you don't yell class warfare then. Why is that?
    Yeah, yeah, yeah, I know the stats for how it boosted our GDP and made a huge increase in our global economic influence.

    But, back to the issue at hand, when you cut tax rates, you run huge deficits, Reagan tripled the deficit in three years and doubled military spending. So, revenues increase, but on the ol' Laffer curve, they were too much.
    Likewise, on the current Laffer curve, the Tea Party/COAST agenda is a recipe for disaster, and if you don't think that actually paying for debt is an issue, then you shouldn't be on here beating your chest with Rush Limbaugh/ Washington Times quotes, being the lap dog of Wall Street pretending to be a down-home, folksy, working class, common sense kind of guy.

  7. "When that fails, sit home and cry about your recent elections beatdown and anonymously whine about people who have better lives than you on an adverary's blog."

    Coming from a guy anonymously whining.

  8. When all else fails, attack the character instead of the facts, then hide behind your own anonymous moniker.
    Go ahead Bris, be a man and post your real name so we can marvel at how darn smart you is. Still living in Westwood, or did you actually move because not everyone shares your narrow point of view any more?

  9. Why don't the resident tax hiker here move up to NE Hamilton County? There, you can move into wonderful communities like Sharonville, Blue Ash, and Wyoming, who raise taxes all the time and spend every penny of it! Maybe you can buy a house next to Virgil Lovitt and Diane Adamec. Tax us more!

  10. Anonymous liberals can't read chartsNovember 30, 2010 at 10:32 AM

    Anonymous liberal liar,
    You're the one who needs to take another look at the chart. You stated that during the Bush years we "lowered the money in our coffers" and the government "quit taking in as much money".

    THAT IS A LIE. The chart speaks for itself.

    At no point, ever, since the Bush tax cuts were enacted in 2004 has the government taken in less revenue than before the cuts. Not once, ever. Not even during the current economic slowdown. NEVER.

    You are a tax loving liberal liar.

  11. Dear Blind Tax Cutter Moron,
    Look at the chart you nimwit! The First Bush Tax cuts started 2001, the second batch begun in 2003. We are debating their expiration right now.
    That means between 2001-2010 we have had the Bush Tax Cuts in effect. (9 years if you can't count either).

    Do you notice the two massive drops (the only negative sections of the red line on the COAST graphic)?
    Those are government revenues, meaning taxes.

    If you don't know how to reach a chart, you need to go back to school. The red line is revenues that the Government took in, (i.e. taxes), the blue line is spending.
    So, out of 9 years of Bush tax cuts, the US government only took in positive numbers of tax receipts 3 of those years.
    3 out of 9 isn't considered success.

    So, no, you are flat wrong, because you can't even read a chart. Revenues went negative compared to the previous year 6 out of 9 Bush tax cut years.

    So, please drink more kool-aid, rant about class warfare, when the real war is being waged on the middle class, stacking all the cards in favor of the rich.

  12. Are you looking at the chart? Or are you just pretending?
    Here, it's kind of like first grade:
    I want you to follow the red line with your finger. As you follow the red line with your finger, I want you to look down at the year.
    Now,the line trends up for most of the graph, until when? At what year does your finger change direction? Write down that year. Now, do that for all the years from 2000 on.
    When the line goes down, that means that the amount of money taken in was LESS than the year before.
    Out of the Bush tax cuts, there were only three years that were positive.
    This is pretty simple stuff and I feel sad that you can't read a chart. It is making me less angry with COASTers, I am starting to pity you.

  13. Anonymous liberals are dumbassesDecember 12, 2010 at 8:47 PM

    Since it should be obvious to everyone reading this that you're a dumbass and completely incapable of following even basic elementary logic I'm going to move on now.

    I'll leave you with this. This morning on Meet the Press, Harold Ford, a Democrat, was arguing with Democrat Anthony Weiner on this very same issue. Like you, liberal loser Weiner was spouting off the usual stale success-hating class warfare rhetoric to explain why their Party should have fought the Bush tax cut extension. Ford, finally fed up responded quite succinctly - "Anthony, there's only one problem. Your viewpoint was overwhelmingly rejected by the voters just a month ago. They don't believe in your position."

    That pretty much sums it up. Now maybe you can go back to HuffPost and continue your socialist whining there. I'm sure it will be more than welcome. Just remember, your side lost, big time. Your viewpoint is the loser minority viewpoint that was rejected across the nation, and here at home in Cincinnati, Hamilton County, and Ohio.

    Enjoy tilting at windmills.

    PS - you still can't read charts you moron.

  14. Dear last poster,
    You're argument is this then:

    You're saying that it doesn't matter what the chart says, the electorate voted a way, so it changes the math?

    I still want you to look at the chart and explain to me why the red line drops massively twice between 2000-2008? My argument is that Bush tax cuts did not ultimately result in more taxes collected. In fact, what the government did was issue more bonds that were bought by China. Basically putting whatever revenues we did not collect on credit card. The same thing is happening right now with the extension of the Bush tax cuts. We aren't reducing our spending, so it doubles the shortfall, putting more on credit card. That is basic math.

    To say that voters believe this or that is irrelevant. By your own argument, that means that in 2008, it proved that supply side economics didn't work because the people voted against it.
    Voting on something doesn't mean that the numbers change.
    Sure, people are making a referendum on Democrats, just like they did in 2006 on Republicans.
    That red line on the chart is revenues (i.e. taxes) that the government received. It drops drastically twice. The only major and sustained declines on the chart.
    If you can't understand that, God help you.


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