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You read that title right, now the $1.3 trillion deficit is being blamed on Bush in a February 6 editorial in the New York Times. Where to begin with this notion is something I have been wrestling with all morning. The author is correct in his assertion that Bush did little to combat the deficit but misses the mark on a few, key, factual points.

What is even more breathtaking is the Republicans’ cynical refusal to acknowledge that the country would never have gotten into so deep a hole if President George W. Bush and the Republican-led Congress had not spent years slashing taxes — mainly on the wealthy — and spending with far too little restraint.

Am I the only one that sees the gigantic factual error in that sentence? A Republican-led Congress? The 110th Congress was a Democratic majority with the only Republican leadership being Dick Cheney. The author is mincing words by trying to distract from the fact that it was a Democratic Congress that approved Bush’s plans. The Congress had the chance and the power to go against Bush’s wishes but instead they buried their heads and let things fall into place.

This leads to the other issue, the tax cuts on the wealthy. I am not even sure why this is an issue anymore, if we continue to think that taxing people who make a large amount of money a lot more than those who are in the middle class, we’ll do nothing but discourage the wealthy to keep their money here. I would argue it is more harmful to the funding of projects, to philanthropy, and to business in general to tax the wealthy a great sum more than everyone else.

You can read the article yourself and come to your own conclusions but it seems that the author is gripping at straws to try and push blame to the past for something that is a very real-time indicator of the present.

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  1. Jeff #
    February 9, 2010

    I haven’t read the article but I think the author might be refering to the 107th Congress, in which Republicans passed Bush’s $1.35T tax cut in 2001, another tax cut in 2003 and the unfunded expansion of Medicare, all of which were opposed by most Democrats.

    If you have time and interest, I’d be interested to hear your thoughts on Bruce Bartlett’s writings, especially his latest book “The New American Economy” in which he argues that supply side theory (of which he was one of the primary architects under Reagan) is not applicable to the current economic conditions. He’s very hard on Republicans (and Democrats, but mostly Republicans because he was one). He argues (rightly, in my opinion) that the only realistic way forward is to increase tax revenue. His preferred method is through a VAT tax.

    • February 9, 2010

      I am of the mindset that right now the deficit should not be the top priority. If more taxes are needed to pay it off, we’re not going to accomplish that without people working, so priority number one should be kick starting the job market.

      As far as VAT taxes, I’ll need to pick up Mr. Bartlett’s book to understand his reasoning. Just off the top of my head, the biggest issue would be deadweight loss, or the tax not being sufficient to create positive results. The other issue that is common in Europe is outright fraud, putting companies out of business.

  2. Jeff #
    February 9, 2010

    At the end of the day, these issues are all kind of inter-related. Until the economy improves and we get some good job growth, tax receipts will continue to fall behind and the deficit will be insurmountable. However, getting the economy growing again is only one part of what needs to be done to get the deficit under control. Entitlement reform will have to be part of the equation.

    Regarding the VAT tax, I think Bartlett addresses the issues you raise. In fact, his argument for a VAT tax is that the mechanism is highly efficient, self-policing and transparent. It’s ashame his ideas are not more seriously considered by Republicans and Dems.

    • February 10, 2010

      But you can’t put the cart before the horse. Raising taxes on people who are already hurting is not going to increase government revenue. Entitlement reform is certainly at the top of the list of things that needs to happen to get the economy running again. The focus needs to be on getting the economy running at full speed again. After that, taxes, healthcare, etc. can be debated in earnest. Trying to co-mingle all of the issues does not lead to good policy, it leads to patched together policy.

  3. February 11, 2010

    I was listening to Paul Ryan talk about his roadmap and one of the things he mentioned was a VAT like tax on corporations. Sounds like his ideas are on the same page as Bartlett’s.

  4. Jeff #
    February 11, 2010

    Except that modestly raising taxes does increase government revenue. We’ve been lowering taxes for so many years things have really gotten out of whack. Personally, I’d like to see the whole tax system scraped and go to a simplier and more transparent system. But short of that, I’m in favor of going back to the same tax levels we had under Clinton when the economy seemed to work just fine. And, yes, you can do this while creating incentives for job growth at the same time. We can’t continue to cut taxes for everyone while healthcare costs skyrocket year after year and the babyboomers retire and think somehow the deficit is going to magically shrink. If Republicans want their prescription drug coverage and Medicare Advantage option, we have to pay for it somehow.

  5. February 11, 2010

    Again, Ryan suggests something like what you propose for taxes. He wants to scrap the current tax system, simplify it, and make it easier for Americans to understand. He also wants to get rid of social security as we know it for anyone under 55. I’m all for that.

    I would like to know how you raise taxes on corporations and employees while creating incentives for job growth. It seems like such incentives (tax breaks, government contracts, etc.) would go against your point about simplifying the tax system.

    The one thing that could potentially be a revenue maker and encourage businesses is the creation of an import tax. We are one of the only countries in the world to only tax exports, so I think we need to play catch up and tax the imports. We shouldn’t slap the hands of businesses because they ship out of the country.

  6. Jeff #
    February 11, 2010

    I’m definitely not for getting rid of SS. I assume you mean Ryan’s plan to privatize it. I’m not for that (unless his plan is different from what has been proposed by Republicans in the past). The whole point of SS is to provide a safety net for seniors. Yes, it’s a form of welfare but it’s a very important protection for a very vulnerable segment of the population (a lesson learned from the Great Depression). I would be more in favor of means-testing but certainly willing to hear other options, even the Ryan option if it doesn’t entail ending SS.

    Regarding an import tax, how would that not spark a major worldwide trade war?

    The current proposals in Congress and in Obama’s budget provide for an expiration of the Bush tax cuts for people making over $250K but also creates tax incentives for small businesses and the addition of jobs. Yes, I’d like to have a simpler tax system, but in the short term where we need immediate job growth and increase gov’t revenue, I think Obama is trying to strike the right balance. I think history has shown that repeatedly cutting taxes for everyone does not generate the kind of economic boom required to pull the economy and the budget out of a ditch, especially this one. It requires a balance between gov’t spending, targeted tax incentives and sustainable broad tax levels. In my opinion, the Bush policies threw these things all out of whack to make it much harder for us to withstand the inevitable cyclical economic downturn or, in this case, near depression.

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