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You may remember that, last week, Republicans forced the Congressional Research Service (basically Congress’ think tank) to take down a study that analyzed 65 years of individual tax rates and found no correlation between lower taxes on the rich and economic growth. This just did not compute with the GOP, so they had to suppress the facts.
Now the Congressional Budget Office has come out with an analysis of the fiscal slope measures, and guess what? They found the exact same thing.
You have to dig into the data a bit to find it, but basically, CBO measured the impact of a series of the expiring tax and spending measures on economic growth and jobs in 2013. That chart is above. The key portion of it is in the middle. CBO estimates that extending all the expiring tax provisions and patching the alternative minimum tax would boost real GDP by around 1.4%. But, right below it, they estimate extending all those provisions EXCEPT the tax rates over $250,000 of income, to boost GDP by roughly 1.3%. In other words, the difference between extending the tax rates and not is a big fat 0.1% of GDP. That’s a rounding error.
Overall, CBO still shows that going down the slope and staying there would cost 2.9% of GDP and 3.4 million jobs. Just letting the payroll tax cut expire, which Congress and the White House seem OK with, would cost 0.7% of GDP and 800,000 jobs. That’s about 1/4 of the total impact, and almost twice as much as the sequester cuts.
But the big news here is the CBO showing that tax cuts for the rich do not correlate at all with economic growth. There is no compelling economic reason to extend those tax cuts. As CBO says in proper budget-ese, “the extension of lower tax rates on higher incomes would have a relatively small effect on output per dollar of budgetary cost.”
And it’s worth pointing out that the Republicans, in defending their position of extending those high-end tax cuts, are pointing to a study from Ernst & Young that actually is methodologically flawed enough to raise the suspicions of any independent analyst. Meanwhile, the study Republicans tried to sink represents the consensus opinion of virtually every unbiased analyst who studies the matter. And that includes George W. Bush’s own Treasury Department.
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Mr. Dayen, I appreciate your columns and the work that you do, but for heaven’s sake the Bush tax cuts expired in 2010. There are no more Bush tax cuts. George Bush was in no position to pass tax cuts in 2010.
And if we were talking VALUE–as in contribution to meeting human need–you can bet the effect would be powerfully retrograde. But “national economies” are a lens through which humans do not appear, designed in part to HIDE labor’s contribution to ruling class wealth.
And thanks to the Republicans O was in no position to let them expire in 2010. Bush owns torture and tax cuts so get over it.
David, would you please follow up on comment #1 by Oscar and give you your best comparative analysis re: the various proposals that have come up thus far re: debt reduction. In your opinion, should the so called “clock” just be allowed to run out? (I’ll catch up on the reading as best as I can — I’m just not a fast typist, etc. like some of these pups!
I wonder how long it will take for the afterglow of victory to fade and the Monsters of Reality to regain control?
Nothing has really changed so i will be very suprised if anything happens to upset the status quo.
We need to grow our way out of this debt problem. . .
We know tax cut for the rich won’t help.
How can we grow the economy so this debt would kill us?
I thought inflation would help, but that hurts old folks on fixed incomes.
Any other answers out there?
I also thought an increase of immigration would help. We need more than 2.5 workers for every 1 person on Security and Medicare.
What’s the best solution to this fiscal slope?
Cut the Defense budget to same % as China’s. We should be able to defend ourselves with the same amount of money per capita that China spends. End the war in Afghanistan right away. Stop subsidizing the oil industry and all other profitable industries like pharma and big ag. You would have allot of money left over for a big party with balloons.
Obama should let the DOD have it, the Bush Tax Cuts expire and let the opposition be the deciders. It’s the role they feel entitled to anyway. They’ll be Dems whining and sniveling here, too, of course. It’s only fair to let the bipartisan butcher’s of our fellow countrymen cut each others’ throats after castrating themselves. ” Oh please, Lord. Hear our prayers. ” Political hari-kari for the Tea Party should make for great TeeVee watching for a week or two. Besides there’s no hockey, and therefore, no good bloody fights until 2013 unless you’re into Pay Per View. I can only hope that Obama doesn’t rise to take Boehner Bait and get us all hooked on the idea of needing more security at home and abroad. Sleeping in the cold, without food and shelter, is about as much security as Americans can handle; thank you very much.
Obama Loves The Bush Tax Cuts. Obama will not increase taxes on the rich. Obama loves the rich. Obama is a proponent of Trickle Down Economics.
Obama clearly stated that the government cannot create jobs. All (blow) jobs must come from the pirate sector.
Obama loves war and the MIC. There will be no cuts to the MIC.
Here’s the “compromise”.
Cut Safety Net to Save War Spending “to keep us safe”.
Safe so we can starve to death with dignity in a short sale home owned by Bain Capital. Go U.S.A.
Bullshit. Obama and the Dems could have passed legislation to end the tax cuts any time before they basically handed the House to the Republicans in the 2010 mid-terms through their political bungling and bank/corporate-friendly governance. He chose to wait and bank on the Republicans being responsible enough (or as politically naive as he is) not to tie continuation of the tax cuts to passing legislation to raise the debt limit ceiling.
Obama owns the tax cuts now.
The policies of Democrats and Republicans are the same. The only difference is that Republicans are more mean-spirited. They’ll cut your food stamps faster and make a woman or a young girl carry an unwanted pregnancy to full term on her own – on account of Jesus (who was apparently a Republican).
It will be interesting to see if the House Republicans can come to agreement, at least a significant number of them, to pass legislation to avoid the cliff’s edge. But, if they don’t they will get ALL the political blame. I’m certain they don’t really want that either.
What may give them an opportunity is to pick & choose and shape said legislation instead of just doing everything at once.
If we could ‘fall off the fiscal cliff’ and survive, then that means there is some inbetween legislation which they might prefer to either ‘falling’ or ‘fixing it all’.
At this point we’ve seen the president’s ideas, so it’s up to the Republicans to present their position. If they are willing to do something, then there can be negotiations around that.
I think it would be best to have a complete path in mind, from dealing with the ‘cliff’ issues to future legislation. Then people would know the plan, schedule and politics of the whole course.
Your right on all counts. Except you forgot to mention that the Baby Boomer, dirty hippie crowd are now all nearing retirement and their Social Security is undeserved and those monies are needed for more valuable things than letting them sit around and listen to old tapes of Jethro Tull.
A lot of those people should be working till their ninety to make up for how they sloughed off when they were young.
(Sarcasm alert)
He certainly does own the Obama extended Bush tax cuts. And he also owns the drones, the NDAA, and the Socializing Expenditures for the biggest Financial Firms on earth at the expense of the middle class.
Well there is another issue out there: the debt limit. Some think we are already at it. So you know the Rs will refuse to raise it without some “payback”. And Moody’s has the US on negative credit watch (idiots but still) and they are planning a party I would suppose. And then you know how well O negotiates. So I’m thinking I know which way this thing is going.
Some bloggers have at least two ways to go around the debt limit, but you know O, conservative sort. It takes a Republican to have the balls to use the tools right in front of your nose.
Bush left office in January 2009. This is 2012, not the “Bush era,” whatever that is supposed to mean.
The tax cuts under which we suffer now are Obama’s.
I have no idea why people refuse to tell the truth about that.
It is the Bush Era in the sense that Obama has maintained and, in some cases, extended policies that the former administration enacted; indefinite detention, destruction of habeus corpus, no bankster indictments, crack-down on med. marijuana dispensaries, more droning war-lite in strange arab-sounding places and historically unprecedented prosecution of so-called whistle blowers.
When I witness stuff such as the spoof (of Harold and Kumar) introducing the Democratic convention, Obama making two trips to Madison, WI within 6 months for campaigning, while a midnight tweet was the entire extent of his involvement with the Walker recall, I cannot help but think these are the machinations of a deeply cynical and self-serving regime, or at best the presidency of a visionless technocrat.