Blaming Obama For George W. Bush's Policies

Bruce Bartlett: Are the Bush Tax Cuts the Root of Our Fiscal Problem? ...
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July 26, 2011, 6:00 am89 Comments
Are the Bush Tax Cuts the Root of Our Fiscal Problem?
12/11/2012 8:35 AM
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By BRUCE BARTLETT
Bruce Bartlett held senior policy roles in the administrations of Ronald Reagan and George H.W. Bush and served on the staffs of Representatives Jack Kemp and Ron Paul. Whether revenue should play any role in deficit reduction is at the root of the fiscal impasse between Congressional Republicans and President Obama. One factor underlying the hard-line Republican position that taxes must not be increased by even $1 is their assertion that the Bush tax cuts played no role in creating our deficit problem.
Todays Economist
Perspectives from expert contributors. In a previous post, I noted that federal taxes as a share of gross domestic product were at their lowest level in generations. The Congressional Budget Office expects revenue to be just 14.8 percent of G.D.P. this year; the last year it was lower was 1950, when revenue amounted to 14.4 percent of G.D.P. But revenue has been below 15 percent of G.D.P. since 2009, and the last time we had three years in a row when revenue as a share of G.D.P. was that low was 1941 to 1943. Revenue has averaged 18 percent of G.D.P. since 1970 and a little more than that in the postwar era. At a similar stage in previous business cycles, two years past the trough, revenue was considerably higher: 18 percent of G.D.P. in 1977 after the 1973-75 recession; 17.3 percent of G.D.P. in 1984 after the 1981-82 recession, and 17.5 percent of G.D.P. in 1993 after the 1990-91 recession. Revenue was markedly lower, however, at this point after the 2001 recession and was just 16.2 percent of G.D.P. in 2003. The reason, of course, is that taxes were cut in 2001, 2002, 2003, 2004 and 2006. It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year. By contrast, after the 1982 and 1993 tax increases, growth was much more robust. Real G.D.P. rose 7.2 percent in 1984 and continued to rise at more than 3 percent a year for the balance of the 1980s. Real G.D.P. growth was 4.1 percent in 1994 despite widespread predictions by opponents of the 1993 tax increase that it would bring on another recession. Real growth averaged 4 percent for the balance of the 1990s. By contrast, real G.D.P. growth in the nonrecession years of the 2000s averaged just 2.7 percent a year barely above the postwar average. Few people remember that a major justification for the 2001 tax cut was to intentionally slash the budget surplus. President Bush said this repeatedly during the 2000 campaign, and it was reiterated in his February 2001 budget document. In this regard, at least, the Bush-era tax cuts were highly successful. According to a recent C.B.O. report, they reduced revenue by at least $2.9 trillion below what it otherwise would have been between 2001 and 2011.
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Slower-than-expected growth reduced revenue by another $3.5 trillion. Spending was $5.6 trillion higher than the C.B.O. anticipated for a total fiscal turnaround of $12 trillion. That is how a $6 trillion projected surplus turned into a cumulative deficit of $6 trillion.
Congressional Budget Office These figures are conservative insofar as revenue is concerned, because the higher interest payments required by the deficits created by the Bush tax cuts are allocated to spending. If one allocates the interest cost proportionally, the Bush tax cuts were responsible for increasing the debt by $3.2 trillion 27 percent of the fiscal deterioration since 2001. These facts notwithstanding, it has become a Republican talking point that the Bush tax cuts did not, in fact, reduce revenue at all something the Bush administration itself never asserted. Last year, Mitch McConnell of Kentucky, the Senate minority leader, said: Theres no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue because of the vibrancy of these tax cuts in the economy. On June 10, former Minnesota Gov. Tim Pawlenty said, Keep in mind, whether it be the Bush tax cuts, the Reagan tax cuts or other tax cuts, they always produce an increase in revenue. On July 10, Senator Jeff Sessions of Alabama said of the Bush tax cuts, The revenue went up every single year after those tax cuts were put in. And on July 15, Representative Trent Franks of Arizona said, Even the much-maligned Bush tax cuts brought in an additional $100 billion a year to government coffers. It is hard to know where these totally erroneous ideas come from. Federal revenue fell in 2001 from 2000, again in 2002 from 2001 and again in 2003 from 2002. Revenue did not get back to its 2000 level until 2005. More important, revenue as a share of G.D.P. was lower every year of the Bush presidency than it was in 2000.
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Congressional Budget Office What will happen at the end of next year when the Bush tax cuts expire is already a matter of intense budget negotiations. Perhaps the whole point of the apparent Republican disinformation effort to deny that the Bush tax cuts reduced federal revenue is to make the reverse argument next year allowing them to expire will not raise revenue. Facebook Twitter Google+ E-mail Share Print Bruce Bartlett, budget deficit, Bush tax cuts, Congressional Budget Office, Daily Economist, politics, tax cuts, Taxation Related Posts
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Featured The Real Long-Term Budget Challenge10 Republican assertions that federal discretionary spending is out of control have contributed to unwarranted fears about the fiscal cliff, an economist writes. Capitalism and the Kids41 American society does a good job of capturing the benefits of well-reared children but has been less successful at spreading the costs, an economist writes. How Medicare Is Misrepresented60 Critics of Medicare appear to be speaking cryptically to avoid spelling out how they want to change popular provisions of the national health insurance program, an economist writes. The Real Fiscal Risks in the United States19
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Bio | Posts About Economix Economics doesn't have to be complicated. It is the study of our lives our jobs, our homes, our families and the little decisions we face every day. Here at Economix, journalists and economists analyze the news and use economics as a framework for thinking about the world. We welcome feedback, at economix@nytimes.com. Our Policy on Comments Tag List DAILY ECONOMIST 967 UNEMPLOYMENT 460 TAXES 338 EMPLOYMENT 324 HEALTH CARE 281 JOBS 256 CASEY B. MULLIGAN 205 SIMON JOHNSON 201 POLITICS 193 JOBS REPORT 192 NANCY FOLBRE 182 FEDERAL RESERVE 177 UWE E. REINHARDT 175 HOUSING 174 HEALTH INSURANCE 161 RECESSION 159 BUDGET DEFICIT 158 STIMULUS 153 WOMEN IN THE WORKFORCE 152 EDWARD L. GLAESER 146 U.S. HEALTH CARE COSTS 130 HIGHER EDUCATION 127 BANKS 120 DATA DECODING 117 FINANCIAL CRISIS 116 EDUCATION 115 CHINA 115 GREAT RECESSION 103 BRUCE BARTLETT 100 STOCKS 100
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Bruce Bartlett: Blaming Obama for George W. Bush's Policies - NYTime...
http://economix.blogs.nytimes.com/2012/08/14/blaming-obama-for-geor...
AUGUST 14, 2012, 6:00 AM
Blaming Obama for George W. Bushs Policies

By BRUCE BARTLETT
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of "The Benefit and the Burden: Tax Reform - Why We Need It and What It Will Take." Although it was quickly overshadowed by his choice of Representative Paul D. Ryan of Wisconsin as his running mate, Mitt Romney released an important document last week by his principal economic advisers that deserves more attention than it got. It is an audacious attempt to blame Barack Obama for the economic mistakes of George W. Bush and Republicans in Congress. The document is attributed to economists Glenn Hubbard of Columbia, N. Gregory Mankiw of Harvard, John B. Taylor of Stanford and Kevin Hassett of the American Enterprise Institute. Professors Hubbard and Mankiw each chaired the Council of Economic Advisers under President Bush, while Professor Taylor served him as under secretary for international affairs at the Treasury Department. Mr. Hassett is co-author of the book, "Dow 36,000," published in 1999. Much of the Romney paper is taken up with reviewing the poor economic recovery, which is undeniable. Reading it, however, one is left with the impression that the recession occurred on President Obama's watch because of policies he is responsible for. Just to be clear, the National Bureau of Economic Research, the private research group that determines the starting and ending points of recessions, says the latest economic downturn began in December 2007 and ended in June 2009. The report points to various causes of the recession as if they all just happened without the responsibility of one party or administration. As the report says, "No single party or administration is responsible for structural headwinds to growth." That is probably true. But what about cyclical changes in growth and unemployment? These are the ups and downs in the economy that occur around the trend rate of growth, which is determined by structural factors, as the report correctly asserts. Factors affecting the business cycle are necessarily short-term in nature. They include Federal Reserve policy; international capital flows; industry-specific policies such as those affecting housing; fiscal policy and many others. Such factors must necessarily have occurred after the previous recession, which ended in
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November 2001, according to the N.B.E.R. That's the nature of business-cycle analysis; once a previous recession ends, the cyclical factors that gave rise to it are assumed to have been purged. The next recession will necessarily result from those factors that postdate the previous recession. So whatever caused the 2007-9 recession had to have resulted from policies that the Bush administration was responsible for - either by initiating them or failing to act against them. Space prohibits a full discussion of these issues, but certainly one factor had to be the squandering of budget surpluses that resulted from the policies of the Bill Clinton administration and their replacement by huge deficits under President Bush. Mr. Bush inherited a budget surplus of $236 billion from Mr. Clinton in 2000, which fell to $128 billion in 2001. By 2002, the federal government ran a budget deficit of $158 billion, which rose to $377 billion in 2003, and $413 billion in 2004. The deficit fell to $318 billion in 2005, $248 billion in 2006, and $161 billion in 2007, then shot up to $459 billion in 2008. It should be noted as well that the fiscal 2009 budget was submitted to Congress by Mr. Bush in January 2008 and took effect on Oct. 1 of that year - almost four months before President Obama took office. Thus the government was running historically large budget deficits long after the end of the 2001 recession. As I have previously documented, these deficits resulted to a large extent from legislated tax cuts during the Bush years. It is also important to note, though one will not find it in the economists' report, that much of the legislated increase in the deficit under President Obama resulted from tax cuts. According to the Congressional Budget Office, tax cuts in the American Recovery and Reinvestment Act of 2009 reduced revenues by $253 billion between 2009 and 2011 - about a third of the budgetary cost of the stimulus package. Further tax cuts agreed to by President Obama in 2010 added another $354 billion to the deficit in 2011 and a similar amount this year. Thus about $1 trillion of the deficit since 2009 came from tax cuts. Most economists believe that running large deficits during cyclical upturns is a bad idea because they overstimulate the economy when it's not needed and thus sow the seeds of economic imbalances that lead to subsequent recessions. One can argue that George W. Bush's budgetary profligacy was a major cause of the 2007-9 recession - the longest and deepest of the postwar era. Even if one isn't willing to go that far, it is apparent that had Mr. Bush reduced budget deficits rather than enlarging them through tax cuts and spending increases for wars, pork-barrel projects and a new entitlement program (Medicare Part D), the federal government would have had more fiscal ammunition available to fight the recession that President Obama inherited from President Bush. Because of the large deficits Mr. Bush bequeathed Mr. Obama - on Jan. 8, 2009, the C.B.O.
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projected a deficit for the year of $1.3 trillion that didn't include any Obama policies - Congress was deeply reluctant to enact a stimulus larger than $787 billion, even though President Obama's economic advisers thought that one at least twice as large was necessary to turn the economy around. The opposition of every Republican to the 2009 stimulus was a major factor in its inadequate size. By way of analogy, suppose you go to your doctor with an illness. He correctly diagnoses it and prescribes the right medicine, but for some reason you are given a dosage only half as large as required. The medicine was enough to improve your condition, but not enough to cure you. You remain sick although you feel better and will remain so until you finally get a full dosage of the proper medicine or your body is able to cure itself, which might take years. Note that in this analogy the medicine was properly prescribed; only the dosage was wrong. It would be incorrect to blame the medicine because you are still sick. The Republican economists nevertheless blame the medicine itself for the failure of the economy to respond to President Obama's prescription. But it was Republican policies during the Bush administration that brought on the sickness and Republicans in Congress who have denied the economy an adequate dosage of the cure. Now they want to implicitly blame President Obama for causing the recession and the failure of stimulus to fix the problem, asserting that fiscal stimulus is per se ineffective. There is a word for this: chutzpah.
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Bruce Bartlett: Are the Bush Tax Cuts the Root of Our Fiscal Problem? ...

Tuesday, December 11, 2012

July 26, 2011, 6:00 am89 Comments

Would Romney Be Another Bill Clinton or Another George W. Bush?

The Republican Idea of Tax Reform

Is the Fiscal Cliff a Big Deal?

Blaming Obama for George W. Bushs Policies

Search This Blog

European Credit Crisis Indicators Italy

Change 0.08 0.006

12/11/2012 Source: Reuters

The New York Times

The Real Long-Term Budget Challenge http://t.co/yGeyQUmm

Laura D'Andrea Tyson

Bruce Bartlett: Blaming Obama for George W. Bush's Policies - NYTime...

AUGUST 14, 2012, 6:00 AM

Blaming Obama for George W. Bushs Policies

Bruce Bartlett: Blaming Obama for George W. Bush's Policies - NYTime...

Bruce Bartlett: Blaming Obama for George W. Bush's Policies - NYTime...

Copyright 2012 The New York Times Company

NYTimes.com 620 Eighth Avenue New York, NY 10018

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