THE END OF BALANCED BUDGETS - DEFICITS AREN'T SO BAD
Fiscal Conservatives, once part of the Republican party but no more, used to call for a balanced budget.
There hasn't been one since Bush took office, either including "emergency" appropriations (how can there be a six-year "emergency"?) or excluding them.
So, today, Sullivan points to Heritage 'research' that suggests not that deficits are not good, but what liberals used to say, that deficits, at these levels, just aren't so bad.
THE REAL PROBLEM FOR FISCAL CONSERVATIVES
One real problem is unaddressed. Simply put, what should be done to "catch up" for the deficits that have already been run up during the Bush years? All of them, not just the so-called on-budget deficit.
After all, it was the GOP that threw out the pay-go rules, wholesale, early on the Bush Administration. All these years later, there is a deficit, whatever you think about its size, and more national debt (a lot more, including the war).
What do they want to do about it?
It's more than facetious to simply say, "We'll stop overspending spending now". It's like asking forgiveness without atonement, that.
BEHIND THE HERITAGE SPIN
The one statistic that I found interesting from Heritage's list is that cap-gains revenues are up sharply ahead of projections. No one sensible believes that tax cuts pay for themselves, but, as I recall, cap-gains cuts are meant to have greater impact than say, payroll tax cuts.
Here, Heritage lauds $35 Billion in unexpected cap gains revenues (at $103 B in 2006 versus baseline projection of $68B, cf. Myth #4). Quite boldly, they attribute the whole lot of this as the result of "encouraging investments".
Two things.
One, while this $35 billion coup is heralded as an enormous achievement, the same figure, roughly, $36 billion, is also viewed as "very little", when related to the repeal of the estate tax. (see Myth #7) It's a strange lens indeed that makes the same figure both laudable and de minimus. (There is a stat out there, unchecked by me, that non-repeal of the estate taxes, but just reform of the old ones, would go a long way to funding the actuarial social security deficit. That's not de minimus).
Second, the idea that short-run extraordinary improvements in cap-gains revenues are related to deepening or widening of capital ("encouraging investments") is to be hotly disputed.
There could be other elements that explain the unexpected rise in cap-gains revenue. For one, the anticipation that tax rates will not remain low incents people to realize their gains at current rates. History has examples of stampedes to take advantage of favorable rates. (Given the size of financial stocks these days, a full stampede would have produced a far larger number than $35, I suspect, however, so there is probably a combination of effects at work). Other explanations might include changing demographics and skews in wealth distribution-to-income.
MEASURING THE UNMEASURABLE
The author from Heritage wants to show that spending 2001-2006, not tax revenues, has been the bane of the GOP (as if Dems would be shy of that "correct" statistic?).
We don't know what tax revenues would have been without the two rounds of Bush tax cuts.
Instead, he looks at the pre-tax cut baseline projection for 2006 (cf. Myth 2) as the next best thing to use.
It is possible that a favorable growth experience might have accompanied *both* a no-cut and cut scenario. In which case, the fiscal balance might be better today in the no-cut scenario, and certainly would be better without the structural changes to the code that were the political price of the cyclical stimulus on which Bush sold the first round of cuts.
The author is aware of this and tucks it into the footnotes, number six and seven. He suggests that the pre-tax cut figure he uses is reasonable, and I haven't checked it.
sullylink
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Voodoo Economists, artist Mark Kostabi.
