Careful Budgetary Analysis Reveals the Iraq War and Bush's Tax Cuts

Jacob Sullum | February 25, 2009

In last night's speech, President Obama claimed "we have already identified two trillion dollars in savings over the next decade." This morning Nick Gillespie estimated "that comes to a whopping 5 percent or so of baseline projected spending." The figure is even less impressive when you consider its basis: Although Obama said the savings come from "eliminat[ing] wasteful and ineffective programs," The New York Times reports that "an administration official said those savings reflected reduced spending on the war in Iraq and higher revenues from letting the Bush administration's tax cuts for the wealthiest Americans lapse after 2010."

To my mind, counting the war in Iraq as a "wasteful and ineffective" program is fair enough (although keep in mind that Obama is ramping up the war in Afghanistan while he's ramping down the war in Iraq). But whatever you think about the wisdom of Bush's tax cuts, it takes a very statist frame of mind to view letting people keep more of their own money as a government program, let alone a wasteful and ineffective one. Furthermore, both sources of savings were elements of Obama's election campaign, not the results of a process he describes as "go[ing] line by line through the federal budget in order to eliminate wasteful and ineffective programs."

Help Reason celebrate its next 40 years. Donate Now!

Try Reason's award-winning print edition today! Your first issue is FREE if you are not completely satisfied.

|2.25.09 @ 5:22PM|#

If the Department of Education still exists after he's done, he lied about "go[ing] line by line through the federal budget in order to eliminate wasteful and ineffective programs."

It will, he did.

|2.25.09 @ 5:27PM|#

although keep in mind that Obama is ramping up the war in Afghanistan while he's ramping down the war in Iraq

OMG! Jacob said Obama is "ramping up"! I don't have my playbook handy, but that sure sounds like a racist statement to me!

Kolohe|2.25.09 @ 5:31PM|#

To be fair, this:

"Still, Mr. Obama pledged to cut the deficit in half by the end of his first term, saying his administration had "already identified two trillion dollars in savings over the next decade." In an interview, an administration official said those savings reflected reduced spending on the war in Iraq and higher revenues from letting the Bush administration's tax cuts for the wealthiest Americans lapse after 2010.

from the NYT could have been a mistake from the reporter or bad editting.

The source could have meant (like others have said on the record) that a key component of the *deficit reduction* is the ending of Iraq and Bush tax cuts, but the reporter and/or editor conflated this into the 2 trillion figure.

The budget is supposed to be released tomorrow and should provide the details of the 2 trillion; so we'll see then officially if the Obama administration is double counting tax increases as spending reductions.

|2.25.09 @ 5:41PM|#

Yes, we all know how raising taxes always increases revenue and has no negative side effects whatsoever!

|2.25.09 @ 5:47PM|#

As opposed to the conservative point of view, which is "Yes, we all know how cutting taxes always increases revenue and has no negative side effects whatsoever!"

Raising taxes increases revenue by definition. That Reaganomics has been proved (with numbers!) to be absolute hocus-pocus doesn't give anyone pause?

¢|2.25.09 @ 5:47PM|#

I don't have my playbook handy

Mine says that black guys are overrepresented among delivery drivers, orderlies, and daredevils' sidekicks, so any usage of "ramp" is suspect.

$|2.25.09 @ 5:51PM|#

Mine says that black guys are overrepresented among delivery drivers, orderlies, and daredevils' sidekicks, so any usage of "ramp" is suspect.

Slope is a different matter of course.

T|2.25.09 @ 5:58PM|#

Raising taxes increases revenue by definition.

Shit, then raise them to 100% and see what happens. I bet you won't get nearly as much money as you think you will.

Warty|2.25.09 @ 6:07PM|#

Tony is a way less fun liberal troll than joe. Hey Tony, shut your ass before I fuck-start your head.

|2.25.09 @ 6:08PM|#

Tony makes me miss joe.

With 0.6 seconds of thought I concluded that raising taxes increases revenue up to a poin and the starts decreasing them. After another 1.4 seconds I concluded that nobody knows what the perfect point for maximizing revenue is because it's a moving target in a dynamic economy.

Any questions?

The Angry Optimist|2.25.09 @ 6:11PM|#

At least Tony isn't going to pull some "That isn't what I REALLY said" shtick.

Raising taxes increases revenue by definition.

I want to introduce you to two concepts, Tony: The Laffer Curve and "Killing the Goose that Lays the Golden Eggs."

Paul|2.25.09 @ 6:18PM|#

But whatever you think about the wisdom of Bush's tax cuts, it takes a very statist frame of mind to view letting people keep more of their own money as a government program,

Remember, this is the Evil Stupid Party that's running things, now. So a tax cut is a government "outlay".

It's the government's money, we're just borrowing it.

KG|2.25.09 @ 6:45PM|#

J sub D: yeah, but that'll never get people scream at each other in the cable news channels.

Gimme Back My Dog|2.25.09 @ 6:51PM|#

you mean those last guys weren't from the evil stupid party?

|2.25.09 @ 7:06PM|#

No, they were from the stupid evil party.
You can see the difference, right?

alisa|2.25.09 @ 7:19PM|#

I thought he mentioned a few other sources of budget cuts in his speech, among them agribusiness subsidies.

|2.25.09 @ 8:31PM|#

The source could have meant (like others have said on the record) that a key component of the *deficit reduction* is the ending of Iraq and Bush tax cuts, but the reporter and/or editor conflated this into the 2 trillion figure.

To be fair, yes, it could be. OTOH, Robert Gibbs didn't exactly deny the charge in the press briefing today. However, Robert Gibbs nearly always sounds like an idiot, so that doesn't mean too much.

|2.25.09 @ 8:34PM|#

Raising taxes increases revenue by definition.

But does raising tax rates?

Look, even though Arthur Laffer himself has never claimed that cutting taxes raises revenue at the rates (especially income tax rates) we have now, I'll grant that many Republican politicians have either directly claimed that or given false impressions. At the same time, the Laffer curve is trivially true, and some taxes are worse than others. Deadweight loss due to taxation is real. For example, taxes on corporations are bad because corporations can move to avoid taxes more easily. Taxes on land are not subject to such an effect because the owners can't pick up the land and move. They can fail to improve the land, but that's about it.

mark|2.25.09 @ 8:35PM|#

What J sub D said. Also, revenues increased during Reagan's term.

That said, I think we all can agree that Bush's tax cuts (with no corresponding spending cuts) were a bad thing, and going from 36% to 39% top rate is not going to hurt the economy significantly.

z|2.25.09 @ 10:28PM|#

But whatever you think about the wisdom of Bush's tax cuts, it takes a very statist frame of mind to view letting people keep more of their own money as a government program, let alone a wasteful and ineffective one.

What frame of mind was Obama in when he declared the Bush tax cut's "a huge transfer of wealth to the wealthy"? I just can't wrap my mind around that point of view, but it's very ingrained in the progressives.

JB|2.26.09 @ 12:02AM|#

Obama is a lying cunt. President Cunt should go back to Harvard and get a refund.

|2.26.09 @ 12:11AM|#

What frame of mind was Obama in when he declared the Bush tax cut's "a huge transfer of wealth to the wealthy"? I just can't wrap my mind around that point of view, but it's very ingrained in the progressives.

The frame of mind in which everything you earn and have starts out being owned by the state, so that letting you keep some of it by not taxing it away is a transfer of wealth to you.

The "progressive" view is that we are all slaves of the state and anything we get to keep is a special reward granted for good behavior.

Ebeneezer Scrooge|2.26.09 @ 12:58AM|#

We know he's going to cut the deficit because he just asked for the money to socialize medicine. But maybe he can pay for it with the carbon tax he's also asked for.

I'm really starting to think McCain might have been better for us. He was unpredictable, but that means at least once in a while his whims landed in something like the right direction. Obama is consistently slitting our collective throats.

Which just goes to prove once again that people probably don't know what's good for them most of the time, in the collective sense.

There's only one thing I've learned about Obama that wasn't 100% clear before the election: people like him more than I thought they would.

And THAT is what makes him one really fucking scary dude.

|2.26.09 @ 8:44AM|#

The budget is supposed to be released tomorrow and should provide the details of the 2 trillion; so we'll see then officially if the Obama administration is double counting tax increases as spending reductions.

WaPo article today says..

"And though Obama told Congress on Tuesday that his budget team has "already identified $2 trillion in savings" to help tame record budget deficits, about half of those "savings" are actually tax increases, administration officials said. A big chunk of the rest of the savings comes from measuring Obama's plans against an unrealistic scenario in which the Iraq war continues to suck up $170 billion a year forever. "

So anonymous "administration officials" seem to be confirming the charge.

Gilbert Martin|2.26.09 @ 9:05AM|#

"But maybe he can pay for it with the carbon tax he's also asked for."

I'm waiting to hear how Obama is going to engineer it so that carbon taxes only increases engery costs on people making over $250 K a year and totally bypasses everyone else.

He DID say that no one making less than $250 K would see their taxes go up a dime.

|2.26.09 @ 9:21AM|#

He DID say that no one making less than $250 K would see their taxes go up a dime.

Well, it'll be a cap-and-trade system designed to raise the prices of industry so that the consumer won't directly see the taxes go up. Prices and taxes will still go up, certainly, but the average person won't be able to see it directly.

It's just a promise to hide taxes in regulation.

Gilbert Martin|2.26.09 @ 9:35AM|#

Well even if you only count diirect taxes, he's already broken that promise anyway with his tax increase on smokes.

There are lots of smokers who make less than $250 K a year.

|2.26.09 @ 11:22AM|#

If I can sift through the straw for a moment... Nobody is talking about raising taxes to 100%. That would be stupid. But going back to Clinton-era levels is not going to bankrupt anyone and is not going to place anyone in any amount of hardship.

If you believe that taxes should exist, then you can't always claim that they can never be raised.

|2.26.09 @ 11:54AM|#

If I can sift through the straw for a moment... Nobody is talking about raising taxes to 100%. That would be stupid. But going back to Clinton-era levels is not going to bankrupt anyone and is not going to place anyone in any amount of hardship.

Yeah, but going back to Clinton-era levels is also not going to do the work to close the deficit that he's promised. Certainly not with the extra spending he's proposing as well.

He's also lying in his talking points, since smokers make less than $250k, and since he's pretending that people making less than $250k will somehow not pay higher energy prices from a cap and trade system he's projecting to bring in lots of money, and which will only work to reduce pollution if energy prices are increased.

|2.26.09 @ 12:25PM|#

"One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary."
-Ayn Rand, 1975

Kolohe|2.26.09 @ 1:09PM|#

Budget's out and in fact they are double counting.

Page 115 of the doc: Table S-2. Effect of Budget Proposals on Projected deficits (fairly big pdf) fleshes out the 2 trillion.

There's 1.4 trillion reduction from cut's in from 'overseas contigency operations'. Another 311 billion from debt service reduction. But the rest (aside from nebulous 'health savings) is the net from tax increases via 'Upper income tax provisions dedicated to debt reduction' ($640B), the new carbon tax/cap&trade permit scheme ($645B), less tax cuts for 'families and buisinesses' ($940B) and $450B in other misc discretionary spending.

Gilbert Martin|2.26.09 @ 1:58PM|#

|2.26.09 @ 2:28PM|#

Does Government "know how" to run a business?
I read the article and had to post something... Do we think that Government is the answer? This is not about Democrats vs. Republicans. This is about free markets and capitalism. Tell me one government run program that makes money and works for the long term. Freddie Mac/ Fannie Mae? Please tell me. Social Security is on the brink of bankruptcy, a social welfare program instituted back during the depression. If you read the original goals and objectives of the program, it was a short-term plan and yet today we are still trying to figure how to run it, fix it or try something else. We must be taking too many of the designer drugs to be thinking straight. Government fix is a quick/knee jerk response to the masses that get most of their information from reality TV.
Make the rich pay for it… that seems like a good answer… It is only the top 5% of the population. Think about you make over $150,000 dollars and the government has just spent 1.7 trillion dollars. That family or person will not get one benefit of that money. Think about this you will get an average of $13 dollars back from the reduce payroll tax bill. The states just voted on increasing fuel tax by another .20 to .30 cents because they are broke. The net effect is not an increase but a decrease in your take home pay. WOW… that makes a lot of sense because they got it all and we have nothing. Americans love to have a villain or something to aim their anger /frustration towards. The real answer lies in all of us. Get a job live within your means, teach values and have a strong belief system. That is a very simple statement but it requires people to have confidence in themselves. I am tired of hearing people looking for handouts. This is just another handout that eventually will be consider entitlement.
Wake up and spend the time to talk to the people. Stop talking at them. There are three sides to the story. The one we read/hear or talk about in the public. The second is the other person's opinion or thought and the third is the truth. It is our responsibility to take action and ownership for our mistakes. Do not sit down or stand on a pulpit and talk about it. All you are doing is stirring the pot. In business, it is the responsibility of the workers and management to come up with solutions to the problems. It is not their right just to complain. BTW… Government is not a business it is here to protect the people and provide a stable environment. Re read Adam Smiths book. Get back to the basics or we will have another Boston Tea party just in a different form. Trust me people are being pushed to the max with listening to how GOVERNEMNT is here to save us….
This proposal for the rich to be "patriotic" and pay for the other 95% of the people is not the answer. BTW… in most of the companies I call on today they are slashing pay between 3-10%, dropping contributions to 401K plans and reducing payments to medical plans. Businesses know what to do to survive. Does the Government?

Reason Magazine

Get Reason E-mail Updates!

Site comments/questions:

Media Inquiries and Reprint Permissions:

Editorial & Production Offices:

advertisements