Government Spending

Why is everyone picking on the Bush "tax cuts" rather than the Bush "spending increases"?

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As the discussion heats up over whether to extend some or all of the so-called Bush tax cuts, a liberal and post-conservative consensus is forming that the reductions in various revenue streams engineered by George W. Bush not only proved ruionous during Chimpy McHitler's two terms in office but would like totally destructerate the federal balance sheet going forward into what is rapidly shaping up as Anything But The American Century.

Our story thus far: The tax cuts passed in the past decade are set to disappear at the end of this year. The Congressional Budget Office estimates that if rates and loopholes revert to where they were before the cuts darkened this sweet land of liberty, the feds would rake in about $3.9 trillion more over the next decade. If, as President Barack Obama has said, Congress simply kneecapped the rates affecting individuals making over $200,000 a year and households pulling in more than $250,000, the feds would be better off by about $700 billion over the next 10 years. Incidentally, the entire federal budget for FY2010 is about $3.55 trillion, but will likely end up being higher (they usually do).

The opposition to extending any or some of the Bush taxes is now pushing the idea that, damn the shitty economy, we need more revenue to pay for government operations, which have been underfed lo these many years by Bushitler starving the feds' coffers like some sort of principled, small-government conservative. As opposed to the Big Government Disaster he really was.

Hence comments such as:

Alan Greenspan, who wants all of the cuts to expire, even the ones targeted at defenseless kittens: "I'm coming out in favor, in the first time in my memory, of raising taxes."

Bruce Bartlett, who smartly points out that Bush pushed Keynesian logic to get the cuts passed in the first place: "[The cuts'] main effect was simply to reduce the government's revenue, thereby increasing the budget deficit.

Daniel Gross, who offers up five things to keep in mind: "President Obama's proposal to extend the tax cuts for those making less than $250,000 per year will add $3.2 trillion to the debt. But as the Congressional Budget Office noted, extending them all will add $3.9 trillion in debt.

Ezra Klein, who implies that the GOP remains in control of a White House that has proposed extending $3.2 trillion in the Bush tax cuts and pushed trillions of dollars in new spending over the past 18 months: "There is no policy that President Obama has passed or proposed that added as much to the deficit as the Republican Party's $3.9 trillion extension of the Bush tax cuts."

OK, we get it: By cutting federal revenues via tax cuts and incontrovertibly stupid rebates (they really were), Bush created the deficits that now have to be countered with…even higher deficits. Right?

Well, not exactly. Here's the actual federal revenues gathered under Bush (whose budgets cover fiscal years 2002 through 2009, which actually includes some spending signed by Obama due to the inability of the government to hit its own budget deadlines). Prior to 2008, when the current recession had gone big, you'll notice exactly one year-over-year decline in revenue. And if you look closely, you'll notice some pretty fricking big increases there, too. How many of you saw year over year gains like this in the "Worst. Decade. Ever."? If you come out of a revenue chart like this in the red, you deserve to be president of Greece.

Year GDP-US
$ billion
Total Revenue-fed
$ billion
2002 10642.3 1853.40 a
2003 11142.1 1782.53 a
2004 11867.8 1880.28 a
2005 12638.4 2153.86 a
2006 13398.9 2407.25 a
2007 14077.6 2568.00 a
2008 14441.4 2524.00 a
2009 14258.2 2105.00 a

So if the feds were generally pulling in more bucks each year - even with those tax cuts that so decimated federal revenue - where did the deficits come from?

Oh, that's right: From massively expanded spending that happened both under a lying GOP Congress and a feckless Democratic majority. The story of the Bush years isn't to be found on the revenue side of the ledger, but on the spending side:

Year GDP-US
$ billion
Total Spending -fed
$ billion
2002 10642.3 2011.15 a
2003 11142.1 2160.12 a
2004 11867.8 2293.01 a
2005 12638.4 2472.20 a
2006 13398.9 2655.44 a
2007 14077.6 2728.94 a
2008 14441.4 2931.22 b
2009 14258.2 3107.36 b

Note: The [a] in the right-hand column refers to actual figures; the [b] in the right-hand column refers to estimates in the FY2009 budget, which will eventually be higher once all the dust is settled. Go here for more fun.

Granted, I've been an English major all my life and I'm not much for book-larnin' and those fancy words and plus and minus signs, but when I look upon these two charts, something hits me in the mush with all the force of a friendly Dick Cheney shotgun blast: "It's the spending, stupid."

This talk about whether tax cuts are irresponsible given the fiscal pickle we're in is nothing more than a way of diverting attention from what Milton Friedman identified years ago as the true cost of government: how much the government shells out in a given year. We're on the hook for it, either through higher taxes now or higher taxes later.

We're in a lousy economy and most folks would agree that it's not a great idea to hike taxes or create huge new entitlements and regulations that will take years to figure out. That sort of action creates exactly the sort of uncertainty that freezes people. So do desperate attempts to keep house prices from falling, zombified banks and car companies from going belly up, etc.

The one thing the federal government could conceivably do is bring some commitment to freezing or rolling back spending and intervention to some baseline. The first rule when you find yourself in a deep hole? Bitch and moan that it's the other guy's fault. The second rule? Stop digging.

Yes, I know, it's unlikely but not impossible that the feds would actually stop spending (go check Clinton's first four years).

But this much is certain: To talk about how "tax cuts" inexorably add to deficits ignores the amount of tribute that poured into D.C. throughout most of the '00s. It's a fundamentally faulty and fruitless discussion.