Friday, December 09, 2005

Yes, Voodoo Economics! (Or, Fisking Hurtleg)

Wow! Lower taxes lead to higher growth? Well, the numbers don't lie...

Hoping desperately to prove that tax cuts actually increase federal revenue (a notion for which Greg Mankiw, chairman of the President’s Council of Economic Advisers during Bush’s first term, wrote that there is “no credible evidence,” and that a person who claims there is is a “snake oil salesman who is trying to sell a miracle cure.”), conservatives are fond of presenting economic data in nominal dollars, and without any context.

All you have to do is go to the CBO's website and dig around a little, and you'll see that nearly every presidential term shows several of those same "highest revenue ever!" figures, and that they're meaningless unless you look at them in terms of the GDP, as the Ragincajun pointed out. The height of receipts under Clinton were about 21% relative to GDP, while Bush's are still a few points lower than that. If you don't look at it in constant dollars relative to the GDP, you're basically claiming that the three bedroom house my grandparents bought in 1928 is 60 times less valuable than the condo my wife and I live in now because they paid 60 times less for it in nominal dollars.

While you're looking at those numbers, you may also want to try to plot a postive, durable relationship between cuts in marginal tax rates and increased federal revenues. I'd love to see what you find.

Republicans were right that Clinton wasn't particularly responsible for the 90s boom. What makes you think Bush is any more responsible for the major currents of the economy now?


Blogger Jeff said...

Another interesting tidbit, from the Federal Reserve's July Monetary Policy Report:

"In addition, individual income and payroll taxes rose nearly 12 percent, twice as fast as the growth of household income. However, some of this rise was due to the features of the Jobs and Growth Tax Relief Reconciliation Act of 2003 that altered the timing of tax payments in a way that temporarily reduced the level of tax collections last year."

Not sure exactly which effect they're talking about, but, provided Hurtleg and I are talking about the same period , it appears that at least some of the increase in receipts is due to a timing difference in collections. The miracles of supply side economics never cease to delight.

5:35 PM  

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