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Were the Bush Tax Cuts Good for Growth?

FilmFestGuy

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Liz Peek at FoxNews.com congratulates me for writing about the importance of economic growth. So in the spirit of maximizing growth, I want to pose a question: Why should we believe that extending the Bush tax cuts will provide a big lift to growth?

Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.


full article

This actually gets to a point I've been trying to make for a while...

If the Bush tax cuts were "good", then why were the 2000s (even if you cut the decade off before the Great Recession) the slowest decade for growth in the post-WW2 era?
 

RightinNYC

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If the Bush tax cuts were "good", then why were the 2000s (even if you cut the decade off before the Great Recession) the slowest decade for growth in the post-WW2 era?

Because 11th Grade stats class taught me that correlation does not equal causation.
 

haymarket

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So did these cuts do as promised by the conservatives who pushed them?
 

FilmFestGuy

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Because 11th Grade stats class taught me that correlation does not equal causation.

That's a dumb answer.

Why didn't they cause growth when we were promised they would.

People are criticizing Obama because the economy only grew 2% last quarter.

You realize that under Bush the average annual growth was 2.39%, right?

The 2000s sucked economically. The worst period ever.

If the Bush tax cuts were "good for growth", then why didn't we grow? That's what I want an answer to. Defend them. What good did they do, especially in light of two wars which went unpaid for.

What good did they do for the economy?
 

justabubba

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That's a dumb answer.

Why didn't they cause growth when we were promised they would.

People are criticizing Obama because the economy only grew 2% last quarter.

You realize that under Bush the average annual growth was 2.39%, right?

The 2000s sucked economically. The worst period ever.

If the Bush tax cuts were "good for growth", then why didn't we grow? That's what I want an answer to. Defend them. What good did they do, especially in light of two wars which went unpaid for.

What good did they do for the economy?

actually the top 2% did quite well during the dicknbush era
 

RightinNYC

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That's a dumb answer.

Why didn't they cause growth when we were promised they would.

People are criticizing Obama because the economy only grew 2% last quarter.

You realize that under Bush the average annual growth was 2.39%, right?

The 2000s sucked economically. The worst period ever.

If the Bush tax cuts were "good for growth", then why didn't we grow? That's what I want an answer to. Defend them. What good did they do, especially in light of two wars which went unpaid for.

What good did they do for the economy?

"That's a dumb answer. Now here, let me really drive home the point that I don't understand the difference between correlation and causation, or why that is relevant to this issue."

Good luck with that, bro.
 

FilmFestGuy

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"That's a dumb answer. Now here, let me really drive home the point that I don't understand the difference between correlation and causation, or why that is relevant to this issue."

Good luck with that, bro.

Good God, man.

Bush and Republicans said: These tax cuts will promote growth. They did not.

I never argued that the necessarily stifled growht. Your "causation / correlation" immaturity would work if that's what I was arguing, but that NOT what I'm arguing.

Bush said "growth". We did not get "growth". Why?
 

haymarket

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RightinNYC

It appears that you are mouthing a platitude that may or may not apply to the topic. I would hope you have a great deal more than just some cliched phrase to offer in refutation to the premise. Statistical evidence would be a nice beginning.
 

RightinNYC

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Good God, man.

Bush and Republicans said: These tax cuts will promote growth. They did not.

I never argued that the necessarily stifled growht. Your "causation / correlation" immaturity would work if that's what I was arguing, but that NOT what I'm arguing.

Bush said "growth". We did not get "growth". Why?

I can't believe I'm doing this, but here.

Imagine that the economy always grows at 3% per year, absent changes in tax law. If Bush promised that his tax cuts would increase growth and the economy continued to grow at 3%, you'd have a point.

Now imagine that the economy tends to fluctuate, though it averaged 3%. Imagine that without a change in tax law, the economy would have only grown at 1% over a particular period. Now imagine that because of tax cuts, the growth rate increased to 2%.

Using your logic, those tax cuts did not create growth because the economy only grew at 2%, which is less than 3%.

Using actual logic, those tax cuts did create growth because the economy grew at 2%, which is more than the 1% it would have otherwise grown at.

Now, it's entirely possible that these tax cuts did not actually have an effect on economic growth. However, you'd need a lot more than simplistic arguments about correlation in order to show that. Given the posts we've seen so far in this thread, I doubt we're going to make it to that level of discourse.
 

Lord Tammerlain

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I can't believe I'm doing this, but here.

Imagine that the economy always grows at 3% per year, absent changes in tax law. If Bush promised that his tax cuts would increase growth and the economy continued to grow at 3%, you'd have a point.

Now imagine that the economy tends to fluctuate, though it averaged 3%. Imagine that without a change in tax law, the economy would have only grown at 1% over a particular period. Now imagine that because of tax cuts, the growth rate increased to 2%.

Using your logic, those tax cuts did not create growth because the economy only grew at 2%, which is less than 3%.

Using actual logic, those tax cuts did create growth because the economy grew at 2%, which is more than the 1% it would have otherwise grown at.

Now, it's entirely possible that these tax cuts did not actually have an effect on economic growth. However, you'd need a lot more than simplistic arguments about correlation in order to show that. Given the posts we've seen so far in this thread, I doubt we're going to make it to that level of discourse.

A tax cut may cause the economy to grow at a faster rate then it would have otherwise, or it may have no effect at all. Plenty of factors are needed to be looked at, including were the tax cuts accompanied by spending cuts, or did the government have to run a stimulative deficit. How was the money from the tax cut spent, on foreign made goods and services, or on domestically produced items.

Simplistic statement saying tax cuts are good for the economy are no better then simplistic comments saying tax cuts did nothing for the economy. The answer is far more complex and involves a large number of areas that would have to be looked at in order to determine if any particular tax cut was benificial, neutral or harmfull to the economy
 

Lord Tammerlain

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I can't believe I'm doing this, but here.

Imagine that the economy always grows at 3% per year, absent changes in tax law. If Bush promised that his tax cuts would increase growth and the economy continued to grow at 3%, you'd have a point.

Now imagine that the economy tends to fluctuate, though it averaged 3%. Imagine that without a change in tax law, the economy would have only grown at 1% over a particular period. Now imagine that because of tax cuts, the growth rate increased to 2%.

Using your logic, those tax cuts did not create growth because the economy only grew at 2%, which is less than 3%.

Using actual logic, those tax cuts did create growth because the economy grew at 2%, which is more than the 1% it would have otherwise grown at.

Now, it's entirely possible that these tax cuts did not actually have an effect on economic growth. However, you'd need a lot more than simplistic arguments about correlation in order to show that. Given the posts we've seen so far in this thread, I doubt we're going to make it to that level of discourse.

Just to note


Your example in bold can be used when discussing the stimulus package by the federal government in 2009
 

RightinNYC

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A tax cut may cause the economy to grow at a faster rate then it would have otherwise, or it may have no effect at all. Plenty of factors are needed to be looked at, including were the tax cuts accompanied by spending cuts, or did the government have to run a stimulative deficit. How was the money from the tax cut spent, on foreign made goods and services, or on domestically produced items.

100% agreed.

Simplistic statement saying tax cuts are good for the economy are no better then simplistic comments saying tax cuts did nothing for the economy. The answer is far more complex and involves a large number of areas that would have to be looked at in order to determine if any particular tax cut was benificial, neutral or harmfull to the economy

Which is why I didn't make a claim either way.

Just to note


Your example in bold can be used when discussing the stimulus package by the federal government in 2009

Also completely true.

I've frequently defended Obama against the criticism that he's a bad president because the economy is bad. The economy was going to be bad whether the president was Obama, McCain, or Alvin Greene. The way someone should be evaluated is not on how things turned out while they were there, but whether they made them better or worse than they otherwise would have been. As you noted, that's much harder to do than to just say "Oh, well X jobs were lost during his term so he must be a bad president!," which is why so many people prefer that to the hard thinking.
 
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haymarket

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It would be nice if we could go back and look at the promises made by those advocating such tax cuts and then measure them to what they actually produced. This would be an especially prudent thing to do before we walk down that same path again.

this is from Wikipedia
There was and is considerable controversy over who benefited from the tax cuts and whether or not they have been effective in spurring sufficient growth. Supporters of the proposal and proponents of lower taxes claimed that the tax cuts increased the pace of economic recovery and job creation. Further, proponents of the JGTRRA asserted that lowering taxes on all citizens, including the rich, would benefit all and would actually pry more money from the wealthiest Americans as they would avoid tax shelters for their money. The Wall Street Journal editorial page states that taxes paid by millionaire households more than doubled from $136 billion in 2003 to $274 billion in 2006 because of the JGTRRA.[5]
Critics state that the tax cuts have failed to spur growth, while increasing the budget deficit, shifting the tax burden from the rich to the middle and working classes and further increasing already high levels of inequality.[6][7][8][9][10] Economists Peter Orszag and William Gale described the Bush tax cuts as reverse government redistribution of wealth, "[shifting] the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes."[11] Supporters countered that the tax brackets were still more progressive than the brackets from 1986 until 1992, with higher marginal rates on the upper class, and lower marginal rates on the middle class than established by either the Tax Reform Act of 1986 or the Omnibus Budget Reconciliation Act of 1990, so any apocalyptic rhetoric was exaggerated.
The Congressional Budget Office estimated that the tax cuts would increase budget deficits by $60 billion in 2003 and by $340 billion by 2008. Supporters of President Bush argue that this analysis ignores the potential growth that the act could encourage. Supporters also argue that this would be further supported by analyzing the effect of the economic shock of the terrorist events of September 11, 2001. The terrorist fears, resulting reduction in travel and consumer expenditure, and increased security expenditures, they say, are a prime example of an economic cost shock, and they suggest that the recession of 2001 and 2002 would have been drastically worse had no attempts at promoting economic growth by reducing taxes been made, though there is no empirical evidence to support or disprove this claim (nor could there be). The lag between policy making and economic impact suggests the possibility to be remote, like any fiscal stimulus plan, most of which are fully enacted only when the recession is over.
This is from the Wikipedia article on the subject

Sadly the article does not have any quotes from politicians who promised certain results in return for this legislation. If anyone can produce them, that would be most interesting and helpful. We should use the promises made in both 2001 and 2003 as a rubric to test this theory.
 
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RightinNYC

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It would be nice if we could go back and look at the promises made by those advocating such tax cuts and then measure them to what they actually produced. This would be an especially prudent thing to do before we walk down that same path again.

If you wanted to measure them by their actual effect, adjusting for all the factors mentioned above, that would be smart.
If you wanted to measure them by just looking at the overall economy and comparing that to past growth, that would be dumb.
 
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FilmFestGuy

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100% agreed.



Which is why I didn't make a claim either way.



Also completely true.

I've frequently defended Obama against the criticism that he's a bad president because the economy is bad. The economy was going to be bad whether the president was Obama, McCain, or Alvin Greene. The way someone should be evaluated is not on how things turned out while they were there, but whether they made them better or worse than they otherwise would have been. As you noted, that's much harder to do than to just say "Oh, well X jobs were lost during his term so he must be a bad president!," which is why so many people prefer that to the hard thinking.

Here we go! This is actually where I was hoping the discussion would lead.

Because I was hoping eventually that we would get to the point that to defend the tax cuts as being "good", you'd have to essentially prove a negative - or "it could have been worse".

This is, of course, the trap that Obama landed in with the stimulus.

But to a deeper question: why do so many believe that a tax cut is automatically good for the economy? I know that it means people take a little more money home and there's obviously nothing wrong with that - BUT historically the correlations with "growth" don't match up very well. Indeed, they seem to have little to no impact or reltionship to being "good for the economy".
 

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Senator Bernie Sanders of Vermont was on the Thom Hartmann radio show on Friday and he spoke about this. He advocated going back to both 2001 and 2003 and reviewing the testimony before both houses of Congress, the speeches made by members of both bodies and the public discussion at the time. He suggested we should make a list of what we were told these tax cuts would do for the economy and then compare them to what they did or did not deliver. He also said if there were reasons why they did not achieve the results promised that these whould be studied in detail.

The point was that Senator Sanders wants a national discussion based on facts and results NOT a vote without a national discussion based on ideology. And to that I agree 100%.

So is that NOT happening? Why is this just more of "I believe in this" or "I do not believe in this". Belief may be fine for religion or the tooth fairy but I hope we can do better when it comes to hundreds of billions of dollars.
 

RightinNYC

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Here we go! This is actually where I was hoping the discussion would lead.

Because I was hoping eventually that we would get to the point that to defend the tax cuts as being "good", you'd have to essentially prove a negative - or "it could have been worse".

You made a stupid argument in the hopes that someone would point out it was a stupid argument?

mission-accomplished.png


This is, of course, the trap that Obama landed in with the stimulus.

Yeah, like was already pointed out.

But to a deeper question: why do so many believe that a tax cut is automatically good for the economy?.

And that's an entirely different question than the one posed in the OP. Somehow I doubt this is what you were really getting at.

So is that NOT happening? Why is this just more of "I believe in this" or "I do not believe in this". Belief may be fine for religion or the tooth fairy but I hope we can do better when it comes to hundreds of billions of dollars.

You realize that it was you and FilmFestGuy who were arguing the simplistic position, right?
 

Kandahar

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Tax cuts will always boost short-term growth. The question is whether they boost growth ENOUGH to justify the negative effect on the federal balance sheet. And in the case of the Bush tax cuts, I strongly believe that they do not.

IMO government spending is usually a better way to stimulate demand than tax cuts...at least over the range of plausible tax rates in the United States. Once you get up to ridiculously high tax rates, it's probably true that tax cuts would be better. But we are nowhere close to that range in this country.

And to the extent that tax cuts stimulate the economy, I think it's far more stimulative to give it to the lower- and middle-class than the wealthy. The lower- and middle-class are much more likely to spend it, since they spend a higher percentage of their income.
 

FilmFestGuy

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You made a stupid argument in the hopes that someone would point out it was a stupid argument?

mission-accomplished.png




Yeah, like was already pointed out.



And that's an entirely different question than the one posed in the OP. Somehow I doubt this is what you were really getting at.



You realize that it was you and FilmFestGuy who were arguing the simplistic position, right?

No...it isn't. I'm arguing that tax cuts have no relationship to economic growth. The question in the OP comes directly from the article that I cited.

So, if the tax cuts were for "growth", why were the 2000s terrible for economic growth compared to previous decades (hell, even the 1970s had more growth - a lot of other major problems, but there was more growth).

I want to get to why. What caused such slow growth in the 2000s IF you buy the argument that tax cuts are "good for the economy" (which I do not...). It seems clear that you don't believe that tax cuts are related to growth (and I agree with you), but for those who do believe it, I want to know why they think the growth failed to occur.
 

RightinNYC

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No...it isn't. I'm arguing that tax cuts have no relationship to economic growth. The question in the OP comes directly from the article that I cited.

So, if the tax cuts were for "growth", why were the 2000s terrible for economic growth compared to previous decades (hell, even the 1970s had more growth - a lot of other major problems, but there was more growth).

I want to get to why. What caused such slow growth in the 2000s IF you buy the argument that tax cuts are "good for the economy" (which I do not...).

I thought we'd moved past this, but it appears that you still don't understand the point. Reread my post above.

It seems clear that you don't believe that tax cuts are related to growth

Where did I say this?
 

Grant

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Liz Peek at FoxNews.com congratulates me for writing about the importance of economic growth. So in the spirit of maximizing growth, I want to pose a question: Why should we believe that extending the Bush tax cuts will provide a big lift to growth?

It really doesn't matter what the tax rate is if the government is going to ignore a budget and borrow money overseas.

The government has plenty of money. The question should be made as to why they need more and to what purpose.

Taxes could go up 20% but this is no guarantee that spending wouldn't go up 30%.

It's how taxes are spent, or not spent, that really matters. It seems clear that the more the taxpayer gives the more the government spends. Until politicians develop some discipline, why give them more?
 

haymarket

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You realize that it was you and FilmFestGuy who were arguing the simplistic position, right?

I do not know what he is arguing for but what I am arguing for is to go back and look at all the promises made in 2001 and 2003 regarding the change in tax rates and see how they stack up after the decade.

You want to call that simplistic? Be my guest. You want to call it chopped liver or crap or fertilizer for the garden? Go for it. What I want is what Senator Bernie Sanders wants. To some extent I compare this to a woman who has been married before and parts of it did not work out and now is considering getting married again to somebody who also was divorced. Before we walk down this aisle again and accept your promises to love, honor and obey and treat me well, I want to look at the last marriage and see if you kept your promises to he first wife.

Why can't we have a detailed and fact based national discussion on this? Why is this coming down to a belief system dictating how people are voting?
 

Donc

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Yet President Clinton looked at the problem of a creeping recession and came up with a different solution.Amazing isn't it? :2wave:

< President Clinton in 1993 proposed to raise the highest marginal tax rate immediately from 31% to 39.6%. In a Wall Street Journal article, Martin Feldstein, the former chief economic advisor to President Reagan and then as well as now a professor of economics at Harvard, opined that "Mr. Clinton's proposal to raise the marginal tax rates of high-income individuals would hurt incentives, weaken the economy and waste investment dollars.">

< And what were the consequences? In the seven years that followed, the unemployment rate decreased steadily, every single year, until it reached 4% in 2000. >

It's time to tax the rich - Los Angeles Times
 

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For me, the question is alittle different.

We've been told that tax cuts spur economic growth. FFG has pointed to an article that essentially states that during the Bush-43 presidency economic growth increased (on avg.) 2.3% - a rather modest increase given the amount of money that went back into the pockets of million+ wage earners, money that we've been told these wage earners would use to reinvest in their businesses to greatly improve the economy. And yet, we ended up with a deep recession.

My question has always been if tax cuts primarily to the wealthiest wage earners were to spur economic growth, why then didn't unemployment ever fall below 4% since 2001? I read a report a few weeks ago that illustrated that between 2001-2008 unemployment fluxuated between 4-6.5%. Granted, that's alittle above what I think most economist say we should shot for (3-5%), but still, why didn't unemployment remain low if tax cuts were suppose to spur economic growth?
 

TurtleDude

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Liz Peek at FoxNews.com congratulates me for writing about the importance of economic growth. So in the spirit of maximizing growth, I want to pose a question: Why should we believe that extending the Bush tax cuts will provide a big lift to growth?

It really doesn't matter what the tax rate is if the government is going to ignore a budget and borrow money overseas.

The government has plenty of money. The question should be made as to why they need more and to what purpose.

Taxes could go up 20% but this is no guarantee that spending wouldn't go up 30%.

It's how taxes are spent, or not spent, that really matters. It seems clear that the more the taxpayer gives the more the government spends. Until politicians develop some discipline, why give them more?


democrats gain power by spending our money on their voters. If the dems were to cut social spending they would lose their power to buy the votes of those who get more from government spending than they pay in taxes. SInce the dems won't cut their own throats, we have to cut taxes.
 
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