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Some Handy Truths About The Bush Tax Cuts

From the opinion section of Forbes Magazine:

Why America Is Going To Miss The Bush Tax Cuts

By Peter Ferrara | December 6, 2012

President Obama seems to have a strategy to terminate all of the Bush tax cuts, not just those for “the rich,” as he has been saying since 2008. He is offering the Republicans exactly zero concessions in the “fiscal cliff” negotiations. No spending cuts, no entitlement reform, no compromise on the rates. It is entirely my way or the highway, and if the Republicans refuse to do everything exactly as he demands, he will let the Bush tax cuts expire entirely, for the middle class and working people as well as the upper incomes, and blame the Republicans for refusing to go along with him, and for the economic results.

Lest we forget, Obama wanted to let all of the Bush tax cuts expire in 2010, even after the Republicans’ midterm landslide. But he was forced out of that position. But he vowed to return to it.

It is a cynical game worthy of an undeveloped, third world country, not the United States of America. But this is just one more reason, with many more to come, for the American people to regret the mistake they made on Election Day.

Because so many major media institutions, like the New York Times and the Washington Post, have been so duplicitous and dishonest in discussing the Bush tax cuts, most Americans don’t know much about them, even though they have been living with them for 10 years or more now. Indeed, most of what they think they know is not true. But the American people will understand them better, when they see what life is like without them.

President Bush and his Congressional Republican majorities at the time cut taxes for everyone in the 2001 and 2003 tax cuts. Indeed, they cut more for lower and middle income taxpayers than they did for “the rich,” as Obama calls the nation’s job creators, investors, and successful small businesses. The top tax rate was cut by only 13%, while the lowest rate was cut by one-third, 33%.

According to official IRS data, the top 1% of income earners paid $84 billion more in federal income taxes in 2007 than in 2000 before the Bush tax cuts were passed, 23% more. The share of total federal income taxes paid by the top 1% rose from 37% in 2000, before the Bush tax cuts, to 40% in 2007, after the tax cuts.

In contrast, the bottom half of income earners paid $6 billion less in federal income taxes in 2007 than in 2000, a decline of 16%. The share of federal income taxes paid by the bottom 50% declined from 3.9% in 2000 to 2.9% in 2007.

The Bush tax cuts also included a doubling of the child tax credit from $500 per child to $1,000 per child. Because of that, and the 33% cut in the bottom tax rate, nearly 8 million more people dropped off the federal income tax rolls entirely, paying zero federal income taxes. Indeed, under the Bush tax cuts, the bottom 40% of all income earners not only paid no federal income taxes, as a group on net. By 2009, they were being paid cash by the IRS equal to 10% of all federal income taxes.

This was actually terrible mistake. It is another income transfer payment. But there it is. And we never hear about it.

These Bush tax cuts did not explode the deficit, as Obama and his echo chamber have alleged. By 2007, the deficit was down to $160 billion, less than 15% of Obama’s deficits today. Total federal revenues soared from $793.7 billion in 2003, when the last of the Bush tax cuts were enacted, to $1.16 trillion in 2007, a 47% increase. Capital gains revenues had doubled by 2005, despite the 25% capital gains rate cut adopted in 2003. Federal revenues rose to 18.5% of GDP by 2007, above the long term, postwar, historical average over the prior 60 years. CBO was projecting surpluses to return indefinitely in 2012 through the end of its projection period in 2018.

Bush did increase federal spending as a percent of GDP by one-seventh, erasing the federal spending cuts enacted by the Republican Congressional majorities in the 1990s. But even with that, deficits during the Bush years averaged just 2% of GDP, one-third less than the average over the prior 50 years. President Obama’s deficits have averaged 5 times as much, at 9.1% of GDP.

The proof is in the pudding over the Bush tax cuts. They were followed by a record 52 straight months of job creation, producing 8 million new jobs, with the unemployment rate falling to 4.4%. Business investment spending, which had declined for 9 straight quarters, reversed and increased 6.7% per quarter, producing all those new jobs.

Because of that increased investment, labor productivity soared by 2.5% annually from 2003 to 2007, higher than the averages of the 1970s, 1980s, and 1990s. As a result, real after tax income per capita increased by more than 11%.

Manufacturing output soared to its highest level in 20 years. The stock market revived, creating almost $7 trillion in new shareholder wealth. From 2003 to 2007, the S&P 500 almost doubled. After the Bush tax cuts started in 2001, quickly ending the 2001 recession, the economy continued to grow for another 73 months. From 2000 to 2007, real GDP grew by more than 17%, meaning an additional $2.1 trillion for the American people.

This was mostly the opposite of what President Obama has produced, with his neo-Marxist Obamanomics, particularly unemployment more than twice as high, declining middle class incomes, soaring poverty, weak job growth, stagnant stock market values, collapsing business investment, and negligible growth in GDP.

Of course, the Bush tax cut boom was ended by the 2008 financial crisis. But as discussed in many previous columns, that was caused by the excessive overregulation of President Clinton’s home ownership promotion policies, creating the subprime mortgage market and the housing bubble, and by President Bush’s cheap dollar monetary policies. Obama’s foolish argument that the Bush tax cuts caused the 2008-2009 recession is so dishonest that abusive propaganda alone should disqualify him from office.

Obama’s gleeful termination of the Bush tax cuts will produce just the opposite results of those tax cuts. The combination of all the tax rate increases, along with Obama’s abusive overregulation, and the Fed’s continued mischief, will throw the economy back into recession next year. Unemployment will soar back into double digits, breaking the post depression record of 10.8%. The deficit will soar to over $2 trillion, setting new all time world records. The national debt as a percent of GDP will gallop past Greece.

Middle class incomes will plummet further. Poverty will soar to new all time records.

We can’t afford the Bush tax cuts, as Obama says? We can’t afford to terminate them. Over the past 45 years, every time the capital gains tax rate has been increased, capital gains revenues have declined rather than increased. Obama’s nearly 60% increase in that rate will have the same effect. After the Bush cut in taxes on dividends, dividends paid soared, and so did taxes paid on those dividends. Obama’s near tripling of that tax will have the opposite effect as well. Indeed, if the economy declines back into renewed recession, total federal revenues will decline rather than increase.

Obama’s ploy of blaming all of this on the Republicans will not work this time. The public knows the Bush tax cuts were adopted into law by the Republicans, with complete Republican control of Congress and the White House at the time. It will be too obvious that it took President Obama and his new neo-Marxist Democrat Party to let them expire.

Enjoy the new Obama recession. You and your neighbors voted for it.

This op-ed rebuts a lot of the current lies being spewed about the Bush tax cuts.

At the very lest it’s handy to keep around as a reference. Especially, if you are visiting low information liberal relatives over the holidays.

This article was posted by Steve Gilbert on Friday, December 14th, 2012. Comments are currently closed.

2 Responses to “Some Handy Truths About The Bush Tax Cuts”

  1. Anonymoose

    The Bush tax cuts did more good than harm; yet the liberals have been screaming since almost day one that it was the ultimate send-off fiscal catastrophe, and too many of the populace have bought into that idea. Yes, if the tax cuts hadn’t been implemented in theory there would have been more money, assuming everyone was making enough to pay. Yet it looked like revenue went up anyways, and all these “facts” of the liberals are debatable. Compared to today 4.4% unemployment and $2 gasoline seems really good.

    The big mistake was letting people drop off the tax rolls by cutting their taxes essentially to a negative number–more welfare idiots who have kids as tax breaks. Instead there should be either a minimum tax everyone has to pay, or simply once the deductions reaches zero it stops. Seriously, why give people money back on taxes when they don’t contribute?

    If you look at the presidential popularity ratings for Bush it shows something not shown for any other president; a gradual decline from 67% or so to the low 20% range. Considering the non-stop media barrage against him, and that we were involved in two foreign wars, and the Patriot Act the liberals screamed so much about, it’s no wonder.

    If there ever is an honest historical assessment of Bush I think he will be seen as a president who made a lot of difficult decisions that ultimately were for the right reasons, even if it cost him politically. If the war in Iraq was really about oil we would have just marched in, toppled the government, and taken over the oil production. Forget everything else. Instead it was about world stability, removing a dictator sitting on top of the 2nd largest proven oil reserves and who’d already shown he had no problem invading neighboring countries or using his money from oil to finance terrorism.

    Similarly the financial crisis was due to the subprime mortgage fiasco, which began under Clinton and was sponsored by the Democrats. Seriously, how hard is it to understand? Sell a McMansion to someone near minimum wage; I heard one bank’s “collateral” was simply taking a picture of the happy new owner next to their house, and offer them a loan with good payments for a few years so they’ll sign away. The payments will balloon in a few years, and how will someone not even making $25,000 a year afford it? And to then assume that million dollar plus loan will be repaid in full with interest and to resell it as a sort of good as cash bond used to finance all sort of other risky endeavors–I can barely balance my checkbook but I “get” it.

    And the Democrats–financially they aren’t making any decisions, only tugging at emotional heart strings. Bush = Bad, Obama = Good, no solution to the money crisis but we’re making sure gay people can marry and you can smoke pot. I’d say they’re due for a good smacking in the history books but hey, they pay the people writing those also.

  2. Rusty Shackleford

    A very clear and honest assessment. But don’t try to convince your average fruit-loop lefty of this. For them it’s all about the emotions and how racist everybody is and how much conservatives hate the poor, the blacks, the gays, etc.

    They’ve never been able to figure out that a conservative, while working hard to protect themselves, build up their own lives and live a clean, decent one themselves aren’t hurting anyone. But, the line-of-”thinking” that has been perpetuated by the power-hungry socialist politicians with more than enough help from the media has been to indemnify conservatives for 230 years of “selfishness” that has cost everyone else.

    Yet you cannot explain to the average moron that 1) “Hey, dude. YOU are the one who elected to do drugs in high-school and drop out. Therefore YOU are the one responsible for your own demise.”

    Or, 2) “Hey, YOU are the one who decided she just couldn’t keep her legs together and thus resulting in the all-too-predictable situation that occurs in such actions. It’s not MY fault you had a kid, so why should I and other people who were nowhere near you when you were all horny, have to pay for it?”

    3) “Hey, I wasn’t there when you chose to hang with losers whose only friends are guns and drugs and who get arrested and sent to jail on a regular basis. That’s a choice YOU made. I didn’t make that choice for you. YOU decided that’s what you wanted…and you got it and all that goes with it. I’m not responsible for your lack of having parents. Neither is the state. It’s harsh, it’s cruel but it’s reality. There are more than enough programs out there to supply you with excellent examples of how not to be. You took the easy path instead of the one that requires you be responsible for yourself. Well, there you are. Reap the whirlwind.

    4) Liberals, YOU have done more damage to the poor, the blacks and the queers by constantly pushing them to the front of the line without expecting anything in return. Or, more accurately, that which you do require results in furthering their problem. By not requiring them to get decent grades or put in a day’s work or even be held responsible for their own actions, they are now of the mind that they are entitled to a free lunch. And you have decided to get that free lunch from people like me, who resent it and you…and by association, them.

    Most conservatives are pretty much sick of it. I no longer give money to charities because I cannot trust them to be up front as to who they give the money to. Many have turned out to be fronts for the socialist party.

    I don’t treat “the poor” with much respect in walmart if I don’t have to. I don’t go out of my way to acknowledge them. I worked hard, put MYSELF through college, served in the military as a stepping stone to earn a better life and can trace my situation, good or bad, to my own actions. I left home when I was eighteen with NOTHING but my brain, my high-school diploma, a drug and alcohol-free body and a desire to do something important.

    There were things I wanted in life. A nice car, a house, a wife and a career. Not necessarily in that order but I knew those things don’t land at one’s feet and had to be worked for and through honesty, my own labor and a little luck…I could get them. I’ve had all of that. The wife left when the career took a turn. I’ve had crappy jobs and great jobs….nice cars…nice houses. I rent a very small house right now in a nice little area but I am content.

    But at NO TIME have I blamed my lot in life on anyone else. Even the damned diabetes is not the result of some nefarious plot against me but it is a pain in the a**. However, as a responsible adult I have to take care of myself, FIRST or it will cost me big. I have healthcare that I pay dearly for and it infuriates me that the goddam GOVERNMENT is going to change my lot in life to make it “fair”.

    That means when I get older and have retired, my options for getting care due to my diabetes will decrease and they will let me die a slow, painful death.

    However, I’m thinking the black-market on such things as medical supplies will grow and I’ll use what small amounts of my 401K I may have left will help my buy what I need. You know…like in China.

    The takers have done a monumental amount of damage. All in the incorrect assumption that this nation has somehow been unfair. When I was a kid, I was told that I had to look at myself first to determine the root of any failure. Nowadays, the liberals use books worth of excuses to avoid the facts of failure.

    They truly like to pick a symptom of failure and try to treat that instead of honestly judging the real problem. Then, they love to get involved in discussion to make it appear that conservatives don’t care. Well, here’s a hot tip. I DON’T CARE. I did at one time but because of the constant harping by the left…I have stopped.

    Bunch of kids are killed in a grade-school in Connecticut? I don’t care. Other than that I feel a large amount of pain for the children who were murdered…I do NOT CARE to hear about gun control, sympathy for the shooter, or even the ridiculous pre-determinations and assessments of why the shooter did what he did. I DON’T CARE. Mental disease, emotional problems…whatever. I DON’T CARE.

    Why? Because in what I consider a NORMAL world, this nutcase wouldn’t have been out on the streets. The left had….for decades….deemed that mentally troubled people shouldn’t be stigmatized and have CLOSED DOWN mental health facilities based on that theorem alone. Thus, you have nutcases and sexual deviants as well as the criminally insane walking the streets, all sponsored by….you guessed it….the socialist party.

    So I don’t care. You asked for it, you got it. A mentally deranged individual shot Giffords. A mentally deranged individual shot people in a movie theater. Major Hasan killed fellow military members in spite of all the warnings given by him and other fellow officers in his unit.

    You asked for it, liberals. YOU GOT IT. YOU OWN IT. AND I DON’T CARE.




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