McCain's Tax Cuts Would Cause the Deficit to Explode

[Toro]

I like John McCain and may support him for President. I believe that his proposals to continue the Republican policies of destroying this country's fiscal balance is a political reaction to the political immaturity and denial of the Republican Party more than a reflection on McCain himself.

Sen. John McCain is proposing tax cuts that would either cause the federal deficit to explode or would require unprecedented spending cuts equal to one-third of federal spending on domestic programs.

Once thought of as a deficit hawk, the near-certain Republican presidential nominee is now putting more stress on the traditional Republican orthodoxy of tax cuts. Altogether, he proposes more than $650 billion in tax cuts a year, much of it benefiting corporations and upper-income families. That includes the cost of extending tax cuts implemented under President Bush that he voted against twice.

To help pay for it all, the Arizona senator says he would cut $160 billion a year from a federal discretionary budget that totals a little more than $1 trillion. He hasn't specified where the cuts would come from.

With military spending -- about half the total -- likely to rise or perhaps stay even, most if not all of the cuts would have to come from domestic programs. The discretionary budget, which excludes entitlements such as Medicare or Social Security, covers areas such as medical research, federal prisons, border security, student loans, food inspections and much else.

The $160 billion figure is equal to the total budget in 2007 for the departments of Education, Energy, Homeland Security, Justice and State. ...

An analysis of federal spending since 1976 show that there has never been a cut in domestic spending as large as what Sen. McCain is proposing, said Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities. The biggest was in 1982, led by President Reagan, when federal spending was cut by about 17%; most of the cuts were reversed over the next few years, he said. ...

http://online.wsj.com/article/SB120882415111033181.html?mod=todays_us_page_one

 

[jreeves]

I like John McCain and may support him for President. I believe that his proposals to continue the Republican policies of destroying this country's fiscal balance is a political reaction to the political immaturity and denial of the Republican Party more than a reflection on McCain himself.



http://online.wsj.com/article/SB120882415111033181.html?mod=todays_us_page_one

Those aren't the only spending cuts he has proposed, he has stated that he will cut spending throughout all levels of the federal government. There is wasteful spending in every level of government including the defense department.

 

[Toro]

Those aren't the only spending cuts he has proposed, he has stated that he will cut spending throughout all levels of the federal government. There is wasteful spending in every level of government including the defense department.

They talk about that in the article, how McCain is targeting waste. The problem is that waste is a generic term always referenced by politicians when they will not or cannot identify programs that they would have to cut to pay for the tax cuts. Feel free to post specific targets McCain is targeting.

Structurally, there is nothing wrong with tax cuts as long as they cut spending.

 

[RetiredGySgt]

They talk about that in the article, how McCain is targeting waste. The problem is that waste is a generic term always referenced by politicians when they will not or cannot identify programs that they would have to cut to pay for the tax cuts. Feel free to post specific targets McCain is targeting.

Structurally, there is nothing wrong with tax cuts as long as they cut spending.

No politician running for office is going to be "specific" on his cuts, because then he alienates voters. Just as Obama is not specific on who he will tax. Claiming he wont tax those under 200 to 250 k while saying he will support types of taxes that in fact do effect those people.

 

[BaronVonBigmeat]

Ah yes, the mythical promises of "cutting waste". Ranks right up there with Sasquatch and the Loch Ness monster. Government IS waste, it can't help but be inefficient, because there is no profit motive.

 

[AllieBaba]

I love the myth that reducing taxes causes economic decline.

 

[Paulie]

I love the myth that reducing taxes causes economic decline.

And I love the myth that you know your ass from a hole in the ground.

But please enlighten us on the myth. Let's get AllieBaba's much revered economic analysis on taxes/spending.

 

[AllieBaba]

"Great leaders of free and prosperous societies get this economic concept: When government cuts taxes it stimulates the economy and brings more revenue into public coffers.

Consider some honored statesmen who turned their nation's economies around with such creative tax policy - John F. Kennedy, Margaret Thatcher and Ronald Reagan, just to name a few....

During Kennedy's presidency, significant income tax cuts were enacted, resulting in a 62 percent increase in revenue to the U.S. Treasury from 1961 to 1965.

Federal revenues increased $500 billion after Reagan cut marginal tax rates during his presidency. Those cuts help stop the horrible inflation that was strangling our nation during the Carter years.

In a 1962 speech to the Economic Club of New York, Kennedy said, "The soundest way to raise revenues in the long run is to cut taxes .... This is the most important step we could take to prevent a recession."

Former British Prime Minister Thatcher had the same experience. When she took control of her country in 1979, the nation was almost bankrupt. Her tax cuts generated new revenue and balanced the country's budget.

After Sept. 11, 2001, when the nation was anxious, the economy slipped into a recession and consumer confidence was down. But President Bush passed two significant tax cuts. Those cuts caused our economy to quickly rebound and bring in new revenues to the federal government.

According to the Tax Foundation in Washington, the state of New York responded to 9/11 by raising taxes, which in turn hurt that state's economy. Only when those taxes expired did New York begin to recover."

http://onlineathens.com/stories/031808/opinion_2008031802260.shtml

And here's a little poll which shows that most people understand the simple concept...
www.rasmussenreports.com/content/pdf/8579
Hopefully that link works. It's a PDF file and I couldn't cut and paste.

From Investopedia (Forbes)
http://www.investopedia.com/articles/07/tax_cuts.asp
"Tax Cuts and the Economy
Tax cuts, when used properly, have stimulated the economy. Many credit President George W. Bush's tax cuts for moving the economy out of recession. Similarly, in 1964, Congress enacted an 18% cut in personal taxes to spur growth. The legislation was designed to encourage consumer spending - many believe that it succeeded admirably as consumers delivered a textbook reaction.

According to a December 2004 article in Celtia.info, a magazine distributed in Celtic countries, tax cuts have also shown positive results in other countries as well. Ireland's recent tax cuts are believed to have improved living standards significantly. For years, the Irish were faced with high unemployment, budget deficits and high taxes. In 1986, Ireland faced a fiscal crisis. After reducing government spending, the government lowered taxes on both individuals and corporations. Over the next 13 years, Ireland's per capita income went from only 63% of the United Kingdom's average to besting it in 2000. Ireland now enjoys one of the highest standards of living in Europe.

According to a May 2007 article in the Herald Tribune, tax cuts in Poland, Slovakia and Hungary before their entry in the EU have spurred economic growth in those countries."

From CNN:
http://money.cnn.com/2001/01/25/economy/greenspan/

"Greenspan said that if it became clear that politicians might be tempted to use the money for major spending initiatives, it would be better to cut taxes.

"It is far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases," the Fed chairman said."

 

[jillian]

And I love the myth that you know your ass from a hole in the ground.

But please enlighten us on the myth. Let's get AllieBaba's much revered economic analysis on taxes/spending.

Don't you love the fact that some self-serving article by an Athen, GA rep is what she uses as "proof" that cutting taxes stimulates the economy...

sure it does... especially during wartime when you're running your economy on fumes....

 

[AllieBaba]

Also Forbes, and the majority of those polled by rasmussen, and Greenspan.

Pretty heady stuff. Don't hurt yourself.
For the simple minded:
http://www.moneychimp.com/articles/econ/tax_cuts.htm

"Tax Cuts
During recessions, the government will occasionally offer a tax cut as an economic stimulus. In rough terms, a tax cut of one trillion dollars over ten years will "give back" an amount equal to about one percent of consumer spending annually over that period.

The first question about tax cuts is, exactly how do they stimulate the economy? This is not a stupid question! Remember, if the government gives us a tax cut they'll still have to make up the budget shortfall somehow, chiefly by selling more bonds to American citizens (who happen to be the same people getting the tax cut) or foreigners (who will raise the money by selling us more of their goods and services, or buying less of ours). In other words, government spending will keep sucking money out of the private sector, only the payment method will be different.

Yet most economists seem to agree that tax cuts really do provide a stimulus. The real reason may be that they provide flexibility: people who want to consume more can use their tax cut for that purpose; people who want to save more can use theirs to buy up the new government bonds. This is the perfect scenario during a recession, when prior over-investment has resulted in bloated inventory levels and poor private investment opportunities."

And from Gallup:

http://www.gallup.com/poll/10306/Did-Tax-Cuts-Boost-Economy.aspx
"Overall, the tax cuts have not received the credit they deserve for their success in the immediate term. Clearly, the tax cut stimulus has combined with accommodative monetary policy to jump-start the first real economic recovery since Sept. 11. Regardless of the distribution effects resulting from last year's tax cut package, the short-term benefits can be seen in the strengthening equity markets, increased capital spending, and strong consumer spending. In this context, last year's tax cuts have significantly benefited the U.S. economy."

That article goes on to say that the perception that the tax cuts haven't helped is due to confusion on the part of the morons who don't get it.

 

[Annie]

What he is saying is BS, one would hope it was for the current consumption, but there is much that went before, which leads one to assume sincerity. It's more that I can ascribe to Hillary or Barack.

 

[BaronVonBigmeat]

The first question about tax cuts is, exactly how do they stimulate the economy? This is not a stupid question! Remember, if the government gives us a tax cut they'll still have to make up the budget shortfall somehow, chiefly by selling more bonds to American citizens (who happen to be the same people getting the tax cut) or foreigners (who will raise the money by selling us more of their goods and services, or buying less of ours). In other words, government spending will keep sucking money out of the private sector, only the payment method will be different.

Imagine a giant bloated fat man, with weak spindly legs and knees that are in constant pain because of all the weight.

He notices the pain in his right knee a little more, so he shifts his weight so that his left leg carries it more. Has he really reduced the stress on his knees, overall? No, not really. There is no easy way for him to do that. He has to lose weight (cut spending) to truly reduce the burden.

 

[Dogger]

Tax cuts do not stimulate the economy, especially if they are coupled with spending cuts. There is a stimulus, but it is offset by the greater loss of stimulus from spending cuts.

An illusion of stimulus was created by deficit spending, which allowed public spending to contine while private spending increased. If you start tapping your home equity or living on credit cards, you can live large for a while. Once the bill comes due, however, you have to cut back on your standard of living.

That economic model is not sustainable. In contrast, lasting stimulus can be achieved by steps to ensure workers receive a living wage, or at least a fair minimum wage. Every community or state that increased it's minimum wage above the federal minimum has experienced better job growth and a stronger economy than the ones who observed the minimum.

 

[Annie]

Tax cuts do not stimulate the economy, especially if they are coupled with spending cuts. There is a stimulus, but it is offset by the greater loss of stimulus from spending cuts.

An illusion of stimulus was created by deficit spending, which allowed public spending to contine while private spending increased. If you start tapping your home equity or living on credit cards, you can live large for a while. Once the bill comes due, however, you have to cut back on your standard of living.

That economic model is not sustainable. In contrast, lasting stimulus can be achieved by steps to ensure workers receive a living wage, or at least a fair minimum wage. Every community or state that increased it's minimum wage above the federal minimum has experienced better job growth and a stronger economy than the ones who observed the minimum.

Link?

 

[Dogger]

Link?

I wrote it myself, from things I've read over several years. Not sure how to link to that.

 

[RetiredGySgt]

I wrote it myself, from things I've read over several years. Not sure how to link to that.

In other words, just your opinion. delivered to appear as more than that.

 

[Zoomie1980]

They talk about that in the article, how McCain is targeting waste. The problem is that waste is a generic term always referenced by politicians when they will not or cannot identify programs that they would have to cut to pay for the tax cuts. Feel free to post specific targets McCain is targeting.

Structurally, there is nothing wrong with tax cuts as long as they cut spending.

The waste is VERY REAL but getting rid of it is next to impossible. The federal procurement and contract management process across all departments is fundamentally broken at every level. Having been a federal contractor for many years I have to say I managed or worked on over 20 contracts worth over 4 billion total and only ONE was ever delivered. The other 19 were dropped after so many requirements changes and directional changes resulted in leaving them all in unworkable states so they had to simply be DISCARDED. I made MY money, though!!! The Pentagon is the worst of the worst.

If someone ever had a way to stop the waste the government could live on 2/3rds or less the amount of money it currently lives on. We could lose upwards HALF the civil service work force and no one outside gov't would ever really know the difference. Civil Service is about as useless a collection of employees as there exists anywhere on earth.

 

[Dogger]

In other words, just your opinion. delivered to appear as more than that.

Nope. Delivered to appear as my opinion. Just as you do, only with better grammar and a fuller appreciation of macroeconomics and history.

I didn't get it from blogs and blowhards. If you think I'm wrong, spell it out. I've explained my theories with brevity. All you offer is rote, unreasoned contradiction.

But thanks for omitting your obligatory ad hominen. That's an improvement in your debating style, and reflects well on you. I hope it continues.

 

[Zoomie1980]

Ah yes, the mythical promises of "cutting waste". Ranks right up there with Sasquatch and the Loch Ness monster. Government IS waste, it can't help but be inefficient, because there is no profit motive.

No profit motive nor any real accountability for anything. Why so many people thing more government is the answer to anything is beyond me. It is VERY RARE for any government program to ever function as it was intended, or function at all, for that matter....

 

[onedomino]

Tax cuts do not stimulate the economy, especially if they are coupled with spending cuts. There is a stimulus, but it is offset by the greater loss of stimulus from spending cuts.

Spoken like a devout member of the Collective. Why do you think the government would be better at spending our money than we are? Why not stimulate the economy with what we spend rather than the government? But of course as a cog in the Collective you recognize that government spending fairly redistributes the wealth of the recalcitrant wrenches in the machinery that have the temerity to want to spend what they have earned.