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Bad-mouthing the economy

Posted by Richard on July 12, 2006

President Bush presented a mid-session review of the economy this morning. The New York Times, knowing he’d report a healthy, robust economy and predict a rosy future, pre-empted him (funny how pre-emption is OK in their line of work…) with a churlish, negative, divisive, and profoundly dishonest editorial that begged to be fisked.

OK, then:

The release of the White House midsession budget review is an annual event normally marked by a few wonkish observations and the routine updating of various spreadsheets, not by a full-dress presidential dog-and-pony show. But President Bush plans to preside today, with members of Congress and invited guests in attendance. By all indications, including his own in his weekly radio address last Saturday, he plans to turn this into a celebration — just in time for the fall campaign.

How dare Bush celebrate good news when he should be apologizing for being the most incompetent, evil president ever!

This is proof, if anyone still needs it, that this administration is desperate for something to boast about. On Mr. Bush’s watch, triple-digit budget surpluses have turned into annual triple-digit budget deficits. There’s no information in the midsession report to alter that utterly dispiriting fact. Yes, the report is expected to project that this year’s deficit will be somewhat less gargantuan than last year’s — probably somewhere between $280 billion and $300 billion, versus a $318 billion shortfall in 2005. That’s not much to crow about.

“On Mr. Bush’s watch” means the Times starts the clock on Jan. 20, 2001, so it can blame Bush for the 2001-2002 recession. Sorry, but anyone with a lick of economic sense knows that — to the extent federal policies control whether the economy grows or shrinks — there’s a significant lag time. The stage was set — and the downturn began — on Clinton’s watch.

Furthermore, would it be rude of me to remind the Times of an incident that took place later in 2001 a short distance south from it at the tip of Manhattan Island?

But Mr. Bush is likely to gloat, anyway. Earlier this year, the administration conveniently projected a highly inflated deficit of $423 billion. With that as a starting point, the actual results can be spun to look as if they’re worth cheering.

And with Bush’s inauguration as a starting point, the results can be spun to look as if they deserve criticism. But, Bush can reasonably be held accountable only for what happened after mid-2002, when the first tax cuts — the cornerstone of the Bush economic plan — went into effect. By any measure, the results since then have indeed been worth cheering.

As for the deficit, forget the projections — look at the actual numbers. The deficit dropped from 4.5% of GDP ($450 billion) in FY2004 to 2.3% ($296 billion) in FY2006. OMB is forecasting 1.3% ($188 billion) in 2008. Others are more optimistic, seeing a balanced budget in October 2008 (early FY2009) if current revenue and spending trends continue.

The razzle-dazzle won’t end there. As he did in his remarks on Saturday, Mr. Bush is sure to use today’s event to credit tax cuts for a projected “surge” in tax revenue. The Treasury is expected to take in about $250 billion more in 2006 than in 2005, for a total take of $2.4 trillion. Devoid of context, the number looks impressive.

Tax receipts grew 14.5% in 2005, the largest increase in 24 years. Receipts are up almost 35% since the full implementation of the tax cuts in 2003. They’re projected to grow another 11% this year. Given those astonishing numbers, it takes a lot of nerve to put scare quotes around “surge” or dishonestly add the qualifier "projected."

In fact, it is $100 billion less than the $2.5 trillion revenue estimate the administration touted when it set out in 2001 to sell its policy of never-ending tax cuts.

Let me get this straight: In early 2001 (before an attack worse than Pearl Harbor awoke us to the fact that we’re at war), the administration forecast that their tax cuts would grow revenues from $1.9 to $2.5 trillion, and it turns out they missed by $100 billion — revenues only grew to $2.4 trillion. The Times, as I recall, insisted back then that the proposed tax cuts would seriously diminish revenues. And now, it has the nerve to sneer at the Bush administration’s prognosticating abilities?

Even with this year’s bigger haul, real revenue growth during the Bush years will be abysmal, averaging about 0.3 percent per capita, versus an average of nearly 10 percent in all previous post-World War II business cycles. …

I’m not sure I believe those numbers. In any case, the Times is still counting from Bush’s inauguration so it can saddle him with an inherited recession and the consequences of 9/11.

That might be excusable if the recent revenue improvements could reasonably be expected to continue. They cannot. Much of the increase in tax receipts is from corporate profits, high-income investors and super high-earning executives, sources that are just as unpredictable as the financial markets to which they’re inevitably linked.

Well, at least the Times admitted that those increased tax receipts came from corporations and the wealthy. Unpredictable? Can’t be expected to continue? For people who rely on Paul Krugman’s economic insights, I suppose that’s true.

Many of us had no trouble at all predicting that tax rate cuts, especially deep cuts in capital gains and dividend taxes, would stimulate economic growth, corporate profits, and those “unpredictable” financial markets, thus leading to higher tax receipts. They always have, and they always will.

So, the revenue surge is neither a sign that the tax cuts are working nor of sustainable economic growth. …

So, it’s just a random, unpredictable event? Sigh. At least this time the scare quotes are gone.

A growing number of economists, most prominently from the Congressional Budget Office, point out that upsurges in revenue are also the result of growing income inequality in the United States, an observation that is consistent with mounting evidence of a rapidly widening gap between the rich and everyone else. As corporations and high- income Americans claim ever more of the economic pie, revenues rise, even if there’s no increase in overall economic growth.

Ah, the Left’s trump card, class envy, combined with a flat-out lie about economic growth. Annual GDP growth since 2003 has been 4.0%, well above the average since WWII of 3.4%. Since full implementation of the tax cuts in 2003, over 5 million jobs have been created, pushing the unemployment rate down to 4.6%, lower than the average for any of the previous 4 decades.

If Mr. Bush looked behind his headline numbers, he, too, could see that the rich are getting richer while the rest are, at best, only holding ground.

Nonsense, we’re all getting richer. If the rich get richer slightly faster than the rest of us, I don’t begrudge them their gains. I’m getting richer because of the new wealth created by the rich — the factories and stores and houses they build and the jobs they create make my gains possible.

It would make sense to use some of the windfall revenue to enact policies and programs that tilt against growing inequality. Unfortunately, he’s flogging more tax cuts that will deepen the divide.

Windfall revenue? Isn’t this the new revenue that the Times poo-poohed as a trifle in the face of the budget deficits, and assured us couldn’t last anyway? Now they’re ready to spend it on new policies and programs! Why am I not surprised?

Bush is “flogging more tax cuts” that will do exactly what his previous tax cuts did — what tax cuts always do — grow the economy, increase our wealth, and make us all better off. But the Times editorial staff would gladly forego those benefits in exchange for causing pain to the rich. Sad. And sick.

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3 Responses to “Bad-mouthing the economy”

  1. VRB said

    What is this suppose to mean to me? We all are not getting a little richer. This is not a trash Bush statement either, it’s understanding their own personal balance sheet.

  2. Anonymous said

    Well, in a population of nearly 300 million, there’s always going to be a wide range of outcomes. In the best of times, some people stumble or suffer; in the worst of times, some do very well. In other words, it’s not just about you. 😉

    When I said, “we’re all getting richer,” I didn’t mean literally each and every person, I meant all the groups and strata of society — rich, poor, and in-between — not just “corporations and high-income Americans,” as the Times claimed.

  3. […] declining deficits, and historically low unemployment. I outlined the facts in July 2006 in a fine fisking, if I do say so myself, of a New York Times editorial. Read the whole thing, but here are some key […]

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