DEBUNKING THE “TAX-CUTS CREATE GROWTH & REVENUE” MYTH

Here’s an article from The Wall Street Journal that, once again, claims higher tax rates on the wealthy are not good for the country. Essentially the WSJ article makes this standard Republican-Conservative claim: Tax cuts for the rich will spur economic growth, enhance tax revenue, and lead to balanced budgets.

Nothing could be further from the truth. Here’s what’s NOT happening, and why we're in dire straits today ...

... THE REVENUE ARENA

BALANCED BUDGETS? When Supply-Side economics arrived on the political scene with Ronald Reagan in 1980, our country owed approximately $979 billion (with a “B”). Today, after almost 20 years of tax cuts for the rich, America now owes $9.4 trillion (with a “T”). This, my friends, helps to explain the dollar’s collapse, and why prices are climbing. As an aside, the only time we started balancing budgets was under President Clinton, who raised taxes on the rich.

ECONOMIC GROWTH? Do tax cuts on the rich increase economic growth? Check this out. With the exception of five years, federal tax receipts have increased every year since 1962. Did Bush’s tax cuts (or supply-side economics) have an influence on the economy starting in 1962 that we don’t know about?

INCREASED REVENUE/CORPORATE INCOME: A 2007 Congressional Budget Office report makes it clear that increased tax revenue after 2003 is due primarily to an “increase in corporate profits” and other policy measures that disallowed certain write-offs. Read the report. Tax policy plays a minimal role.

... IN THE AREA OF ECONOMIC GROWTH

THE BUBBLE ECONOMY: The vast majority of growth that occurred during the Bush administration was driven by low interest rates and the subsequent housing bubble. As the value of homes increased, homeowners took out equity lines and used their homes to purchase cars, boats, vacations, etc.

DEBT FINANCED PURCHASES, I: If more money was put into the pockets of ordinary Americans it’s not because of higher wages or the jobs created by new investments (effectively zero in both areas). It’s because the Bush administration borrowed money to send to American tax payers. A monkey could have borrowed money and sent out checks. Tax cuts were a political Trojan Horse designed appeal to unsophisticated voters. But they worked politically.

DEBT FINANCED PURCHASES, II: Americans went further into debt to finance consumption. This helped create the illusion of prosperity. Credit card and personal debt are at all time highs.

That's it. Debt, demographics, and bubbles. This explains the Republican-led spending and debt binge since 1980.

My friends, the argument that tax cuts for the rich creates growth is, at best, misleading. More probably, it’s a lie. At the end of the day we need to build bridges, roads, and schools. Someone has to pay for this. Contrary to the ideas pushed by Republicans, there are no Infrastructure Fairies out there. Oh, and did I mention that we now need to pay down trillions in debt caused by the Republican's tax cut jijad? No? Well, we do.

Borrow and Spend is not an economic policy we should continue to follow. That almost one-half of America can't see this says alot about the state of this nation.

- Mark