Thursday, September 2, 2010

Americans overcharged no longer

When George W. Bush made his plea to Congress for his grandiose tax cuts back in 2001, he stated that "The people of America have been overcharged and, on their behalf, I'm here asking for a refund." (see here for the quotation). Bush was right, in a way -- the country was earning surpluses in the federal budget, and had been for a few years. With the economy in good shape but wobbling a bit, tax cuts seemed like a decent strategy to keep the good times going.

Of course things quite turn out as planned. Over the next while, the tech bubble burst, the attacks of September 11 occurred, and two money-sucking wars were started. And all this happened while regular pork-barrel spending in Congress continued unabated. Rather than surpluses, the country was racking up record deficits (at the time -- they're even worse now, of course).

In view of the original argument about being "overcharged", then, why oh why is it considered even among Democrats a mortal sin to let these tax cuts expire on schedule? Moreover, why do most media outlets treat the issue in the same way? The Economist, as expected, weighs in on the side of keeping the cuts in this article:
Some form of extension of the cuts for most households does seem prudent. America’s economy can ill afford a big fiscal blow. A return to recession is still unlikely, but the odds of one have recently increased.
Yet earlier the same article stated the following:
The tax cuts, which were supposed to last for only ten years, had their genesis in the 2000 presidential campaign, when both Mr Bush and Al Gore, the Democratic candidate, proposed to return a portion of the then budget surplus to voters. As the economy tipped into recession in 2001, stimulus became the rationale for the cuts, and for the 2003 law that phased them in more rapidly than originally planned.
Does The Economist not see that their argument for keeping the cuts going is simply another in this long line of excuses?

I seem to recall that things were pretty good in the post-recession 1990s, even if a good chunk of that wealth was later proven to be ill-invested in bad tech. Employment increased, wealth increased, stocks increased -- everything increased, all while income taxes were set at this supposed draconian level.  The 2000s?  Not so great, even with the cuts.

Perhaps a gradual reintroduction of the old tax rates might provide less of a shock to an unsteady economy. But why isn't there anybody coming even close to advocating this sort of plan? Income taxes can't keep coming down forever if there are no other revenue streams to make up the loss. The Economist talks about a VAT like it could ever happen in the U.S. It won't. So this is the one of the few other options.


  1. In Norway young people are guaranteed jobs/training up to the age of 24, abolishing Not in Employment Education or Training since 2006, long term unemployed for over 26 weeks are included too.

    A US approach is

  2. Yeah, yeah, WillORNG. In Sweden, EVERYONE is guaranteed job training until they turn 65. Whoop-dee-do.

    Let's not compare apples and oranges, OK.

    More to the point, the first sentence of the second paragraph is missing an important qualifier (i.e. "never", or "rarely"). Without the paragraph is a contradiction. This is where I stopped reading because I can't listen to the opinions of someone who can't be bothered to use a spell checker.

  3. Americans think the word "taxes" is a dirty word. Especially now in the "tea party" era. They want no or low taxes, but don't touch their SS and/or Medicaire!