Report: Bush Tax Cuts Gutted Americans' Incomes 6.6 Trillion Dollars

[eridani]

http://www.dailykos.com/story/2014/07/11/1313326/-Report-Bush-Tax-Cuts-Gutted-Americans-Incomes-6-6-Trillion-Dollars

According to an analysis by Pulitzer-Prize winning reporter David Cay Johnston, formerly of the New York Times, the Bush tax cuts, touted as a harbinger of prosperity by the Republican Party, actually robbed each American taxpayer of $48,000 in pre-tax personal income during the twelve years of their existence, for a total of approximately 6.6 trillion dollars.

This is more than enough to pay for every student loan, car loan, and credit card debt in the U.S, while still leaving 2.4 trillion dollars in the pockets of Americans. It is the equivalent of an extra 11 dollars a day lost to each American taxpayer over the last twelve years.

Johnston analyzed rates of long term average personal incomes as reported by American taxpayers from 2000-2012, adjusting for inflation and population growth. His tables are contained in this article:

In 10 of the 12 years when the Bush tax cuts were in effect, the average income shown on tax returns was lower than in 2000. In the two upside years, average income rose modestly, up $504 for 2006 and $1,744 for 2007.

Total those 12 years and the net shortfall per taxpayer comes to $48,010.

He notes that after twelve years of tax cut mania average real hourly wages are now 6% less than they were in 1972-1973.

[delrem]

1. I'm glad those miserable, dishonourable tax cuts were repealed.

I'm glad Dems stood their ground.
On this topic, alone, Dems should be proud.

[MannyGoldstein]

4. Only 18% were repealed

82% were made permanent.

[BillZBubb]

28. Sarcasm?

The Democrats didn't stand their ground. They caved and made much of them permanent.

[delrem]

31. yes. a truckload of sarcasm.

[Cha]

2. K&R

[Spitfire of ATJ]

3. Then there's the bank bailouts which totaled the value of all of the real estate in the country.

[Enthusiast]

14. The banks were deserving. You wouldn't want to bail out the undeserving.

People might take advantage.

You must remember, wealth = virtue.

[Spitfire of ATJ]

21. It was a test to see if the government would pick Capitalism over the will of the People.

[Enthusiast]

22. I'm glad they passed the test.

[Skittles]

5. remember the bribery checks that bastard sent out?

fucking pathetic how many people fell for that crap

[LuvNewcastle]

8. When people fell for that, all I could do was shake my head and say,

"Americans are fucking stupid." I hated Cash for Clunkers, too. I've always bought used cars and paid cash for them and drove them until they fell apart. Now there aren't that many old, cheap used cars around. I love my scooter, but I'd like to have a car, too, for when it pours down like it is right now. I just get soaked when I have to go to work or when I have an appointment. It's hard to find a car for less than $3000 nowadays.

[Spitfire of ATJ]

23. "Cash For Clunkers" got a lot of SUVs off the road.

[aint_no_life_nowhere]

6. And yet at the next GOP presidential debates, you know the trickle down theory will still be alive

and kicking, with the Republican base still looking up in the sky and still expecting to be trickled down upon, some day soon.

[LuvNewcastle]

9. We get pissed and shat upon. That's about all I see coming down.

[PowerToThePeople]

7. Big K&R! n/t

[Rapillion]

10. I don't understand

Average disposable household income, adjusted for inflation, could certainly be less. That also correlates with the years of the Bush tax cuts, which were unnecessary. But that doesn't explain how the tax cuts caused the decline in personal income.

[A Simple Game]

11. It's probably because of all the money hoarded by the 1%. If that money was

in circulation, which it would be if the government had it, it would increase wages and productivity. Money just sitting there does nothing it needs to be in circulation.

[eridani]

12. Exactly. What happens in Monopoly when one player gets all the money and wins?

The game ends, obviously. And if you haven't run out of beer and popcorn and want to keep playing, what do you have to do?

[Rapillion]

17. But I think that's an aggregate demand issue

I don't think it is a tax cut issue.

I don't understand how there would be an increase in wages and productivity if the US Government had retained the money.

You can argue that the tax cuts simply led to financial speculation causing the bubble that burst in a financial meltdown, pointing out that the average American didn't benefit. But my quibble with Johnston is that he doesn't show how the tax cuts caused the decline in income.

[A Simple Game]

18. But the government wouldn't have retained the money, it would have

spent it and returned it to circulation. The rich are sitting on money, not the government. Borrowing by the government would be lower freeing up money to use on infrastructure instead of interest paid to, yes even more money for the rich to hoard. Even worse the rich are using the money to collect more money in the form of interest and dividends. Much of the money is set overseas in the form of offshore investments that decrease jobs in the US and higher unemployment keeps wages lower.

It is not just one dollar out of circulation, that dollar is passed from business to person to business to government to person to business, etc., etc., etc. Pull that dollar from circulation and just sit on it and the process stops.

[BillZBubb]

29. The government doesn't retain money.

When the rich get big tax cuts, according to right wing mythology, they invest the money in new enterprises. But, historically, that almost never happens. They might invest the money, but a lot of it goes offshore. Look at romney's financial gymnastics during that period as an example. Very little of his money went to grow American businesses. He was typical.

So, the growth upon which the scheme is based never materializes. But, government still has bills to pay. The loss of revenue leads to two problems, larger deficits and the need to curtail government spending.

That always leads to lower aggregate demand. On the other hand, had the government had those revenues and invested them in areas with a high multiplier like infrastructure, education and even welfare, economic growth would have been higher. Along with that demand would have risen and wages too.

Anyway, Johnston is showing correlation, a correlation that is backed up by other periods of trickle down quackery. Even if he didn't show a direct mechanism, there is clearly a connection. It is a tax cut issue.

[Cresent City Kid]

13. That is a good question

The average voter needs this made clear. In 2008 with the whole economy blowing up at election time, they seemed to understand that the party in power for the previous 8 years was to blame. 2 years later in the midterms, voters seemed to forget all the lessons learned. This would be like the republicans running on Hoover economics in the 1934 midterms and being swept into power.

To your point, it is imperative that we get our heads around cause and effect with the Bush tax cuts in particular and the underlying economic model in general. This model is being sold to the average Joe with an easy to digest, sounds good on paper narrative. I wouldn't care except that average Joe is voting food off of my table or staying home on election day and letting it happen.

[Orsino]

20. Tax cuts always depress wages.

Trickle-down is a big con. The Bush tax cuts were squandered opportunity, and along with his wars have helped Congress cry poverty ever since.

[davidcay]

25. you would understand if you read my column

All I did was hold Mr. Bush to his own standard -- actually a lesser standard. His standard was that no ifs, ands or buts his tax cuts would make us better off than we were in 2000. My calculations are just for staying at the level of 2000. Please read my column at this bitty link: http://alj.am/1pYQBZt

You may also want to click on my byline to read my June 4 and June 20 columns, which are related.

[eridani]

32. Thanks for joining--stick around and comment in the Economy section please n/t

[Dawgs]

15. Yeah, but look at the great economy we got because of it. n/t

[WillyT]

16. K & R !!!

[dawg]

19. Sigh.

I hate to be the bad guy here, but this "report" makes no economic sense.

Bush's tax cuts starved the U.S. Treasury. They increased the deficit. They gave politicians cover for their attempts to cut social net programs.

But they did not contribute to the lowering of average Americans' incomes. If anything, they would have been mildly stimulative to the economy; not worth the cost in foregone tax revenue, but mildly stimulative nonetheless.

[davidcay]

26. yes it does make sense

Last edited Tue Jul 15, 2014, 09:00 PM - Edit history (1)

You should read my column. I just compared the data -- after waiting 14 years for it to become available -- to the oft repeated and unqualified promise of Mr. Bush that his tax cuts would make us better off. I offered campaign opportunity to hedge its bet and they said no ifs, ands or buts, tax cuts will make us more prosperous than in 2000. All I did was hold him to lower standard of staying even. Please read my column at this bitty link -- http://alj.am/1pYQBZt

You will find other columns there (click on my byline) with analysis of data showing how, for example, Americans fared better 1933-36 than 2009-12 and how higher taxes do not mean fewer jobs, etc.

David Cay Johnston

[dawg]

33. Correlation does not equal causation.

It is undoubtedly true that middle-class incomes have declined since 2000. It is also true that the Bush tax cuts were sold to the American people based on ridiculous assumptions about the growth they would supposedly spark.

But nowhere in that data is there any proof that the cuts were the actual *cause* of the drop in incomes.

The tax cuts were a huge waste of money. They increased the deficit. They failed to provide any significant stimulus to an ailing economy. But they were not the underlying cause of the income decline.

So what do I think caused the decline in incomes? A number of factors, most of which are the fault of conservatives.

Globalization and outsourcing is a huge factor. As multinationals move jobs to low-wage countries, the remaining American workers must compete for the remaining onshore jobs, putting downward pressure on wages. Likewise, many of the jobs lost were manufacturing jobs that paid higher wages than the service industry and retail jobs people were forced to take in their stead. NAFTA and other "free" trade agreements accelerated this problem.

Allowing companies special visas to hire low cost foreign workers in technology and other industries also helped push worker incomes down.

Mergers and consolidations allowed corporations to cut "redundant" jobs, making them leaner and meaner. The Bush administration never saw a merger they did not like. There was a real perception in the business community that anything goes and that anti-trust laws would not be enforced.

The continued decimation of labor unions has weakened worker bargaining positions and lead to lower wages and benefits. The Bush administration was actively hostile to labor unions, and conservatives around the country have been successful in bringing "Right to Work (for less)" laws into effect in their states.

There were even some factors leading to the decline in wages that were *not* specifically the fault of conservatives, although they certainly didn't do anything to mitigate them. Technological advances have made it possible for many positions to be eliminated, or combined with other positions, exerting even more downward pressure on wages. One could argue that this could potentially be a good thing, but with no one looking after the interests of workers, all of the benefits of these technological advances have gone to the owners of capital. Instead of making workers' jobs easier and more rewarding, technological changes have just allowed corporations to hire fewer people.

The stock market crashes in 2000 and 2008, as well as the housing market crash mid-decade, led to major negative wealth-effects, lowering demand and slowing the economy. The capital end of the economy was bailed out at government expense while the labor end was largely allowed to twist in the wind. People who still had jobs knew they were lucky, and were too terrified to make any demands for additional salary.

I could go on a great deal longer listing all the different variables that contributed to the decline in middle-class incomes that we experienced last decade. But that's beside the point. The tax cuts were bad policy. They were sold to us on the basis of fairy tales. But we are telling a fairy tale of our own if we try to blame these tax cuts for all of our woes.

Correlation does not equal causation.

[BillZBubb]

30. You are WRONG. 100% WRONG.

Those kind of tax cuts are not stimulative at all--ie the multiplier is low. That's why trickle down always fails.

What would have been stimulative, and probably what the author assumed, is that those lost revenues, if invested by the government in high multiplier areas would have definitely been stimulative, highly so. The historical data backs this up.

[dawg]

34. I'm not wrong. The tax cuts were bad policy, but not the cause of the drop in incomes.

The tax cuts probably were stimulative, but, just as you said, with a very low multiplier. That would mean, for example, that $100 of tax cuts might stimulate the economy enough to generate, say, $2 of additional tax revenue. The government would still be $98 in the hole. It would be a terrible policy. But the overall economy is still (slightly) stimulated and there has been no downward pressure on wages as a result of the tax cuts. Supply-siders argue that tax cuts raise enough revenue to pay for themselves. That is patently false.

On the other hand, running a deficit is a fiscal stimulus of sorts. Targeted spending is almost always more stimulative than tax cuts. And middle-class tax cuts are, at least, more stimulative that upper-income tax cuts. But even the poorest tax cuts are at least somewhat stimulative (even if not worth the cost in lost revenues).

You speculate that the author is considering all of the "alternative" uses to which the government could have put the lost revenues. But they *did* spend all that money. They just obtained the money through issuing debt rather than levying taxes. You can accuse the Bush administration of lots of things, but curtailing government spending is not one of them . After all, they started at least two wars and implemented a major health care reform without coming up with an adequate funding mechanism for any of it. Stupid policy. But fiscally stimulative policy. None of that contributed to the decline in wages experienced by middle-class taxpayers.

We are on the same side as far as policy goes. Liberals are on the right side of the issues from both a macroeconomic standpoint and from the perspective of how these issues affect the lives of everyday people. But I think we need to take care to see that we make arguments that are properly nuanced and that can be supported by sound economic modeling. Substituting our own set of fairy tales for those of the Republicans is not something that appeals to me.

[BillZBubb]

35. Wrong again.

Your bookkeeping is suspect, you are shortchanging the no cut analysis. You have to make an apples to apples comparison.

What you aren't seeing is that without the tax cuts, suppose they spent that tax revenue PLUS the added bush debt. The net position of treasury would be the same.

For example, what would be the net position of the treasury in both cases?

Scenario 1
Say the revenue is 100. Tax cuts cost 20. Spending is 110.

Balance = Revenue - Tax cuts - Spending = 100 - 130 = -30

Scenario 2
Revenue = 100, Tax cuts = 0, Spending = 130

Balance = 100 - 130 = -30

Notice the spending could increase by 20 without a net change in the balance. That's where the extra growth would come from. Invest that in high multiple projects and you get solid growth--no low to no multiple tax cuts.

[dawg]

36. Sorry, but you have missed the point entirely.

The original article was arguing that the Bush tax cuts *caused* the reduction in middle-class incomes that we experienced in the 2000's. Not that that we would have been better off without them, or that the money could have been spent in a more stimulative manner. But that the tax cuts actually *caused* the incomes of middle-class workers to drop in real terms. That is a patently false argument.

You, on the other hand, are arguing that in an alternative universe where the tax cuts were replaced instead by targeted high-multiplier spending programs, we would have been better off. You are right about that, but that is not the point I'm arguing against.

[napkinz]

24. ...

[rustydog]

27. Then, by "their" logic, Trickle-Down worked!