marți, 1 februarie 2011

Tax Cuts (again with the tax cuts)

Ok, I'm just going to post a response before I see it somewhere else again. I've been seeing this news article being posted on left-leaning blogs and some atheist blogs as well. I've responded twice and I'm just going to post those responses so that people can just come here instead of me copying and pasting all the time. The Article in question is this one: Is Bush the Worst Pres Ever. The article lists a bunch of different things to support it's claim and one of them is
He is bankrupting the country with a combination of aggressive military spending and reduced taxation of the rich;
I'm going to post my comments with a little editing to make them more readable. Also, I'm attaching a graph that shows US GDP growth and the circle is around the recession. Here are my original comments:

When Bush took over as president, the economy was going strong, however, there were problems (can we say tech bubble). Then, 9/11 hit and we had a recesession. This lead to two things, the Fed lowered interest rates and the government cut taxes. This was a good thing for the economy and the result was a fiscal and monetary stimulus that many say caused the recession to be short-lived. As a result we ran up a large deficit. In the short-run, that is ok, because we needed a stimulus. However, in the long-run the deficit will strangle US growth. So think of it that we had some bad times and we had to run up our credit cards to keep going. Now that we’re back on our feet, we need to start making some minimum payments.
In order to get the deficit under control, we need to either raise taxes or cut spending. As a Republican president, Bush is doing what others (Regan) have done before him: run up a deficit and then claim government is too big we need to cut spending. What would be more prudent is to do a combination of cutting spending and raising taxes.
So, we did have a recession, but it was short-lived. The cuts were for everyone, the middle class received cuts as well.
I am not denying that the cuts created the deficit. What I am saying is that the cuts were justified at the time. Yes, the military spending is also a significant contribution to the deficit.
This is the Republican formula. Run up a large deficit and then claim that we are in a budget crisis, Government spending is too large, yadda, yadda….we need to cut spending. It’s the same tired old trick. Could Bush had handled the recession differently, yes. Would it have been better to curb spending and cut taxes rather than one or the other, yes. Is it politically easier to just cut taxes rather than cutting spending (at least initially), yes. These factors are the reasons why there were tax cuts.

Going forward the tax cuts need to either be revoked or spending cut drastically to get the deficit manageable. So we shouldn’t just wail at the tax cuts incessantly, we should try to talk about them more rationally.

Finally, here is the graph of GDP: