Wednesday, October 27, 2010

Political Myths 1 & 2: Obama Raised the Deficit and Raised Taxes

Each day from now to the election I am going to post an item (today, two items), from "Eight False Things the Public 'Knows' Prior to Election Day," by Dave Johnson. I believe our politics will be conducted better if we know what is truly happening and discuss it calmly.

1) President Obama tripled the deficit.
Reality: Bush's last budget had a $1.416 trillion deficit. Obama's first budget reduced that to $1.29 trillion.

2) President Obama raised taxes, which hurt the economy.
Reality: Obama cut taxes. 40% of the "stimulus" was wasted on tax cuts which only create debt, which is why it was so much less effective than it could have been.


Anonymous said...

The article you are quoting is on a website called "Campaign for America's Future". On the "About Us" page I found this:

"The Campaign for America’s Future is the strategy center for the progressive movement."

A brief scan of the website reveals articles that strongly support the Democrats and slam conservatives, Republicans, and the Tea Party movement.

Is this what passes as centrism today?

Gruntled said...

Do you think either statement is untrue?

That is my standard.

Brendan said...

Congratulations on ferreting out that well-hidden secret, Anonymous.

Dr. Weston: knowing the comment-storm you're about to weather, I can only salute.

Whit said...

First, while it was "Bush's budget" which ended 9/30/09, it was passed by the Pelosi-Reid congress and spent, for the most part, during the Obama administration. So your statement was true but misleading.

Second, as far as I know there were no real tax cuts in the stimulus. All that happened was that the IRS was used to send checks to some Americans. So your statement was false. In effect, people got "tax refund" checks even if they paid no income tax, and for those who did pay income taxes, the less tax you paid, the bigger the "refund". A real tax cut is a cut in rates that incentivises people to work, save and invest. Obama might just as well have dropped dollar bills from airplanes. Had they actually brough Republicans into the process, they might have included some real tax cuts that might have us recovering faster.

The real problem is that progressives think that the problem is "demand" so what they want to do is spread money around. Thus, they funded the hiring of various government employees, or government contractors, and in effect sent checks to people, all financed by withdrawing the same amount of money from the economy either by taxing or borrowing the same. Naturally it didn't work. Using the same money to, for example, cut tax rates or provide a payroll tax holiday actually encourages employers to hire. It may offend the progressive sense of justice to help employers (the rich) but they are folks that create jobs.

Whit said...

Oh, and one more thing. Bush is not the standard for Conservatives, especially on spending.

Amy said...

You are good at snide.

Anonymous said...

Thank you Brendan, and congrats on a being a typical smug liberal.

It must feel good being you.

Anon 11:13

Gruntled said...

Cutting the payroll tax is a tax cut.

Giving it back to all Americans who pay payroll taxes is not simply giving it to government employees.

Giving it back in small amounts, rather than in a lump-sum payment, is a better way to stimulate demand. Stimulating demand really does stimulate the economy (actually, I don't see what else "stimulating the economy" could mean).

Pastor Dennis said...

I pay my own taxes based on an estimated tax form. I got a tax cut because I sent in lower quarterly payments.

Whit said...


One of the limitations of the progressive mind is that it cannot see that stimulating the supply side is what actually creates jobs.

The government can get the "stimulus" money either by taxing or borrowing. In either case it comes out of the economy and into the government before it gets distributed back in the form of "stimulus". It seems obvious that money spent to start a business, expand a factory, buy new equipment, etc. will do more than money spent to buy a flat screen TV most of which are imported.

The stimulus contained no permanent marginal rate reductions, at any income level. They were rebates which INCREASED with lower income levels. But they were distributed, rather than being dropped from airplanes, by a reduction in payroll tax rates. But their economic effect was the same as a rebate - and in your first post you admitted they had no positive effect (something I agree with). Marginal rate decreases, which increase incentives to work, save and invest, are what Republicans wanted. None were included in the Stimulus.

High marginal tax rates on the investing class make many new business ventures, which would have been profitable at lower rates, unprofitable and thus not undertaken. If the projects are not done, jobs are not created. QED

Cameron Mott said...

It seems obvious to me that money that is not deducted from your paycheck and spent is the money spent to create the demand and supply the money spent to start a business, expand a factory, buy new equipment, etc..

Whit said...

Cameron, the point is that money saved and invested is what buys capital equipment. Wealth consumed does not build capital. High taxes make new investment less profitable, and encourage people to invest in government bonds rather than new or expanded businesses. That is what is happening now. Banks can make a profit buying government bonds at no risk.
Progressives have it backward. Demand is not the problem or the $1 Trillion in "stimulus" would have us roaring. What we need is not consumption but savings and investment.

Cameron Mott said...


I don't know if we are disagreeing or not. I agree we need savings and investment but in this ecomony we need money to survive/consume first which creates demand and incentive for banks and business to get off their cashes. I thought the payroll taxes were a brilliant way to put money in hurting peoples' pockets and local economies immediately.

My word verification word is "ranting". Should I be miffed?