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Wednesday, July 21, 2004

Battle Tax Cuts - Iron Blogger Republican - Second Rebuttal

Well, I’m done. Done playing the game bloggers seem to love called “fit definitions to my own purposes.” I’m calling Stirling out here, then I’m moving on and I’m not coming back.
 
I mentioned that Stirling is a liberal. Um, over at Daily Kos they use the word all the time, proudly, but mention the word here and it’s SUPER snarky. Here, being called a liberal seems to be an insult.
 
Of course, Stirling called me an “outright liar” and “foolish,” which are more clearly insults. You’ll forgive me if I don’t play the escalation game.
 
As nearly as I can tell, an “outright lie” is anything Stirling disagrees with. That’s fine with me – insult away! It’s the more insidious alterations of definitions that bother me.
 
Yes, Stirling knows a LOT about economics. He has a good head on his shoulders, too. That doesn’t mean he can sweet talk his way out of addressing tax cuts as an issue and it doesn’t mean he can adjust definitions to meet his whims. I’m not Alan Greenspan when it comes to economics, but I’m not Jessica Simpson, either (it’s true… my legs are much nicer). My opponent seems to think I’m too dumb or awed to respond to his reshaping of simple terms.
 
“Tax Cuts,” - specifically the tax cuts Bush passed recently – are just that. CUTS IN TAXES. Why is this hard to understand? I made a B in college economics and even I understand that. That somebody made up a fancy acronym, PAYGO, and Stirling can name it, doesn’t mean it applies here. In fact, it does not. 
  
The Bush tax cuts reduce the amount of tax revenue the government collects in the short term only. This is not a loan, we aren’t borrowing the money. If government spending were to stay the same, I would go along with the PAYGO theory, but spending, as I thought I made crystal clear, will go down as the tax cuts are implemented. Money you don’t have to pay back is not a loan, is it? 
 
Well, to be fair, we’ll have to wait for Stirling’s closing arguments to see how he defines “loan.” 

No, PAYGO is a label used to put people in a box and dismiss them more than it ever was a description of spending policies. It demonizes as much as terms like “religious right,” “tax and spend liberal,” and “flip-flopper” do. Maybe these terms used to have real meaning but now they are just political tools. Helpfully, John Kerry brought this to my attention. Agreeing with John Kerry, I say let’s not vote for a slogan or a spin – even PAYGO – and instead, let’s talk about the issue at hand. 
   
Stirling shows an excellent grasp on the deeper levels of economic theory that DO NOT APPLY (you could say they don’t have anything to do with the price of tea in China. Or the price of oil in America.) to the rather simplistic notion of whether the Bush tax cuts are a positive or negative force. His first chart looks very nice and professor-y, but only proves that deficits exist, a point I conceded long ago. It says NOTHING about the issue of tax cuts and their efficiency at overcoming deficits in the long run. 

NOTE: from here on, when I say “tax cuts” I mean “cuts in taxes.” I hope the gentle reader can keep up with that sophisticated definition.
 
Still, Sterling refers to the “cost of tax cuts,” and is even nice enough to give us a figure, even though it has been made clear that it doesn’t cost anything to take less money from people. And still, we talk about energy supply and the war in Iraq.
 
“The Bush economic program as a whole has not done anything to address this supply side problem, other than invading Iraq and promising cheap oil,” Stirling said.
 
We aren’t talking about the Bush economic program as a whole, we’re talking about the Bush tax cuts. Not only that, but the same Bush tax cuts he chooses to ignore (I guess on Daily Kos, Iraq and oil are daily winners), I claim will FIX the supply side problem he’s concerned with.
 
Perhaps this will be more clear if we move on and talk about tax cuts for a change.
 
I claim tax cuts are the BEST option for the country, but not the only option. If my opponent had promoted a better option than tax cuts, I would surrender the “battle tax cuts” debate immediately.
 
In the absence of an alternative to tax cuts being presented by the challenger, I will turn my attention to the idea that tax cuts will help the economy in the long run. My contention all along has been that it is too soon to tell with certainty the actual long-term effect of these particular tax cuts, despite doom and gloom from the left and some admittedly optimistic hope from the White House.
 
We CAN, however, take a look at how tax cuts have done in the past as a guideline. Let’s take the two biggies.
 
I always like to pick on the liberals first, so let’s start with the Kennedy tax cuts, m’kay? Well, would you look at THAT link! It turns out Kennedy (yes, that Kennedy) discussed “a tax cut designed to boost the economy, increase tax revenues, and achieve - and I believe this can be done - a budget surplus.” Those happen to be his words describing his tax cut plan. I can’t WAIT to see the spin on that one. 
 
Let’s look at the numbers on the results of Kennedy’s (yes, that Kennedy) tax cut.
 
Real income tax revenues did go up 67% from 1961 to 1969. The top marginal rate went down from 91 percent to 70 percent (Reagan later knocked it down to 28 percent with his tax cuts, but I get ahead of myself). 

Wait just a second! Didn’t Stirling say the cost of “borrowing” (spin alert!) money would wipe us out? That’s not what Kennedy said. He said “The revenue gain in these proposals will offset the revenue cost of the investment credit” in his tax cut sales pitch to Congress. 
 
And what of all the money Stirling says Uncle Sam will lose from tax cuts? Surely Kennedy would admit to that much as a result of his cuts, yes? Well let’s look and see.
 
“John F. Kennedy proposed major tax cuts in 1963, and in February 1964, after his assassination, the top tax rate was cut to 70 percent from 91 percent. Tax revenues nearly doubled in the next four years.”  
 
Hmmm. Maybe Kennedy himself said something different? Uh oh… scroll down and it turns out he said, “An economy hampered by restrictive tax rates will never produce enough revenues to balance our budget, just as it will never produce enough jobs or enough profits. In short, it is a paradoxical truth that tax rates are too high today, and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the tax rates now.”
 
Emphasis mine, words Kennedy’s. Yes, THAT Kennedy.
 
And then there’s this, spoken before the Congressional Subcommittee on Financial Services: “The 1964 Kennedy income tax rate reductions spurred a bull market expansion and budgets in near balance through the 1960s.” 
 
Now, I’m not the super-genius that Stirling is, but even with my little brain I can conclude (pre-spin, of course) that the Kennedy tax cuts turned the country around for the positive.
 
That’s one of two major tax cuts in U.S. history before Bush. The other was implemented by President Ronald Reagan.
 
Wow! Look at how nicely income tax revenues grew as a response to those cuts! They grew, despite the fact that under Reagan tax rates themselves fell, astoundingly, from 70 percent to 28 percent!

From that same site:


“The predicted inflation never materialized from the ‘Reagan deficits’ because the deficits themselves were the direct consequence of the collapse of inflation. Treasury supply-siders predicted the disinflationary expansion. But their prediction was ignored, because it conflicted with the Keynesian interpretation of fiscal policy and the economic establishment’s belief in the ‘Phillips curve.’”


Replace “Reagan” with “Bush” and “economic establishment” with “Stirling” and you might have a read on the complaints about the 2003 cuts. I’m sure the economic establishment knew lots about economics, too.

Even better, the Bush tax cut is currently smaller than either Kennedy’s or Reagan’s, and “is less than 29 percent of the projected surplus, less then 6 percent of projected revenues, and less than 1.2 percent of national economic output over the 10-year time period.” This leaves us some nice room to grow once we see how well it works. 
 
Demand, to use Stirling’s words, does appear to create its own supply. Look again at the numbers on increased investment potential, too.
 
The only two other tax cuts in our history worked swimmingly. So why the grim faces over this one? Oh, yes… the election slipped my mind there for a second. Gotta be pessimistic if we’re gonna beat Bush!
 
How interesting that Stirling should mention the election right near the beginning and at the very end of his final rebuttal. I can’t tell anymore – were we debating oil, Iraq, or the November election?
 
The pessimism is clear near the end of Stirling’s final rebuttal where he calls a program which was JUST implemented a “failed policy.” I guess now all economic policies should work within a week or be counted as failures.
 
In any case, we can see above that it is likely Bush’s tax cuts will save the lagging economy in the long run, but what about today? Are the tax cuts helping anyone right now?
 
Well, in my opening I listed the actual wording from the most recent tax cut law. That wording clearly spelled out all of the income groups that are immediately helped by keeping more of their own money.
 
National numbers aren’t how we judge the economy, though. We judge it by our own lives, by whether the man on the street is being helped. With that thought in mind, I went out into my actual street. I talked to six of my neighbors over about two hours on my morning walk and asked them what they did with their last tax refund. 

Surprisingly, 4-of-6 couldn’t remember exactly how they spent the money, but they all remembered exactly how much it was.
 
One man added his $600 check to his retirement IRA, which has earned 9.4 percent since. If I wasn’t such a pup in the world of economics I could probably do the math here. As it is, we’ll have to rely on Stirling’s superior ability.
 
The other neighbor who remembered, a woman, was a real find for me. She said she held her check for nearly a month but was finally forced to cash it when she needed help paying an unusually high winter heating bill. And, as I mentioned, I used my $600 check to pay an electric bill, take the wife out to eat and catch up on my tithe.
 
What do you think they all said when I asked if the checks helped them survive (and I was careful to use the word “survive”)? Yes, they all said that the six hundred bucks made their lives easier. 
 

“Indeed the entire ‘600 dollars will make survival easier’ is worse than nonsense, it is an outright lie.”
 
That’s from the challenger’s first rebuttal. Stirling, if you like, I can post their house numbers in my closing. You know, in case you’d like to call them outright liars in person.
 
Clearly, the immediate tax cuts give a boost to the economy by giving a boost to the real, live people who make up the economy. That, coupled with the long-term gains, sells the tax cuts pretty nicely in my book, even if it is, as Stirling fans would say, a remedial text.

Respectfully,

Dan Champion, Iron Blogger Republican



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