Bush-Era Tax Cuts Projected As Largest Contributor To Public Debt [CHART]

This post has been corrected.

If the Bush-era tax cuts are renewed next year, that policy will by 2019 be the single largest contributor to the nation's public debt -- "the sum of annual budget deficits, minus annual surpluses" -- according to new analysis from the non-partisan Center for Budget and Policy Priorities.

These tax breaks, combined with the cost of fighting wars in Iraq and Afghanistan, will account for nearly half the public debt in 2019, measured as a percentage of economic output, the CBPP's analysis shows. Even the cost of the economic downturn, combined with the cost of the legislation passed to stem the damage, won't be as burdensome as the weight of the Bush-era tax cuts, the chart below suggests. See if you can find the debt associated with the Trouble Asset Relief Program and the rescue of Fannie and Freddie:

Tax cuts for the highest earners were renewed late last year, as part of a deal that extended tax breaks for middle earners and reauthorized unemployment insurance. In an April speech, President Barack Obama laid out a plan to reduce the nation's deficit and debt, suggesting that he would strive to make sure the tax cuts for the highest earners expire naturally in 2012.

If tax cuts do expire as scheduled, that would win significant debt relief for the government, CBPP says:

[S]imply letting the Bush tax cuts expire on schedule (or paying for any portions that policymakers decide to extend) would stabilize the debt-to-GDP ratio for the next decade. While we'd have to do much more to keep the debt stable over the longer run, that would be a huge accomplishment.

Correction: An earlier version of this post incorrectly stated in one instance that the tax cut portion of the chart refers to tax cuts for the top earners. In fact, the Bush-era tax cuts apply to a broader range of income levels.

Comments

[JohnnyAce Okeke]

06:15 PM on 06/12/2011

Why let them expire? Cut them NOW. My parents are having their wages garnished under the Bush system. {{-_-}}

[Joe Corbett]

05:11 PM on 06/12/2011

Somebody is going to get thrown under the bus. Who is best suited? What are we waiting for?

http://www.nytimes.com/2007/12/15/business/15rich.html

http://www.walletpop.com/2009/08/20/how-the-rich-get-richer-inside-our-growing-income-inequality-ga/

http://money.cnn.com/2010/12/23/pf/rich_wealth_gap/index.htm

[nirek]

11:57 AM on 06/04/2011

When will tax cuts become enemy #1 of the deficit?

They have been for years now. The filthy rich say if they have tax cuts they will create jobs.
Where are the jobs? They have had the benefit of these tax cuts for ten years or so , where are those promised jobs ?

[Albert Jenkin]

09:13 AM on 06/01/2011

A graph is a mathematically precise line between an unwarrented assumption and a foregone conclusion. No one should accept such a chart without at least glancing at the supporting calculations, if any. Remember the famous Laffer Curve, drawn on a restaurant dinner napkin?
Who or what is this CBPP and what manner of axe do they have to grind?
Isn't anyone else asking?

[maigrey]

06:46 AM on 06/04/2011

Center on Budget and Policy Priorities - Link to there board of directors.
http://www.cbpp.org/about/index.cfm?fa=board

Reading right now. I'm with you, who are these guys?
But I want to see taxes raised, that we may not agree upon but above is the info.
Go to it Albert! Happy reading.

[FaceReality2]

05:07 PM on 05/25/2011

One of the most preposterous ideas in all of economics-- the Laffer Curve:

http://finance.yahoo.com/expert/article/economist/4065

"We don't have a 99 percent marginal tax rate. Or 70 percent. Or even 50 percent. We start with low marginal tax rates relative to the rest of the developed world.

"So cutting the tax rate from 36 percent to 33 percent is not going to give you the same kind of economic jolt as slashing a tax rate from 90 percent to 50 percent. There's no huge black market to be shut down, no big supply of skilled workers to be lured back into the labor market, and so on."

[montestruc]

09:31 PM on 05/24/2011

More revenue and less spending have very different effects on the economy.

More revenue means more money in the hands of the government , and less in the hands of the people. Less spending means less money in the hands of the government and more in the hands of the people.

The government has way too much money and power now, so clearly fiscal sanity lies in cutting spending, not in raising revenue. This is also a political power issue. Big government advocates want to pretend it is about some grandiose altruistic purpose, truth is more like they like power and spending other people's money.

Also this is about having power over people in other nations where it is none of our effing business. Bin Ladin is dead, it is long past time to pack it up and go home.

The US Government, specifically the congress has been showing less and less fiscal discipline or restraint as time goes on. Our congress spends like drunken sailors. That needs to stop -- NOW!

[FaceReality2]

12:17 AM on 05/25/2011

Shut down our worldwide military empire of 700 plus military bases in over 130 countries, corporate welfare, ag subsidies, and let's see where we are.

[sif2988]

11:33 AM on 05/25/2011

word

[GJCO-JMH]

12:56 PM on 05/25/2011

Problem is, neither party has been willing to get rid of the subsidies for ALL industries.

[GJCO-JMH]

11:44 AM on 05/24/2011

Spashy propaganda headline, but according to one of the same CBO reports that CCBP claims to have used to draw its conclusions:

"The severe economic downturn and nearly unprecedented turmoil in the financial system over the past few years—combined with federal policies implemented in response to those conditions—have caused deficits to climb dramatically. However, even after the economy has recovered and the budgetary costs of associated federal policies have waned, the budget outlook will remain daunting. If tax provisions expire as scheduled and discretionary spending grows at the rate of inflation each year (as assumed in CBO’s baseline), budget deficits averaging almost 3 percent of GDP will persist between 2013 and 2020. Federal debt held by the public will reach 67 percent of GDP by 2020, the largest share since the early 1950s. Moreover, if expiring tax provisions are extended or spending grows faster than is assumed in the baseline, those deficits—and the corresponding debt that will result—may be much larger."

http://www.cbo.gov/ftpdocs/108xx/doc10871/Chapter1.shtml#1096828

[FaceReality2]

12:22 AM on 05/25/2011

"if expiring tax provisions [i.e. the Bush tax cuts] are extended or spending grows faster than is assumed in the baseline, those deficits—a­nd the correspond­ing debt that will result—may be much larger."

[GJCO-JMH]

11:33 AM on 05/25/2011

You do realize that the expiring tax provisions provide $2.3 Trillion in tax relief (over ten years) for those earning less than $250K. Here's the breakdown (from Poltifact):

- $679 Billion from those earning more than $250,000
- $2.3 Trillion from familes earing $250,000 or less

"The President’s proposals to index the AMT for inflation and to extend various tax provisions contained in EGTRRA and JGTRRA would have, by far, the greatest budgetary impact. Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3.0 trillion."
http://www.cbo.gov/ftpdocs/112xx/doc11231/frontmatter.shtml"

In other words, to gain the most revenues, ALL the tax cuts would have to expire.... but without serious reductions in spending we will still be drowning in debt.

[PRR Fan]

11:41 AM on 05/24/2011

What a crock. First, government revenues went UP following the Bush tax cuts, the same as they did when Coolidge, Kennedy and Reagan lowered taxes before him. Second, tax cuts don't contribute to debt, spending does. I lost a job and got another that paid only 75% of what I'd earned previously. And yet, somehow, I didn't go into debt. The same way as any private individual or business would do, I modified my budget to reflect my lower income. But again, the Bush tax cuts increased revenue.

[FaceReality2]

11:35 PM on 05/24/2011

"Yes, federal revenues have been increasing since 2003 [Update: This diary was posted in 2007. 2008 revenues are projected to decline in real terms and even in nominal terms] but, needless to say . . . that coincidence hardly establishes causation. While some talk show blowhards, politicians and editorial page / op-ed writers persist in contending that the Bush tax cuts have had a net positive impact on revenues, the strong, broad consensus among economists -- including conservative economists and Bush's own current and former top economists -- is to the contrary: The Bush tax cuts have had a net negative impact on revenues (i.e., revenues would have been higher, and would be higher today, if the Bush tax cuts had not taken place)."

http://swordscrossed.org/node/1671

[GJCO-JMH]

12:14 PM on 05/25/2011

And in the same article...
"Most economists are skeptical of both polar cases. They believe that taxes influence national income but doubt that the growth effects are large enough to make tax cuts self-financing."
http://post.economics.harvard.edu/faculty/mankiw/files/dynamicscoring_05-1212.pdf

In other words, when all private citizens get to keep more of their own money and the economy grows, it doesn't offset government spending. Great.

Sooooo, if the spending curve keeps rising more than taxes, even confiscating 50% of all private wages will continue to not raise enough revenue. Heck, why not just confiscate private bank accounts. That'll show the citizenry who's in charge of our money! Balance the Government coffers in no time at all!

[PRR Fan]

12:26 PM on 05/25/2011

I read over the quotes in the link you provided and I have to express a bit of doubt as to their veracity. The reason for this is as follows, the increase in tax revenues resulted from higher economic activity and growth, ie a smaller piece of a larger pie turns out to be bigger than a bigger piece of a smaller pie. These economists seem, from what I can tell as an admitted amateur, to be generating their revenue projections based upon the economic growth post-tax cuts rather than upon the rates of growth that prevailed prior. This type of wrong-headed base-line budgeting begs the question would the increased economic activity have occurred without the tax cut? I would argue that it would not.

At any given moment, there is a finite amount of capital in the economy. Tax cuts frees up more of that capital to be invested by business and individuals, who make spending decisions based upon economic considerations rather than political considerations as is done by the government. Further, lower taxes mean a greater potential reward without increase in risk, which spurs investment and entrepreneurship. Finally, as was stated earlier, government revenues have increased every time taxes have been cut in the last century, so the idea of tax cuts costing the government money seems more to me like standing on one’s head and then telling the rest of the world that they’re the ones who’re upside-down.

[FaceReality2]

10:42 AM on 05/24/2011

"This has been obvious since the start when Bush's first budget turned Clinton's surplus into a deficit. That year, the Congressional Budget Office for the Republican-controlled Congress attributed 43% of the debt to Bush's tax cut. After the Republicans won the mid-terms in 2002, the dumbasses gave us another tax cut. Of course, Bush also began the state of Texas on its road to fiscal ruin with his property tax cuts of 1997. Not only was Bush obviously a learning disabled dyslexic that couldn't talk, he also couldn't add."

[GJCO-JMH]

12:41 PM on 05/25/2011

Oh please. As long as people like yourself keep buying into the partisan bickering, nothing is likely to change. We can't have it both ways - low taxes and lots of government goodies from an ever-growing, inefficient and intrusive government bureaucracy.

Contrary to partisan propaganda from the Left, "the Bush tax cuts" let people earning less than $250K keep more than $2.3 TRILLION dollars (over 10 years). Letting the cuts expire only for those earning more than $250K will gain the Government less than $700 Billion over the same 10 years.

That said, the Bush cuts and other policies took millions of people off the tax rolls entirely. That's not good either.. when almost half the population has little or no skin in the game.

[danglines]

10:40 PM on 05/23/2011

Really, I just can't believe how far the dems will go to make bush look like an idiot!

[FaceReality2]

10:30 AM on 05/24/2011

You mean the Bush who started two wars and paid for them with borrowed money? The Bush who signed into law a Medicare drug benefit that allows the drug companies to charge whatever they want and forbids Medicare from negotiatin­g drug prices? The Bush who enacted tax cuts and didn't pay for them by lowering spending? The Bush whose party (along with Clinton's endorsement) deregulate­d the banks and allowed commercial banks to invest in unregulate­d mortgage backed securities­?

[PRR Fan]

11:39 AM on 05/24/2011

Aren't all those war bonds that Roosevelt used to fund WWII debt instruments?

[maigrey]

06:52 AM on 06/04/2011

Nobody is trying. He pretty much did it to himself.
Come on... mission accomplished??????? Please, that man couldn't find his way out of a paper sack.

[cupoftea2]

10:02 PM on 05/23/2011

I know nobody likes taxes, including me, but if our nation has entered two wars but didn't commit to funding them from year to year, shouldn't we now pay for those wars? Is there any talk about a war tax, something that can begin to pay back what we borrowed/are borrowing for Iraq and Afghanistan? If you voted for or supported these wars, it would seem that you would need to support this war tax or to have a real way to pay for it. Cutting govt spending is only a partial answer for the entire debt. If supporting the wars is patriotic to many Americans, those Americans should, I would think, also see this war tax as a patriotic burden. Could this fly?

[FaceReality2]

12:50 AM on 05/24/2011

The rich should pay for the wars. Their man Bush started them, and the rich profited from them.

[Y3rMawm]

10:48 PM on 05/24/2011

Perhaps you pay less at the gas pump because of those wars? If this is indeed the case, you are profiting as well.

[sif2988]

11:34 AM on 05/25/2011

they were bushes wars. then obama escalated and continued them. now, they're obama's wars.

[Harbinger08]

07:49 PM on 05/23/2011

This is the final chapter of the Reagan Republicans "Starve the Beast" strategy to bankrupt the Federal Government in order to force the dismantling of FDR'S New Deal. Massive defense spending coupled with steadily reducing taxes for the most affluent has done the job and allowed the richest to make a pile of money at the same time. If more people don't start learning how to vote to protect their interests they are going to get what they deserve.

[greenbubba]

06:16 PM on 05/23/2011

Turn off the trickle...down!

[maigrey]

06:55 AM on 06/04/2011

Drowning in republican sewage instead green backs?

[bridge to somewhere]

05:02 PM on 05/23/2011

The only solution, CUT THEM MORE!

Frikkkkin right wing voters are f0000ls to support that tw!sted party of oligarchs and billionaires.

[TXFIRE]

06:45 PM on 05/23/2011

Don't just look in the pockets of the right wing... There is a load of change sitting in the pockets of left wing too... They just hide it better... They all are a bunch of crooks

[jffrymg]

04:53 PM on 05/23/2011

Raise the damn taxes!!!! Or, at least collect what is owed.