The figures released by the administration show revenue some $100 billion greater than the $2.2 trillion forecast in February, with the deficit at least that much smaller than the $390-billion forecast. Naturally yesterday's Wall Street Journal editorial page thought this was just peachy news. In a piece called "Soaking the Rich" they tried to argue that
"even Washington can't avoid the obvious forever: to wit, the gusher of revenues flowing into the Treasury in the wake of the 2003 tax cuts.
...
The real news, and where the policy credit belongs, is with the 2003 tax cuts. They've succeeded even beyond Art Laffer's dreams, if that's possible. In the nine quarters preceding that cut on dividend and capital gains rates and in marginal income-tax rates, economic growth averaged an annual 1.1%. In the 12 quarters -- three full years -- since the tax cut passed, growth has averaged a remarkable 4%. Monetary policy has also fueled this expansion, but the tax cuts were perfectly targeted to improve the incentives to take risks among businesses shell-shocked by the dot-com collapse, 9/11 and Sarbanes-Oxley. This growth in turn has produced a record flood of tax revenues, just as the most ebullient supply-siders predicted.
This leads them to conclude, crazily: "Because of the tax cuts, the still highly progressive U.S. tax code is soaking the rich. Since when do liberals object to a windfall for the government?"
Haha
It's all here.
Alas, as Joel Haveman writes, here, it's all nonsense:
This will be the third year in a row that the administration put forth relatively gloomy deficit forecasts early on, only to announce months later that things had turned out better than expected.
"The White House would have signaled that it was serious about the budget if it had decided not to spin the numbers," Stanley Collender, a budget specialist with Qorvis Communications, wrote for National Journal. "The fact that it is choosing to do so points out directly that, in spite of what appears to be good numbers, nothing much will have changed."
"Even with these re-estimated revenues," said Robert Greenstein, the center's executive director, "there's something a little unreal about celebrating deficits of 'only' $300 billion, with the baby boom crunch just around the corner."
Contrary to the administration's rhetoric, Greenstein said, tax revenue has grown more slowly during this period of economic expansion than during previous expansions. Adjusted for inflation, he said, government revenue this year will probably fall short of the level it reached six years earlier. And as a share of the U.S. economy, revenue will be about 10% short of its 2000 level.
Analysts at the center said revenue in 2006 would remain about $200 billion short of the level the White House and Congressional Budget Office projected in 2001, before the tax cuts.
And hey, look, the entire argument is nonsense, as it turns out: A recent study by William Niskanen of the conservative/libertarian Cato Institute, found that the conservative "starve the beast" strategy with regard to taxes does actually have the opposite effect in the real world. Beginning in 1981, Niskanen discovered to his shock and profound surprise that tax cuts tend to produce more spending, while tax hikes tended to produced less. (He hypothesizes that tax cuts make government cheaper, so voters want more of it.) There's a bit more here but I don't seem to be able to find the whole study.
Jon Chait has more and so does Brad DeLong.
Baseball, hotdogs, apple pie and what? (parental advisory)
Thoughts on Neocons, read Josh: Here.
Put simply, do we not detect a pattern in which the foreign policy neoconservatives strike out boldly on some foreign policy adventure, flop right down on their faces and then present the cause of their undoing as a novel insight wrestled from the maw of history when in fact, to everyone else except for them, this 'insight' was completely obvious and predictable from the start?
Kaplan says that America can't contain the Iraqi's "sectarian rage" nor "reprogram [the Iraqi's] coarsened and brittle cultures." As Louis Menand put it in The New Yorker, quite relatedly, when reviewing Francis Fukuyama's richly articulated discovery that regime change and preemption might not have been such a royal road to peace and democracy, "No duh!"
Correction: George McGovern was a B-24 bomber pilot, not a fighter pilot during WWII.
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