Tuesday, December 14, 2010

the obvious counter-example

i don't understand the tax cuts increase revenue argument when applied to the question of whether to extend the 2001 bush-era tax cuts. the argument is based on the idea is that if you cut taxes, people hold on to more of their own money and then tend to invest it in businesses. that in turn generates more revenue for the government as those new businesses pay taxes on their new revenue. proponents justify larger cuts on upper income people because those are the "investor class", who would be inclined to make the kind of investments that end up stimulating the economy.

the 2001 tax cuts were phased in over ten years, with the biggest cuts coming at the very end, that is, the cuts that primarily benefited the wealthy. and by "very end" i mean 2008 through 2010.

if tax cuts really stimulate the economy and end up generating more tax income from that increased economic activity, why the fuck haven't we seen anything like that for the past three years? to review, in 2008, just as the bush tax cuts were giving major breaks to the "investor class", the american economy almost completely collapsed. that was followed by pathetic economic performance in 2009 (when even more tax cuts for the wealthy kicked in). when the full force of the upper income tax cuts came into effect in 2010, we saw only anemic economic performance and exploding deficits.

if proponents of the "bush tax cuts help the economy" theory were right, the american economy would have looked totally different over the past three years. instead the record shows pretty stark evidence that they are completely wrong. not that the modern GOP cares much for data. but why isn't anyone calling them on this? why is the public debate based on the fantasy that the tax cuts are some kind of new thing, and not the extension of a policy that has already made our deficit explode with little-to-no economic growth benefit?