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Putting the $3.9 trillion extension of the Bush tax cuts in context

DebtTaxCutsJan2010projections_7-30-10_opt(2).jpg

More needs to be done to put the numbers involved in extending the Bush tax cuts in context, so consider this: There is no policy that President Obama has passed or proposed that added as much to the deficit as the Republican Party's $3.9 trillion extension of the Bush tax cuts. In fact, if you put aside Obama's plan to extend most, but not all, of the Bush tax cuts, there is no policy he has passed or proposed that would do half as much damage to the deficit. There is not even a policy that would do a quarter as much damage to the deficit.

The stimulus bill, at $787 billion, would do about a fifth as much damage. But that's actually misleading: The stimulus bill was a temporary expense (not to mention a response to an unexpected emergency). Once it's done, it's done. An indefinite extension of the Bush tax cuts is, well, indefinite. It will cost $3.9 trillion in the first 10 years. And then it will cost more than that in the second 10 years. Call that number Y. And then it will cost more than Y in the third 10 years. And so on and on into eternity. Comparatively, the stimulus bill is a tiny fraction of that. The bank bailouts, which were passed by George W. Bush and the Democrats in 2006, will end up costing the government only $66 billion. The health-care bill improves the deficit outlook.

Republicans and tea party candidates are both running campaigns based around concern for the deficit. But both, to my knowledge, support the single-largest increase in the deficit that anyone of either party has proposed in memory.

By Ezra Klein  |  September 15, 2010; 9:26 AM ET
Categories:  Taxes  
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Comments

Oh, there you go again, Ezra talking about numbers this and economics that.
The GOP doesn't want to hear this egghead mumbo jumbo!
Who needs facts when you got slogans.

Posted by: nffcnnr | September 15, 2010 9:58 AM | Report abuse

When dogmatic ideology confronts facts, the facts are part of a liberal, socialist atheist conspiracy of .... Fact.

Solutions? No. Fear, Hatred, Distortion, Distraction and Division is all Republicans have to offer America.

Posted by: thebobbob | September 15, 2010 10:06 AM | Report abuse

Completely, utterly, ridiculously not true.

These assumptions are so back asswords, that someone needs to go back to school and study economics and the effect of taxation on the economy.

Only 22% of economist polled (2 out of 10) feel that the Bush cuts for the wealthy should expire while extend for the middle & lower class. See NABE survey in WSJ:

http://tinyurl.com/25temb3

These are economist Ezra, not some mouth piece from the administration.

WSJ also polled 53 economist and here was their conclusion:

http://tinyurl.com/26kbsh6

*6 percent said no, all the tax cuts should be allowed to expire,
*24 percent said yes, but only for those making less than $250,000 a year,
*70 percent said that all the tax cuts should be extended.

Let's use some common sense here. If the economy was kicking butt, hey, I would be all for it, but it's not, and we need job creation, not higher taxes.

Economic output will decrease with higher taxes, which will reduce Tax Revenue.

I know it might be hard to grasp, but raising taxes will actually reduce revenue.

So once again, if Obama does not extend the tax cuts, HE, not the Republicans, will be responsible for damaging the deficit.

Posted by: marteen | September 15, 2010 10:08 AM | Report abuse

Am I mistaken, or did Ezra not say just two days ago that the Obama administration was proposing a 3 trillion indefinite extension of the Bush Tax Cuts for the Non Wealthy?

There is also a spending side to the deficit equation. Let's see if either side proposes to pay for their tax cuts with spending cuts and then compare the numbers.

But either way, it's insane.

Posted by: bgmma50 | September 15, 2010 10:16 AM | Report abuse

Fine. Take out the extension for the top 2%, and it is still $3 Trillion, a number that also dwarfs anything else that's been done, proposed, etc. But THAT $3 trillion is sexy enough to warrant an attempted re-branding as "Obama's tax cuts for the middle class". It is not just the Rs and Tea Partiers Ezra, and your attempts to paint it that way are disingenous, at best.

Posted by: bzod9999 | September 15, 2010 10:20 AM | Report abuse

All well and good, Ezra, but until you persuade some of your deficit-tutting colleagues (think Broder and Hiatt) this argument won't get the proper airing it deserves.

Posted by: scarlota | September 15, 2010 10:26 AM | Report abuse

People act like this is a tax increase for "the rich", as if this is a class of people that has been identified and targeted. It's not. It's a return to the marginal tax rates for the top two brackets prior to the Bush tax cuts. Earners who make enough to have income taxed in the top two brackets save more in the "middle class" tax cuts than the middle class, because they have more income in those brackets that's being taxed at the lower rate. People aren't categorized and taxed accordingly, income is.

Posted by: mp123 | September 15, 2010 10:31 AM | Report abuse

Ezra Klein writes, "More needs to be done to put the numbers involved in extending the Bush tax cuts in context...."

Yours is certainly a clever way of writing, "I am lying to America" and lying to America is precisely what you are doing with deliberate intent.

Klein, you have your arrogant elitist nose held so high you would drown in rainstorm. You have elevated your left liberal self to atop a white Ivory Tower so high, you can no longer see reality.

Those numbers of yours are absolutely meaningless. Those numbers are a fool's folly. Our America cannot sustain a debt which is greater than 50% of Gross National Product, not in our modern times. America is collapsing, is turning into a two bit Banana Republic. Those numbers of yours will never come to past, America will become a wasteland of impoverished peoples and wealthy politicians before any of those numbers will become reality.

You only need to look at Bell, California, to realize this future of America if our nation continues on this path of government corruption. Reality is, America is already Bell, California.

Klein, you are so very ignorant. You only see a solution of raising taxes. You are so stuck in this sense of entitlement, read welfare, you simply cannot realize reducing taxes and reducing the size of government is the solution to save our nation from Mexico Norte.

Americans are currently being taxed into the Soup Line, taxed into the Poor House, and ignorant fools like you come along and yell, "We need higher taxes!"

Americans simply cannot afford higher taxes; we have no money thanks to socialist fools like you.

This government chart you cite, your own words, both are deceitful fabrications designed to fool Americans. This borrow and spend policy, this tax and spend policy, those cannot be sustained. There is no money remaining to be borrowed from China nor Japan nor any other country. Americans have no money to pay higher taxes. Those numbers on your chart will never happen; America is bankrupt both financially and morally.

Your words, this chart, both are absolutely meaningless; a fool's fantasy and you are quite the fool, Ezra Klein.

Okpulot Taha
Choctaw Nation

Posted by: PurlGurl | September 15, 2010 10:34 AM | Report abuse

"The bank bailouts, which were passed by George W. Bush and the Democrats in 2006, will end up costing the government only $66 billion."

Ezra, perhaps you mean the "auto" bailouts will be a cost to the government(taxpayers). The "bank" bailouts ended up being profitable. Note that bailouts are bad even if the government makes money.

"President Obama has passed or proposed that added as much to the deficit as the Republican Party's $3.9 trillion extension of the Bush tax cuts."

However, the problem is clearly spending. In 2050, even without the Bush tax cuts the national debt will be over 200% of GDP and rising by 50% of GDP each decade.

In any case, the true measure of taxation is spending. All spending is paid for by taxes.

The sad fact of the matter is we have no real options here as each party is content to pick our pockets as it drives us toward the cliff (though one party might be hitting the gas a little harder than the other), all the while being cheered on by the base.

Posted by: justin84 | September 15, 2010 10:49 AM | Report abuse

Chris Christie in 2012. If there's a God in heaven.

Posted by: bgmma50 | September 15, 2010 11:01 AM | Report abuse

What's the problem? The Republicans just said that they will balance the budget the same way that Bush balanced the budget.

Posted by: AMviennaVA | September 15, 2010 11:07 AM | Report abuse

The projection appears somewhat meaningless beyond 2030, when even the unadjusted debt exceeds 100% of GDP. Under that circumstances, the economy, attmepting self-correction despite the best efforts of humans, would hit against the wall of either tax increases (think the Fountainhead), spending decreases (real spending decreases, massive cuts do not equal reducing spending from a 4% increase to a 1% increase), inflation, or monetary devaluation (think Zimbabwe)>

If we do not make the necessary choices on the spending side (the only tax side approach that would work is to collect moneys for the sole purpose of buying up treasury bills and notes), they will be made for us.

Posted by: PALADIN7E | September 15, 2010 11:34 AM | Report abuse

Stevenson insists he holds no grudge against the business community for its unwillingness to hire. "I understand they have to hoard the money because they don't know what's coming around the corner," he said. "They wonder what DC's going to do. ... They know healthcare reform is around the corner. Everybody's real tentative."
And even though he's been forced to move back in with his parents and has virtually no income, he opposes Obama's proposal to let some tax cuts for the wealthy, dating back to George W. Bush's presidency, expire at year's end in order to raise revenue and reduce the deficit.
"How is more people, keeping more of the money they earn, bad for the economy?" he said. "The answer is -- it's not."
Perhaps most surprisingly, Stevenson says he's worried Obama and the Democratic Congress may move to extend unemployment benefits past 99 weeks early this fall in an effort to curry popular support ahead of the midterm vote.
"That could be the October surprise," he said, "to try to buy people's votes."

Posted by: corebanks1940 | September 15, 2010 11:42 AM | Report abuse

Ezra, you forgot to mention that studies have shown that the tax cuts have had a net negative effect on economic growth and if extended will continue to do so.

These tax cuts need to expire not only to help the deficit, but also to help the economy.

Posted by: zackool | September 15, 2010 11:52 AM | Report abuse

"Economic output will decrease with higher taxes, which will reduce Tax Revenue.

I know it might be hard to grasp, but raising taxes will actually reduce revenue."
This is an utter fabrication, often regurgitated by misguided, uninformed right-wingers. Even economic advisers to President George W. Bush have debunked this preposterous claim. That you heard it on talk radio, fella, doesn't make it the truth.

Posted by: CompulsiveCollector | September 15, 2010 12:23 PM | Report abuse

ROFLMAO!

Ez, you using CBO projections? Pretty funny.

To consider using you must 1st X10 all its projected costs for large gov programs. In short, without HUGE and DEEP cuts in Fed spending we can't raise taxes enough to keep the deficit from ballooning. Eventually the US will run out of creditors (we ran out of money LONG ago) and the economy will come crashing down faster than the Wiemar Republic's did. Neither party has put forward any workable plan to address...

Posted by: illogicbuster | September 15, 2010 12:27 PM | Report abuse

"Ezra, you forgot to mention that studies have shown that the tax cuts have had a net negative effect on economic growth and if extended will continue to do so.

These tax cuts need to expire not only to help the deficit, but also to help the economy."

Oh boy studies! Awesome! Ezra you are so totally hipster how did you not discuss these studies? Please post these studies to the journolist so the whole gang can repeat them.

Posted by: permagrin | September 15, 2010 12:56 PM | Report abuse

"Economic output will decrease with higher taxes, which will reduce Tax Revenue.

I know it might be hard to grasp, but raising taxes will actually reduce revenue."

This is an utter fabrication, often regurgitated by misguided, uninformed right-wingers. Even economic advisers to President George W. Bush have debunked this preposterous claim. That you heard it on talk radio, fella, doesn't make it the truth.

......................

Really? Really?

think about it. If the government taxed 100%, what would the revenue?

$0. Nada, because no one would work or money would be paid under the table.

What if the government taxed at 0%? Obviously it would be $0.

So there, on just the basis of common sense, has to be a point where tax revenue's are at a peak given a tax %. In tough economic times, it's lower. During boom economic times, it's higher.

What times are we in now?

But, you don't have to listen to me, listen to the economists, not the politicians...

Posted by: marteen | September 15, 2010 1:04 PM | Report abuse

To Purl Gurl:

I'm really sick and tired of seeing your long-winded, ridiculous posts. You never provide any counterarguments, other than to fling your venom in any direction possible. Please try something else.

Ezra Klein's article is excellent. This is exactly the kind of information that is needed to understand the effects of the Bush tax cuts for the rich. Context is hugely important, and something that is almost always ignored by the MSM.

Posted by: dougd1 | September 15, 2010 1:31 PM | Report abuse

This reporter needs to go back to school and learn to get the facts correct. He also needs to take economics 101 again. This is another liberal attack on a good plan to get our country back going again. It is typical of the agenda the Post has.

The American people are speaking through the ballot box against tax and spend politicans and saying no to back room deal, and kicking out people who are not acting in the best interest of taxpayers.

Posted by: tonyjm | September 15, 2010 1:48 PM | Report abuse

The Laffer curve - cutting taxes raises tax receipts - has been largely discredited. Even the chief economist for the 2nd President Bush recognized (as most economists do) that federal tax revenues are less than they would otherwise have been absent the tax cuts.

With the exception of a capital gains tax cut, which would encourage sales to realize a gain at a reduced tax rate and could, only in the short term, increase revenues, there are no tax cuts (at least none in the proposed Bush tax cuts extension) that increase revenues to the government.

The dollar loss of most tax cuts is not 1 for 1, because there is usually some economic stimulative effect. Depending on the tax cut, 10 to 60 percent of the lost revenue might be returned to the government from new economic activity. But make no mistake, there is still a significant net loss to the government.

I think most reasonable people would agree that when you are already operating at a deficit, borrowing money to pay for a tax cut is horrendous fiscal policy.

Posted by: Pericles3 | September 15, 2010 2:08 PM | Report abuse

Hey Ezra, how about if we compare some apples to apples. Give us a graph, side-by-side to this one, of what the deficit would look like if the cuts for the top two margins are allowed to expire, but the cuts for everyone else are permanently extended. Something tells me that the graph won't look much different. You're just an idiot with an agenda. It's pathetic.

Posted by: lopence | September 15, 2010 2:10 PM | Report abuse

Ezra's chart is completely wrong because like all good liberals he assumes the money belongs to the government. Keep the tax cuts and reduce federal spending to balance the budget. OMG big government would not exist.

Posted by: topgun97365 | September 15, 2010 3:48 PM | Report abuse

We all understand that less tax income means that they have less to spend, what most people want is the government to spend less and leave our money alone.

It would not be so hard to sell taxes if people felt they got value out of the money they owe in taxes.

Posted by: flonzy1 | September 15, 2010 3:53 PM | Report abuse

The President's class-warfare, tax-the-rich rhetoric is not helping anyone. He forgets that according to the IRS, the top 1% of taxpayers provide the IRS with more revenue than does the bottom 95%. Is that fair? And 45% of a households pay no Federal income tax at all while about half the households get some kind of government check each month. Why the insistence that the rich pay their "fair share" when they are already paying more than that.

Posted by: MrBethesda | September 15, 2010 3:56 PM | Report abuse

Well said, Doug. I hope everyone who reads the tendentious garbage Purl Gurl dumps here will take the time to hit the "report abuse" button to get her permanently banned from the site.

Posted by: DCSteve1 | September 15, 2010 4:01 PM | Report abuse

If you liked Bush.......

You have to love his tax cuts.

WHO NEEDS A BIG NATION WITH BIG HIGH QUALITY SERVICES, ANYWAY ?

Posted by: vze4k4bh | September 15, 2010 4:17 PM | Report abuse

The analysis here assumes no cuts in spending. Accurate if the Dems stay in control (and unfortunately possible under the Repubs). If the Repubs can ever stick to their published policy of cutting spending with taxes then the analysis is false and wage earners can keep their wages while the deficit does not grow.

Posted by: jonessk | September 15, 2010 5:03 PM | Report abuse

We need to eliminate tax cuts for the rich! Our economy isn't bad enough yet, Obama's plan of ruining the country isn't complete yet, eliminating the the Bush tax cuts for the wealthy should just about do it.

Posted by: phines1 | September 15, 2010 5:35 PM | Report abuse

Obama once declared these reckless unpaid for tax cuts and wars.

Now they are his.

Posted by: cautious | September 15, 2010 5:46 PM | Report abuse

DOUGD1 comments, "I'm really sick and tired of seeing your long-winded, ridiculous posts."

Then stop reading my comments. DUH!

Okpulot Taha
Choctaw Nation

Posted by: PurlGurl | September 15, 2010 8:01 PM | Report abuse

DCSTEVE1 comments, "Well said, Doug. I hope everyone who reads the tendentious garbage Purl Gurl dumps here will take the time to hit the 'report abuse' button to get her permanently banned from the site."

Poor boy! I hurt your left liberal sissy boy feelings.

Message you are sending to readers is,

"I disagree with you therefore I will kill you."

You are a Muslim of a Taliban variety, yes?

Okpulot Taha
Choctaw Nation

Posted by: PurlGurl | September 15, 2010 8:08 PM | Report abuse

This CBPP chart reminds me of human evolution.

Early humans were an average 3 feet tall.

In time, humans became an average 4 feet tall.

By the time of Christ, humans were an average 5 feet tall.

Today, humans are an average 6 feet tall.

Therefore, in the future, humans will be an average 9 feet tall.

In the far future, humans will be an average 18 feet tall and still growing.

Sure! No consideration is given to natural events which will halt this growth pattern, such as Mother Nature and Her survival of the fittest.

This is precisely the same as assuming our national debt will continue to grow because no natural events will halt this, such as no money to borrow and no money to tax.

"Sorry, America, your credit is terminated."

"Sorry, America, your citizens have no money to tax."

Assuming this CBPP chart reflects reality is an act of idiocy.

America can choose between lowering government spending voluntarily or having government spending halted by bankruptcy. There are natural events which will prevent this projected level of debt, and those natural events will not be pleasant.

This is literally impossible for America to reach the levels of debt projected by the CBPP. This chart is idiocy.

This CBPP chart is realistic and humans will 18 feet tall in the future.

Only a fool would present an argument based upon this CBPP chart.

Okpulot Taha
Choctaw Nation

Posted by: PurlGurl | September 15, 2010 8:25 PM | Report abuse

You are entitled to your opinions, but not the facts. You mislead your readers in the following statement:
"Republicans and tea party candidates are both running campaigns based around concern for the deficit. But both, to my knowledge, support the single-largest increase in the deficit that anyone of either party has proposed in memory."
The position of the Republicans is that these additional funds can be found by cutting federal spending. In fairness, you should have included this.

Posted by: edwardallen54 | September 15, 2010 9:58 PM | Report abuse

@edwardallen54 "Cutting federal spending?" Whoo hoo! I can't stop laughing. Stop, please!

Oh you mean the $300B spending FREEZE McConnell says will pay for a $4 TRILLION dollar tax cut?

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/14/AR2010091406838_pf.html

I don't think I've been alive long enough to see a republican reduce the deficit. What a joke! Whew, can't stop laughing!

Posted by: fakedude1 | September 15, 2010 11:11 PM | Report abuse

20.8 Million PRIVATE sector jobs CREATED under Clinton's top marginal tax rates of 39.6% (raised from 31%).

3.1 Million PRIVATE sector jobs LOST during the Bush's top marginal tax rates at 35%, as well as 5M manufacturing sector jobs lost.

There is NO evidence that tax cuts for the wealthy create jobs. None.

Some research suggests that higher tax rates actually encourage small business formation.

The top marginal tax rates are currently at historical lows. They’ve only been lower in 5 of the last 79 years:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213

The real question is "what's the best way to help the economy in the short-run and help establish budget discipline as the economy recovers?"

A: Let the tax cuts for the top 2% expire and extend the cuts for the other 98% for a year or two until the economy recovers.

Posted by: Bassplayer27 | September 16, 2010 7:00 PM | Report abuse

Let's beat this horse real dead: voodoo economics says that raising taxes on the wealthy reduces private sector investment, and so reduces job creation. All things being equal, this is true. So does cutting government spending (which does so by reducing effective demand for the things those jobs produce). So does government borrowing, by putting upward pressure on interest rates. However, all things aren't equal, and the first and third dynamics aren't in play as much as the second: 1) the wealthy are not going to invest in job creation when there is no demand, will actually invest more, and earn more, if government grows and increases demand; 2)interest rates are at historic lows and not being significantly affected by the current deficit spending. That means we need to increase government spending now to increase demand.

Increasing the tax burden on the rich is also justified through an alternative analytical lens: over the last 30 years, a larger share of GDP has been redistributed to the very wealthy. Tax burden needs to follow that trend for the economy to remain just.

Posted by: otterinwater | September 16, 2010 7:26 PM | Report abuse

So, if tax cuts are so great for the economy, why did it flounder for so long under Bush? Why did the whole thing fall over in the fall of 2008? If what you say is true, we should be humming along better than ever, because the tax cuts STILL EXIST RIGHT NOW.

At some point, you right-wing nut jobs have to point to some sort of success if you want to push your policies.

Put up or shut up.

Posted by: Froomkin_fan | September 17, 2010 7:34 AM | Report abuse

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