This tax day, one of the big Republican talking points is that cutting taxes raises revenue. The theory is that if businesses and the wealthy pay less in taxes, they have more to spend on creating jobs.
The trouble with this is that it’s not true.
But even conservative economists have cast doubt on this claim.
“Federal revenue is lower today than it would have been without the tax cuts. There’s really no dispute among economists about that,” said Alan D. Viard, a former White House economist under George W. Bush, in a 2006 Washington Post article.
Robert Carroll, deputy assistant Treasury secretary for tax analysis, also said that no one in the administration believes tax cuts created a surge in revenue. “As a matter of principle, we do not think tax cuts pay for themselves,” Carroll said.
Bruce Bartlett, a Reagan economist who became a strong critic of the Bush administration’s policies, used data from the Office of Management and Budget in a blog post last year to illustrate how “the Bush tax cuts reduced revenue rather significantly.”
Ronald Reagan, in fact, demonstrated how untrue it is that cutting taxes raises revenue:
Reagan enacted a major tax cut his first year in office and government revenue dropped off precipitously. Despite the conservative myth that tax cuts somehow increase revenue, the government went deeper into debt and Reagan had to raise taxes just a year after he enacted his tax cut. Despite ten more tax hikes on everything from gasoline to corporate income, Reagan was never able to get the deficit under control.
(See also here and here.)
Reagan—Ronald Reagan, the icon of today’s Republican party!—realized that cutting taxes decreased revenues and increased the debt. And he responded by raising taxes. He raised them in regressive ways that didn’t fix the mess he had made, but in comparison to politicians like Paul Ryan and John Boehner, whose response to creating a mess is to see if they can’t turn it into a disaster, he was practically a moderate.
Tags: budget, economy, taxes
A big round of teacher layoffs is coming. From the NY Times:
School districts around the country, forced to resort to drastic money-saving measures, are warning hundreds of thousands of teachers that their jobs may be eliminated in June.
The districts have no choice, they say, because their usual sources of revenue — state money and local property taxes — have been hit hard by the recession. In addition, federal stimulus money earmarked for education has been mostly used up this year.
As a result, the 2010-11 school term is shaping up as one of the most austere in the last half century. In addition to teacher layoffs, districts are planning to close schools, cut programs, enlarge classes and shorten the school day, week or year to save money.
Arizona:
Tolleson Union High School District is laying off 207 employees, including 34 classroom teachers, to balance a budget hit by state funding cuts, climbing expenses and the March failure of a crucial budget override election.
That’s nearly 19 percent of the district’s workforce.
Iowa:
Dozens of Cedar Rapids School employees learned on Friday they will no longer be with the district.
The school board approved cutting 60 positions earlier this week, including 23 teachers.
Ohio:
The Cleveland school board appears ready to lay off more than 650 teachers union members.
Michigan:
The cash-strapped Flint school district will lay off 261 teachers at the end of the year.
The Flint Community Schools Board of Education approved the layoffs Wednesday night.
These cuts are also affecting state colleges and universities. In New Jersey:
Facing record deficits, Gov. Chris Christie has proposed cutting $173 million in state aid to universities, a nearly 8 percent reduction. New budget language released last week also included a surprise cap on tuition proposals, further squeezing the bottom lines at state colleges and universities.
The first battle will take place Wednesday afternoon in Trenton, during an Assembly budget hearing on the governor’s proposals. The stakes are high for the universities, which have endured cuts in state aid for seven of the past 10 years, according to union officials.
“Immediate effects include larger class sizes, fewer faculty hires, fewer class offerings, cutbacks in services and hours, and cutbacks in technology purchases and facilities renovations,” the New Jersey Association of State Colleges and Universities said.
Georgia:
As universities across the nation face budget shortcuts, Georgia is trying to meet the demands of a $385 million budget cut from the state’s higher education budget.
Chancellor Erroll B. Davis, responsible for the 35 public colleges and universities in Georgia, says that in order to meet this budget cut, the colleges and universities would have to increase tuition by 77 percent. Chancellor Davis, along with other university presidents in the state of Georgia, is attempting to discuss specific budget cuts, rather than have the state House-Senate joint budget committee make budget cuts wherever they choose.
A survey of community college presidents finds that as unemployment rises, so does the enrollment at community colleges. At the same time, these schools are facing significant budget cuts.
It’s all grim news on the education front. That’s why the Local Jobs for America Act is so important.
Tags: budget, budget cuts, Education, Local Jobs for America Act
The Center on Budget and Policy Priorities recently released a report on state budget cuts caused by decreasing tax revenues. Over 45 states have already made deep cuts, and in 2011, another round of cuts is expected:
With tax revenue still declining as a result of the recession and budget reserves largely drained, the vast majority of states have made spending cuts that hurt families and reduce necessary services. These cuts, in turn, have deepened states’ economic problems because families and businesses have less to spend. Federal recovery act dollars and funds raised from tax increases are greatly reducing the extent, severity, and economic impact of these cuts, but only to a point.
The cuts enacted in at least 45 states plus the District of Columbia in 2008 and 2009 occurred in all major areas of state services, including health care (29 states), services to the elderly and disabled (24 states and the District of Columbia), K-12 education (29 states and the District of Columbia), higher education (39 states), and other areas. States made these cuts because revenues from income taxes, sales taxes, and other revenue sources used to pay for these services declined due to the recession. At the same time, the need for these services did not decline and, in fact, rose as the number of families facing economic difficulties increased.
These budget pressures have not abated and, in fact, are increasing. Because unemployment rates remain high — and are projected to stay high well into next year — revenues are likely to remain at or near their current depressed levels. This is likely to cause a new round of cuts. Based on new, gloomy revenue projections, governors have begun issuing their budget proposals for the 2011 fiscal year (which begins on July 1, 2010 in most states), and the proposed cuts go even further than those that states have enacted to date.
So, as the need for services increases, the budgets for programs that help those who are most vulnerable are cut.
This slideshow gives a brief and helpful overview of the situation, and an idea of how long it’s likely to take to dig out of this.
This website has a lot of useful information, including a look at the ABC’s of State Budgets, an intro to the Federal Budget Process and some all round helpful information and definitions of terms that we hear all the time, (like Pay as You Go, Budget Reconciliation, or Earned Income Tax Credit) but may not fully understand unless we are budget geeks.
Bottom line – the news isn’t good, and the only way out is to create jobs, as quickly as possible.
Tags: budget, economy
Asked about that Republican budget, the one that privatizes Social Security and Medicare, House Minority Leader John Boehner didn’t know quite what to say.
Since he was sort of all over the place, I think we better just translate. Shorter, more direct John Boehner: “I don’t disagree with anything in the budget, but I know it’s terrible politics, so this is me distancing myself from it.”
True, this plan was not officially THE single plan from his party. No, it was the plan of their top budget guy, and one said top budget guy says has a lot of support from his party’s leadership. But if Boehner’s response is any guide, don’t look for anyone else to release specific proposals anytime soon. Because specific proposals have a nasty way of being really unpopular when they’re issued by Republicans, what with all the cutting and privatizing of very popular programs.
Tags: budget, Medicare, social security
Meet the new Republican budget plan, same as the old Republican budget plan.
Privatize Social Security.
Privatize Medicare.
Raise the age of Medicare eligibility to 70.
Freeze nonsecurity spending until 2019.
All that, and a budget surplus at some point in the late 21st century.
We won the Social Security fight in 2005, the last time Republicans tried to privatize it. Since then, we’ve watched the stock market—the source they want people to rely entirely upon for their retirement—collapse. Imagine if Social Security had been privatized in 2005 and America’s retirement security had been shifted into the stock market by fall 2008. What would that have looked like?
Yet they’re back for another crack.
Medicare won’t just be privatized, either. It’ll be privatized with vouchers that grow more slowly than insurance costs. So that’s fantastic policy, too, and should be very popular among senior citizens and people who hope someday to become senior citizens.
This is nuts. It’s also what the Republican party wants, even when they try to pretend otherwise.
Tags: budget, Medicare, social security
This recession was years in the making, but some of Pres. Obama’s critics want us to believe that because he didn’t eliminate unemployment at the snap of his fingers, his policies—especially the American Recovery and Reinvestment Act—aren’t working.
A couple days ago, the New York Times gave us a this person vs. that person report: members of the Obama administration say the recovery act is creating jobs, while the usual suspects say it is the worst thing EVER.
There is still a lot that’s unknown about how the president’s policies are working—and we can’t know how bad things would have gotten without the actions he took. But it’s not just he said/he said, either.
That’s why I want to look at another set of information on this. The Center on Budget and Policy Priorities did a study looking at the impact of the stimulus on the budgets of New York and Virginia. These states are a great source of information because both had large projected budget shortfalls, and both had proposed budgets established before the recovery act was passed. The budgets they actually ended up with, then, which came after they had received significant federal aid, show us where cuts that were already planned got uncut.
The bottom line? In Virginia, the recovery funds closed 37% of the shortfall, and in New York, 31%.
A few of the specifics for Virginia:
- Enabled the state to retain its funding for some 13,000 non-teaching school personnel — such as janitors, psychologists, and administrative assistants — that the governor had proposed eliminating.
- Allowed the state to reduce its planned cut to state colleges and universities from $296 million to approximately $169 million(not taking into account other smaller changes enacted by the legislature), lessening the need for tuition increases.
- Prevented closure of three hospitals and treatment centers serving persons with mental health needs.
- Averted a proposed cut in aid to local sheriffs’ departments.
For details on these cuts, go to the CBPP report. But note that it’s not just that people with mental health needs, including 844 children and adolescents, would have gone without care and maybe ended up in juvenile detention facilities rather than getting the treatment they needed—what would have happened to the staff of those hospitals? We’re talking about both services and jobs, in other words.
Tags: budget
