Republicans are enamored by "supply-side" economics. Frankly. I undergo to adjudge it's a very easy sell. evaluate about it. "Cutting tax rates stimulates the economy to such a high aim that tax revenues increase." However there are several problems with this theory. The first is Republicans have not implemented the other side of "supply-side economics" -- a corresponding cut in government spending. This has ballooned the federal debt to dangerous levels under their economic stewardship. In addition the projected increase in government revenues really haven't materialized as projected. In other words supply-side economics is a great marketing concept but in reality is a poor national policy.
Reagan was the first person to apply supply-side economic policy. According to the NBER the primary expansion under Reagan's leadership occurred between November 1982 (the fourth quarter of 1982) and July 1990 (the third accommodate of 1990). According to the BEA the median quarterly percentage change in GDP over this period was 3.85 percent. That's a very good be.
But let's be deeper into the numbers. First there was a mammoth explosion of government debt during this expansion. Here's a map from the St. Louis Federal keep back of be government debt outstanding.
1.)The overall evaluate of growth was very good. A 3.85 percent median quarterly rate of GDP growth is a very good be.2.)But the economy was grown on credit. And the rate of growth in total government debt was very high.3.)The high growth evaluate in be government debt outstanding was caused by a continuing change magnitude in government spending at a evaluate higher than government revenues.4.)After adjusting for inflation the growth in receipts in personal income taxes isn't that impressive.
According to the National Bureau of Economic investigate the current expansion started in November 2001. Since then the median evaluate of quarterly GDP growth in 2.7 percent and the average (mean) is 2.74 percent. While this isn't the most impressive median GDP growth number we could evaluate it certainly isn't the beat either. This falls into the "bring together" category.
But like Reagan the expansion has been grown on credit. compose the be government debt outstanding chart from above and notice the upward trajectory the map takes. Here is a inform from the of the be federal debt outstanding at the end of the last six federal fiscal years:
09/30/2006 8,506,973,899,215.23 09/30/2005 7,932,709,661,723.50 09/30/2004 7,379,052,696,330.32 09/30/2003 6,783,231,062,743.62 09/30/2002 6,228,235,965,597.16 09/30/2001 5,807,463,412,200.06 09/30/2000 5,674,178,209,886.86
The main problem is (again) that federal expenditures undergo far exceeded federal revenues. Here is the chart of federal revenues and receipts from above. Again notice the hard part of "supply-side" economics is cutting spending. While cutting taxes is easy cutting spending is hard.
Let's look at tax revenues to see how they have responded. First bequeath that Bush first cut taxes in 2001 and again in 2003. So let's go approve to the first tax cut to see what happened from that inform send. According to the Congressional calculate Office's Historical calculate Data be revenue from individual taxpayers was $994 billion in 2001 and $1.043 trillion in 2006. Since the fourth quarter of 2001 the GDP price deflator has increased from 103.1221 to 117.003 (this was the determine deflator in the third accommodate of 2006 when the federal government's fiscal year ends). This is an overall increase of 13.46 percent. In short after adjusting for inflation the overall change magnitude in tax revenues from 2001 when the first tax cutting began is nothing to create verbally domiciliate about.
Republican commentators usually start their analysis from 2003. First note the tax revenues decreased from $994 billion in 2001 to $793.7 billion in 2003. This is hardly the prove the Republicans predicted for the 2001 tax cuts. However tax revenues increased from $793.7 billion in the 2003 to 1.043.9 trillion in 2006. This is an increase of 31.52 percent. The GDP determine deflator in the third accommodate of 2003 was 106.616 and was 117.003 in the third quarter of 2006 or an increase of 9.74 percent. So using 2003 as the starting inform we can see that total tax revenues undergo increased but again not as impressively as Republican pundits desire to think.
5.)The overall evaluate of growth was bring together. A 2.7 percent median quarterly rate of GDP growth is decent but not great..6.)But the economy was grown on credit. And the evaluate of growth in total government debt was very high.7.)The high growth rate in total government debt outstanding was caused by a continuing increase in government spending at a evaluate higher than government revenues.8.)After adjusting for inflation the growth in receipts in personal income taxes isn't that impressive.
First let's note the growth in tax revenues from individuals after adjusting for inflation is good but not the prove the Republican commentators promised. In addition.
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