27-05-2003 12:44									#1
	US $350 Billion tax cut is likely $800 Billion Help yourself to an AD-FREE life

"'The lunatics are now in charge of the asylum.' So wrote the normally staid Financial Times, traditionally the voice of solid British business opinion, when surveying last week's tax bill. Indeed, the legislation is doubly absurd: the gimmicks used to make an $800-billion-plus tax cut carry an official price tag of only $320 billion are a joke, yet the cost without the gimmicks is so large that the nation can't possibly afford it while keeping its other promises.

"But then maybe that's the point. The Financial Times suggests that 'more extreme Republicans' actually want a fiscal train wreck: 'Proposing to slash federal spending, particularly on social programs, is a tricky electoral proposition, but a fiscal crisis offers the
tantalizing prospect of forcing such cuts through the back door.'

"Good for The Financial Times. It seems that stating the obvious has now, finally, become respectable.

"Yet by pushing through another huge tax cut in the face of record deficits, the administration clearly demonstrates either that it is completely feckless, or that it actually wants a fiscal crisis. (Or maybe both.)

"Here's one way to look at the situation: Although you wouldn't know it from the rhetoric, federal taxes are already historically low as a share of G.D.P. Once the new round of cuts takes effect, federal taxes will be lower than their average during the Eisenhower administration. How, then, can the government pay for Medicare and Medicaid — which didn't exist in the 1950's — and Social Security, which will become far more expensive as the population ages? (Defense spending has fallen compared with the economy, but not that much, and it's on the rise again.)

"The answer is that it can't. The government can borrow to make up the difference as long as investors remain in denial, unable to believe that the world's only superpower is turning into a banana republic. But at some point bond markets will balk — they won't lend money to a government, even that of the United States, if that government's debt is growing faster than its revenues and there is no plausible story about how the budget will eventually come under control."

More here:

http://www.nytimes.com/2003/05/27/o...print&position=

The deal with this is, the $350 billion was based on the expiration dates on the provisions, but nobody believes that repealing it will be politically possible, unless more tax cuts are enacted in its stead. This is not a happy situation. Likely the only way to remove Social Security, Medicare, Medicaid, etc. is to crash them in a period of financial ruin; if a political group wants to get rid of those programs, these economic moves (an avowed weak-dollar policy, massive tax cuts in time of debt, etc.) make more sense. Both the weak-dollar policy and the tax cuts in deep debt, of course, have never happened before in the US.

	27-05-2003 13:35									#2
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Let me be the first...

dl

	27-05-2003 15:58									#3
	Increase Your PM Length

let me join you.

	27-05-2003 15:59									#4
	Help yourself to an AD-FREE life

quote: "'The lunatics are now in charge of the asylum.'

The British are quite good at diagnostics.

Now that I think about it, they could be right : hysteria, delirium, compulsive lies, obsessive repetitions are indications that back this diagnosis.

	27-05-2003 16:01									#5
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quote: Originally posted by Azazel let me join you.

May I have this dance, Az?

	27-05-2003 16:12									#6
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w00t!

	27-05-2003 16:41									#7
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he posted a news link guys! Give him a chance!

Meh...can't beat 'em, Join 'em



I liked the article though

	27-05-2003 16:44									#8
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The article was fine. The fact that a guy with a post count of 16 came here... IS NOT.

	27-05-2003 16:54									#9
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However, military spending is rising by several dozen billion IIRC.

This lower spending is going to come from somewhere, and that is the health insurance, which will be increased to a band where practically no-one will qualify (compared to today), and of course the education system suffer. All very well for those that are making money, but what about the poor? What about those who need help?

	27-05-2003 16:55									#10
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Elijah: in the US, the education system will suffer much less, because it's a State, not a federal affair.

	27-05-2003 17:12									#11
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quote: Originally posted by Azazel Elijah: in the US, the education system will suffer much less, because it's a State, not a federal affair.

You are aware that the Dept. of Education is a Federal department, yes?

	27-05-2003 17:29									#12
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I always thought that school funding, and University funding was by states.

	27-05-2003 18:42									#13
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quote: Originally posted by Azazel I always thought that school funding, and University funding was by states.

Usually ongoing funding comes from the local level. Federal money is used for grants for capital improvements in most cases or to provide incentive for additional education or training of teachers. Some special programs like Head Start and Breakfast programs receive a large share of their budgets from the federal level.

	27-05-2003 19:30									#15
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(Defense spending has fallen compared with the economy, but not that much, and it's on the rise again.)

Well, this is a little glib. Defense spending has fallen precipitously compared to the economy versus Eisenhower's administration. By about 5 to 9 percentage points. This slack has been taken up by spending on Medicaid and Medicare. Our basic structure of government hasn't changed in the post war era besides those elements.

Last edited by DanS on 27-05-2003 at 19:57

	27-05-2003 19:34									#16
	Avatar Enlargement: We've got the solution

The tax cut is a poison pill for the Democrats. The Republicans expect to lose control, and the Democrats will be stuck with a large tax increase, which the Republicans believe will give them a latch on power for a decade or more.

Or maybe not.

	27-05-2003 19:48									#17
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The tax cut is not large enough to be a poison pill--it is pretty small, actually. Even at $850 billion. Bush is just whittling down the federal tax as percentage of our economy to 18%.

Now, hopefully we can have better fiscal discipline this year.

	27-05-2003 19:51									#18
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It's not necessarily how big the figures are but how they are perceived. If the idea that this is an unsustainable tax cut gains momentum it won't do much for the US economy, regardless of whether it is actually true or not.

	27-05-2003 19:53									#19
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quote: Originally posted by DanS Now, hopefully we can have better fiscal discipline this year.

	27-05-2003 20:05									#20
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If the idea that this is an unsustainable tax cut gains momentum it won't do much for the US economy, regardless of whether it is actually true or not.

This dog won't hunt. It never has. The Dems kept up the drumbeat that the first Bush tax cut was unsustainable. The public agreed and then duly ignored them.

	27-05-2003 20:32									#21
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while it may be political suicide, providing tax cuts for cyclical economic conditions is stupid stupid stupid. the fact that spending ISNT being kept in checked by washington makes it a whole lot worse.

bush has become cut taxes and spend. and thats not sustainable forever.

	27-05-2003 20:44									#22
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quote: Originally posted by DanS If the idea that this is an unsustainable tax cut gains momentum it won't do much for the US economy, regardless of whether it is actually true or not. This dog won't hunt. It never has. The Dems kept up the drumbeat that the first Bush tax cut was unsustainable. The public agreed and then duly ignored them.

The first Bush tax cut didn't seem to improve the economy. The rebates gave us a little boost, but certainly nothing like Snow and Bush talk about.

Money magazine did a survey. Anyone got the numbers? I think I might go to the library and get them. They show that not many people believe that the tax cutswill improve the economy. And one number that I do remember is that only 13% of investors plan to spend the money the get from the cut.

Bush should have listened to the people who know. I like the transfer to the states, but the dividend cut is really stupid and will do nothing.

	27-05-2003 20:46									#23
	Avatar Enlargement: We've got the solution

My feeling is that The Federal Government should control spending by providing the minimum level of services required in order to meet its obligations. There should be a control that new spending cannot be added unless the budget is balanced or in surplus.

The problem is:

Democrat philosophy: Tax and spend.

Republican philosophy: Cut taxes and spend.

The problem is in the will to spend. Without fiscal control in congress than wheather or not taxes are cut is irrelevant.

	27-05-2003 20:52									#24
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the republicans plan would work if they cut taxes proportional to economic growth and growth of the government. of course that might mean taxes get cut .5% every year

	27-05-2003 20:54									#25
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Plato,

How would you sell a tax increase when the budget is balanced? Or maybe you are saying that all spending increases should include tax increases.

The way it tends to work is that the economy creates a surplus and then spending is increased. But then there is a recession and taxes are increased.

edit: well atleast it worked like that until Reagan. Now it's just a battle between the reps and the dems.

	27-05-2003 20:59									#26
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the thing about the republican outlook on tax cuts though, that they will spur out of control econoomic prosperity to cover the tax cut is ridiculous.

especially considering that in times of prosperity they want to cut taxes to "give back to the people" and in times of recession they want to cut taxes "to spur economic growth" if republicans had their way we would abolished taxes in 1983.

the planet would also be a cross between planet of the apes and thunderdome.

	27-05-2003 21:10									#27
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especially considering that in times of prosperity they want to cut taxes to "give back to the people" and in times of recession they want to cut taxes "to spur economic growth" if republicans had their way we would abolished taxes in 1983.

That's funny.

Even in the the most bitter battles, of which this isn't one by a long shot, everybody's arguing about maybe spending/taxing of 2% of the economy. This latest tax cut is a real snoozer. It's more symbolic than anything--Bush is claiming the economy as his own rather than Clinton's.

	27-05-2003 21:13									#28
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it may be funny to you but youre saying it isnt true? when bush was elected what was his reason for the tax cut? it was to give back to the working people what is it now? to boost the economy

and both will achieve neither.

	27-05-2003 21:17									#29
	Increase the size of your Attachments

Why should the size matter? If it's bad it's bad.

	27-05-2003 21:33									#30
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The later Clinton years were good times, but there was a lot of bracket creep and the like. Taxes were being raised during these good times. But the bottom fell out of the economy in 2001. So a tax cut made sense for both reasons (giving people some money back and stimulating the economy).