Republican candidates understand biology better than economics

The author was making a lot of sense up to this point:

Of course, this suggests an important reason why some people may opt to support the Republican contenders. With the Democrats backing down from plans to end the war in Iraq, the war may continue long into the future if Democrats take the White House. On the other hand, the tax cuts proposed by the leading Republicans could take away the money needed to prosecute the war. In short, when it comes to the war in Iraq, the only way out may be to "starve the beast".

Only a Republican would think this way, i.e. create massive deficits so that there will be no money left for "entitlements" like social security and medicare.

Great article, thanks for the seed!

This coming from the most left-wing newspaper in the UK. I have a few issues with some of his tripe.

Under the Romney plan, a person who collects $200,000 a year in interest on $4m held in government bonds would pay zero tax. By contrast, a custodian working two jobs to earn $40,000 a year can look to pay around $4,000 a year in taxes.

To be honest, anyone that can afford to put $4 million in to government bonds has most likely worked darn hard for that money.

If we don't tax items like healthcare and house sales and the savings on rent that a family gets by living in their own home, we might be up to 40% with Huckabee's Fair Tax.

Yet he produces no evidence. Nice argument to pluck figures out of the air, doesn't hold much water though.

Typical workers will probably have to pay President Huckabee's Fair Tax on almost everything they buy throughout their life.

That's quite misleading. Huckabee's website says "All of us will get a monthly rebate that will reimburse us for taxes on purchases up to the poverty line, so that we're not taxed on necessities."

Suppose these folks manage to accumulate $1m or so by age 50. They have paid zero tax on their accumulation.

Zero tax on their accumulation, yes. However, how many people can live from, say, age 22 to age 50 without buying anything, including food or water? They will pay tax. And this is what the tax-code should encourage: it should encourage hard work at school and it should encourage innovation and hard-work in the workforce. The tax code we currently have penalises success and provides a safety net for laziness. That's probably why the author bemoans any change to his beloved system.

The Republican candidates also want to extend President Bush's tax cuts past their scheduled expiration date in 2010.

And so they should. Increasing taxes on an economy that's feeling a bit of a credit crunch worldwide would cause quite a sneeze. And you know what they say happens to the rest of the world when America sneezes...

All the Republican candidates claim to be devout believers in tax cut creationism: the view that tax cuts pay for themselves due to their effect on stimulating growth. Even Rudy Giuliani and former straight talker John McCain claim to believe that tax cuts pay for themselves.

That is quite well-established. The economy has grown considerably since the Bush tax cuts. The economy doubled in about 10 years due to the Reagan tax-cuts. It worked incredibly well in Estonia. You don't create debt by cutting taxes, you create debt by spending too much and living outside of your means. I wouldn't expect the most left-wing newspaper in the UK to acknowledge that though.

In short, when the Republicans claim that they can have large tax cuts without any offsetting cuts in spending, they are prescribing a route to really large deficits.

Who is claiming that? I've not heard anyone claim that. What I've heard is all Republicans saying that you can't cut taxes and continue to raise spending willy-nilly. I've heard them all say you have to spend within your means. I guess the author is suffering from selective hearing. Or simply choosing to make his own truth.

I'm reminded again why I often choose not to read the Guardian.

This isn't really a study, this is correlation, not causation, don't forget that this era was the beginning of the PC among other things.

Revenues have increased 35 percent since the Bush tax relief was fully implemented in 2003. He didn't cut taxes by 35%, did he? And this was on the back of 9/11 and dot-com bubble burst, hardly an era destined for strong growth. I'd say there must be some weight behind the study I linked if everytime taxes are cut the economy grows and far more revenue is received within a few years. Of course, the first year or two you cut taxes you'll see a decline in revenues, but long after you'll be receiving far more than originally.

But a 30% tax rate is a different story. This is economics here, not politics.

Here's a chart that shows the tax burden has shifted since the Bush tax cuts. The top earners are paying a greater share of the tax burden. This study from the Heritage Foundation using Congressional Budget Office data shows how the wealthiest are paying even more of the tax burden after Bush's tax cuts.

You gotta ask yourself how credible the Republicans are, they had 6 years of controlling all branches of government and spending and deficit both rose waaaaaaay faster than it did under Clinton.

I agree with you. But how many Congressional budgets did Romney, Giuliani or Huckabee have a say in? None. They all balanced the budget in their state/city and left it with a surplus. Since the Democrats have taken a slim, perhaps unworkable majority, I've not seen anything from them that suggest that they will curb spending. The President wanted earmarks reduced from something like 13,000 to 6,500. Congress handed him a budget with about 11,500 earmarks. I haven't seen Clinton, Obama or Edwards put up any kind of fight in the Senate to get spending reduced.

but one thing that will stimulate the economy is universal health care

People that contribute most to society are covered by private healthcare. Those that contribute the least are generally covered by a government program anyway. Interestingly enough, US workers are far more productive than their European counterparts who do have a universal healthcare.

Let's not forget that small businesses, start-ups and IPOs are the real engines for economic growth, and they always have been but they are a small fraction of what they once were

That's why I agree with some Republicans saying that corporate taxes need to be cut and the redtape and regulation that they have to fight through needs to be reduced. A small business cannot afford a compliance department like Merril Lynch and Goldman Sachs have at their disposal. Afterall, corporate taxes only get passed on to us, the consumer, so eliminating corporate taxes will reduce the cost of American goods.

Universal health care will help start ups and small businesses and the economy regardless of the extra taxes it will require.

Then you're getting in to the realm of over-taxing people to the point where they try every loop-hole to get out of paying or they simply don't stay as productive because they have no incentive. When you're paying income tax rates of 40% above $50,000, sales taxes of 17.5% and paying $8.50 for a gallon of gas, I don't think you will help the economy.

I'm not sure what point you're trying to make in your first paragraph. Please correct me if I've grabbed the wrong end of the stick. But you're saying a 35% increase in government revenues would only be seen after a period of economic bust? Is it perhaps the tax cuts that got the economy out of the bust and the tax rises of FDR that prolonged a recession into a depression?

let's read the CBO study sited in the article, and discuss it.

I don't have the variables of their economic models, so it's difficult to discuss the levels of accuracy. However, if their models were run with the Bush and Reagan tax cuts and the eventual outcome that has resulted, I'm 101% confident the model would give a different answer to what has actually happened.

Spending has increased by 42% since 2001. If spending had only increased, by say, 20%, then there'd be a big budget surplus. How is it that Bush can cut taxes and if he moderated spending could have had a handsome surplus, yet the CBO thinks that he'd end up with a $400something billion deficit? The reason the US has a budget deficit now is due solely to massive spending increases. The inflation-adjusted 20 percent tax revenue increase between 2004 and 2006 represents the largest two-year revenue surge since 1965 - 1967. Does the model predict events like that?

The CBO calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion, yet 2006 revenues came in $47 billion above the pre-tax cut baseline released in March 2003. This is not a coincidence. Tax cuts clearly played a significant role in the economy's performing better than expected and recovering much of the lost revenue.

I think it's apparent that the CBO's models need a little more calibration.

You are attributing the tax cuts to have a causal role.

It's hardly a coincidence anymore that every time taxes are cut the economy has been stimulated and revenues have risen. Everytime is no longer just a coincidence.

Just like a President can't take much credit for economic growth, neither can tax cuts. Not in 2003.

What do you attribute the USA having stronger economic growth than any other G8 country between 2003 and 2007? Or the longest consecutive period of job creation? I'm genuinely curious now.

But keep in mind the taxes need to be high enough to create a disincentive to work more.

Why should taxes create a disincentive to be less productive?

Well, why not claim that FDR's policies ended the Depression and Bush's prolonged the bear market?

After Bush's tax cuts were inacted economic growth increased and stayed higher than any other G8 nation-state. Is there any justification for suggesting that about Bush's actions? I see absolutely no evidence, simply because there was no bear market following the tax cuts.

and you're critiquing the CBO model because it's predictions are off a percent or so over 3 years after a bull market.

It's more than a percent or two. They got it wrong by over $100 billion! If anyone in the private sector got their sums wrong by that amount they'd find themselves out of the job pretty quick!