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The Wisdom and Folly of the Bush Tax Cuts

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Ross Kaminsky Aug 8, 2010 9:48 AM GMT Coy says: "The Bush tax cuts of 2001 and 2003 embodied both wisdom and folly. The wise part was cutting rates in a way that increased incentives to work, save, and invest. The cuts came straight out of the economists' cookbook for achieving stronger economic growth. But setting tax rates without taking spending into consideration was pure folly. Washington lowered taxes while raising spending—an unsustainable combination in the long run."In other words, the wisdom of tax cuts is inherent in the way they improve economic incentives.The "folly", though, is NOT inherent in tax cuts. It was a folly of not understanding Congress or, by Bush, refusing to stand up to Congress.In other words, the "folly" of tax cuts has NOTHING to do with tax cuts themselves whereas their wisdom is built right in.It's time to stop letting the left make the tax cut debate all about that side of the equation while they ignore the spending side, acting as if government has the first claim on our earnings and that they're doing us a favor by letting us keep any.
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Henry Patrick Aug 8, 2010 8:14 AM GMT The article fails to adequately factor in the impact of the dot com bust at the end of the Clinton administration, the economic impact of 9/11, and the burst of the housing bubble that created much of the mess that we are in now. Bush did not create that housing bubble, yet he is blamed for the impact its collapse had on our economy while under his watch. But he did undermine his own tax cut initiatives with liberal spending policies that relied heavily upon borrowing. Add to this the fact that we are in not one, but two unfunded wars. Given this scenario, how can you possibly measure the effectiveness of the Bush tax cuts?
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Lee A. Arnold Aug 7, 2010 11:50 PM GMT The authors didn't mention that payroll taxes have been raised a few times on the promise to save Social Security -- but ONLY income taxes have been cut. It's a sad joke that the so-called "Trust Fund" has been vacuumed-out by the Bush Tax Cuts, and then some. For a picture of the swindle see:Bush Tax Cuts:http://www.youtube.com/watch?v=SA1f2MefsMM Social Security:http://www.youtube.com/watch?v=Tts2uTWt6e8&feature=related
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Bill from Columbus Aug 7, 2010 8:20 PM GMT Let's see: after the the Bush tax cuts, which were designed to promote growth, we had seven or so years of relatively poor growth followed by the worst recession since the Great Depression. Of course, this is not a controlled experiment, but would not one suppose that it would cast some doubt on the theoretical underpinnings on these policy decisions, or at least on the models that support them? Apparently not for Dr. Hubbard and his ilk. Einstein's well-known definition of insanity (continuing to do the same thing and expecting a different result) certainly comes to mind. How can we take any of this seriously?
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Ken Aug 7, 2010 6:23 PM GMT I don't see the increase in the top rate as a problem for anyone not in that bracket. And it will generate some additional revenues.I do see two interesting aspects of letting the top bracket & the capital gains rates increase. First, the IRS has a huge base of information on taxpayers who disclosed income when the rate went down. Hiding it now will be far more difficult.Second, focusing on lowering the national debt while protecting lower earners may well generate some confidence in the economy for many, helping the economy recover at a better rate.
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Mike Floyd Aug 7, 2010 4:17 PM GMT In one instance, you write that Mr. Hubbard is queasy about extending the tax cuts but I see no quote from him. Your adverb, I'm sure. He doesn't sound sick to his stomach and dizzy for the continued tax break for the country's tax payers, he states it won't turn the economy around...because of continued deficit spending by our government. There is no folly in what the tax cuts did and can do if extended but you do your best to paint it as such.
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dw Aug 7, 2010 1:54 PM GMT I am thinking the Bush tax cuts had very little impact if they were suppose to improve the economy. at best they may have ameliorated the recessions impact. but they did impact what little recovery we did have . looking back we know that almost the entire 8 years was nothing but a fake economy driven by easy credit. back out that, and there was no recovery. as it is, there really hasn't been once since 2001.
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Geo from Jefferson Aug 7, 2010 10:48 AM GMT Social Security is a cash system. Cash has a low rate of return, but is very safe. The question is how much of our retirement should be in cash vs. longer-term investments.Given that privately-managed long-term investments have done VERY poorly during the last ten years, it would be the height of folly to dump our safe, cash system.We should focus our spending-control energies on containing health-care costs. As for letting the Bush tax cuts expire, lets look at the three tax increases that did NOT hurt the economy:the two at the beginning of World War II, which took the top tax rate to 90% (!!) and Clinton's increase of 93 that took the top rate to 39.6%. Both were followed by periods of economic growth and productivity increases.
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PA_Observer Aug 7, 2010 8:45 AM GMT Hey, I've already been here. In the 1ate 1980's we were in the same hole. The GOP demi-god St. Reagan lowered the top tax rate and increased gov't spending......so the deficit ballooned. Adults stepped in, raised the top rate and controlled spending, and we soon ran surpluses.But, by 2001, Greenspan and Co. were telling us that those surpluses were a drag on the economy, so back to tax cuts and deficits. However, the new wrinkle is the GOP idea that unlocking the SS funds (by privatizing them) will revitalize the economy with riskier investment vehicles.Yee Ha ........ let the poverty roller coaster roll.....
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ross Aug 7, 2010 8:07 AM GMT Our government spends too much and a majority of it is on labor, pensions, social security and health care. As the population ages and retirees begin pulling money from the market, chances for strong investment growth will dwindle. The minimum age to collect social security needs to got to 70 (avg lifespan when it was enacted in 1935 was 63...now it is 79m 82f). Pensions need to be converted to 401K's. It is not our taxpayers reponsibility to gaurentee retirement pensions even in a shrinking market. The private sector forces people to be responsible for their retirement and invested in its growth. Lastly, health care future reform must tackle the cost of death...up to 60% of all healthcare costs are often spent in the last year of life. Until we take responsibility of making our end of life decisions when we are younger and of sound mind, end of life will be just as painful and even more costly. More taxation is not the answer, changing policy to limit spending is. Simple changes like these will allow for more funding for things like schools and small business growth opportunities.
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