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Opening Arguments

Getting your $17,855 worth?

Ah, for the good old days of "The era of big government is over":

The federal government raked in a record of approximately $2,672,414,000,000 in tax revenues through the first ten months of fiscal 2015 (Oct. 1, 2014 through the end of July), according to the Monthly Treasury Statement released today.

That equaled approximately $17,955 for every person in the country who had either a full-time or part-time job in July.

[. . .]

Despite the record tax revenues of $2,672,414,000,000 in the first ten months of this fiscal year, the government spent $3,137,953,000,000 in those ten months, and, thus, ran up a deficit of $465,539,000,000 during the period.

And of course, 40 cents of every one of those dollars spent was borrowed.

At least, I think they have slowed down a bit from the pace that did Ronald Reagan in. His tax cuts did bring in more money, but when you spend more than you take in, the more you take in the bigger the deficit gets. Perverse.


Thu, 08/13/2015 - 11:03am

During the Reagan years, the debt increased to nearly $3 trillion, roughly three times as much as the first 80 years of the century had done altogether.  Reagan enacted a major tax cut his first year in office, his signature Economic Recovery Tax Act of 1981, and government revenue dropped off precipitously. The Reagan administration was shocked when revenue declined rather than increase as expected.  “We were scared out of our wits because that seemed to be unimaginable,” David Stockman, Reagan’s first budget director, said in an interview.   When budget projections showed the deficit poised to reach levels not seen since the World War II era,  Reagan reversed course with The Tax Equity and Fiscal Responsibility Act of 1982, then criticized as the largest tax increase in history, scaled back corporate tax breaks, increased unemployment-insurance levies, and raised excise taxes on cigarettes, among other changes.  Reagan later signed the Highway Revenue Act of 1982, which doubled the gasoline tax. Both measures came as millions struggled with the 1981-1982 recession.   Despite ten tax hikes after the Economic Recovery Tax Act of 1981, including four hikes in two years,  Reagan was never able to get the deficit under control in large part due to massive increases in military spending.  Reagan’s biggest deficit came in 1983 when it reached 6 percent of the gross domestic product -- about two-thirds the size of the shortfalls the government has run in each of the past three years.  

  Unemployment also jumped to 10.8% after Reagan enacted his much-touted tax cut, and it took years for the rate to get back down to its previous level. Meanwhile, income inequality exploded. Despite the myth that Reagan presided over an era of unmatched economic boom for all Americans, Reagan disporportionally taxed the poor and middle class, but the economic growth of the 1980’s did little help them. Since 1980, median household income has risen only 30 percent, adjusted for inflation, while average incomes at the top have tripled or quadrupled.

The Reagan tax cuts had little to do with economic growth in the 80's. The real hero was Federal Reserve Board Chairman Paul Volcker who, after raising interest rates to kill the economy in an attempt to squash inflation, decided to lower rates resulting in increased economic activity.  It was more people going back to work paying taxes after the lowering of interest rates that resulted in more increased federal revenue, not mystical tax cuts.  The Reagan myth lives on but history tells a different story.


Rebecca Mallory
Tue, 08/18/2015 - 5:30pm

Joe, your usual Pavlovian response.  Perhaps a perusal of this article will bring some objectivity.


Wed, 08/19/2015 - 10:29am

Again, Becks doesn't let facts get in the way of a myth.  This from Bruce Bartlett who is an American historian whose area of expertise is supply side economics. He served as a domestic policy adviser to Reagan and as a Treasury official under Daddy Bush.

 "Many declared Reagan’s 1981 tax cut to have been one of the seminal economic accomplishments in history. I did not see any tributes to Reagan’s legacy as a tax increaser, however, an important part of his legacy that conservatives would like to forget.

  Reagan’s record on raising taxes began almost the moment he entered politics. Elected governor of California in 1966, he inherited a large budget deficit from his predecessor, Pat Brown. Although a conservative, dedicated to shrinking government, Reagan nevertheless found the magnitude of spending cuts that would have been necessary in 1967 to be beyond reach. This led him to endorse a $1 billion per year tax increase, equivalent to a $17 billion tax increase today – an enormous sum equal to a third of state revenues at that time. Journalist Lou Cannon recounts the circumstances:   “No amount of budget reductions, even if they had been politically palatable, could have balanced California’s budget in 1967. The cornerstone of Governor Reagan’s economic program was not the ballyhooed budget reductions but a sweeping tax package four times larger than the previous record California tax increase obtained by Governor Brown in 1959. Reagan’s proposal had the distinction of being the largest tax hike ever proposed by any governor in the history of the United States.”[1]   The top income tax rate was raised from 7 percent to 10 percent, the sales tax rate went from 3 percent to 5 percent, the cigarette tax was increased from 3 cents to 10 cents per pack, the alcohol tax was raised from $1.50 to $2 per gallon, the bank and corporate tax rate went up from 5.5 percent to 7 percent, and the inheritance tax rose from a range of 2 percent to 10 percent to a range of 3 percent to 15 percent.[2] According to Cannon, this was essentially the Democrats’ wish list of tax initiatives, with the sole exception that it did not institute tax withholding, which Reagan adamantly opposed. In Cannon’s words, “An economist who analyzed the tax bill without knowing its political background might conclude that it had been crafted by a New Deal Democrat.”[3]   In 1970, Reagan proposed yet another big tax increase of $1.1 billion, which would have been used to finance property tax relief. Incomes above $32,000 would have been subject to a new 11 percent tax rate, and three years later a new 13 percent bracket would have applied to those with incomes above $36,000. The bill would have also instituted tax withholding, which ironically led to its defeat in the Senate by a single vote. However, many of these provisions were enacted the following year.[4] The 1971 legislation raised taxes by $508 million (about $6 billion today), including an increase in the top income tax rate to 11 percent, a rise in the bank and corporate tax rate from 7 percent to 7.6 percent, and institution of an alternative minimum tax and tax withholding.[5] State taxes were raised another $1.1 billion in 1972 (about $12.5 billion today). This legislation included another increase in the sales tax rate from 5 percent to 6 percent and a further rise in the bank and corporate tax rate from 7.6 percent to 9 percent.[6]   Reagan had little to say about these tax increases in his memoirs except to claim that he gave back $5 billion to taxpayers.[7] However, in many cases, the tax relief consisted of tax rebates and one-shot tax cuts.[8] In the end, it is clear that Governor Reagan presided over an astonishing expansion of taxes in California. According to the California Department of Finance, state revenues tripled from $2.9 billion in the 1966/67 fiscal year to $8.6 billion in the 1974/75 fiscal year, Reagan’s last.[9]   After leaving the governorship, Reagan ran for the Republican presidential nomination in 1976. No mention was made of the many tax increases he enacted in California. Instead, his principal focus was on cutting spending, which ultimately sank his chances for the nomination when he proposed dumping $90 billion in federal spending (almost $700 billion today) on the states in order to balance the budget.[10]   Over the next few years, Reagan came under the influence of Rep. Jack Kemp (R-NY), Wall Street Journal editorial writer Jude Wanniski, economist Arthur Laffer and other proponents of “supply-side economics.” While skeptical at first, in 1979 Reagan endorsed the Kemp-Roth tax bill, which would have cut statutory income tax rates by about 30 percent across the board. After winning the White House in 1980, Reagan sent the Kemp-Roth proposal to Congress and it was enacted in August 1981.   Almost immediately upon enactment of the 1981 tax cut, Reagan came under enormous pressure to do something about the federal budget deficit. While his preferred approach was to cut spending as much as necessary, it was not politically possible to so. His aides began pressuring him to support a tax increase. Conservative activists were appalled that Reagan would even consider such a thing, but he eventually endorsed the Tax Equity and Fiscal Responsibility Act of 1982. According to a Treasury Department analysis, it raised taxes by close to one percent of GDP, equivalent to $150 billion per year today, and was probably the largest peacetime tax increase in American history.[11]   This was just the first of many tax increases that President Reagan endorsed and signed into law. There were 11 major tax increases during his administration. And this doesn’t count the fact that Reagan intentionally delayed the start of tax indexing, which was part of the 1981 tax bill, until 1985 so as to capture a lot of anticipated bracket-creep for the Treasury. In fact, it was the failure of inflation to come in as fast as White House economists expected that created much of the deficit problem. I estimate that lower than expected inflation and the loss of bracket creep was responsible for about half the budget deficit in 1981 and 1982.[12] It’s also worth noting that the Tax Reform Act of 1986, which was revenue-neutral in the long run, was a fairly substantial revenue-raiser its first year, increasing taxes by $18.6 billion or 0.41 percent of GDP.[13]   According to a table in Reagan’s last budget (FY 1990), the cumulative legislated tax increase during his administration came to $132.7 billion as of 1988 ($367 billion today). This compared to a gross tax cut of $275.1 billion. Thus Reagan took back about half the 1981 tax cut with subsequent tax increases.   Legislation Billions of Dollars Tax Equity and Fiscal Responsibility Act 57.3 Highway Revenue Act of 1982 4.9 Social Security Amendments of 1983 24.6 Railroad Retirement Revenue Act of 1983 1.2 Deficit Reduction Act of 1984 25.4 Consolidated Omnibus Budget Reconciliation Act of 1985 2.9 Omnibus Budget Reconciliation Act of 1986 2.4 Superfund Amendments and Reauthorization Act of 1986 0.6 Continuing Resolution for 1987 2.8 Omnibus Budget Reconciliation Act of 1987 8.6 Continuing Resolution for 1988 2.0 Total cumulative tax increase 132.7   As with his California tax increases, Reagan had little to say about them afterwards. In his diary, he says only that the 1982 TEFRA bill “is the price we have to pay to get the budget cuts.”[14] He later tried to repudiate his consistent support for tax increases after 1981.[15] But it’s clear that getting control of the deficit in the 1980s required both spending cuts and higher revenues.   In the end, Reagan’s tax legacy fits neither the right-wing nor left-wing pigeonholes. Although he cut taxes when he could, he raised them when he had to. That’s something self-styled Reaganites today should remember."

[1] Lou Cannon, Governor Reagan (NY: PublicAffairs, 2003): 194. [2] David R. Doerr, California’s Tax Machine, 2nd ed. (Sacramento: California Taxpayers’ Association, 2008): 89. [3] Cannon, op cit., p. 199. [4] Garin Burbank, “Speaker Moretti, Governor Reagan, and the Search for Tax Reform in California, 1970-1972,” Pacific Historical Review (May 1992): 199-200. [5] Doerr, op. cit., pp. 136-37. [6] Carl Greenberg, “$1.1 billion Bill to Shift Taxes Signed into Law by Reagan,” Los Angeles Times (Dec. 19, 1972): 3. [7] Ronald Reagan, An American Life (NY: Simon & Schuster, 1990): 191. [8] Doerr, op. cit., pp. 124, 142, 144-45. [9] Data downloaded at www.dof.ca.gov/budgeting/budget_faqs/information/documents/Chart-A1.pdf. [10] Cannon, op. cit., pp. 406-11. [11] Jerry Tempalski, “Revenue Effects of Major Tax Bills,” Office of Tax Analysis Working Paper 81 (Sept. 2006): 15-17. [12] Bruce Bartlett, The New American Economy (NY: Palgrave Macmillan, 2009): 121. [13] Tempalski, op. cit., pp. 16-17. [14] Douglas Brinkley, ed., The Reagan Diaries (NY: HarperCollins, 2007): 96. [15] Ronald Reagan, “There They Go Again,” New York Times (Feb. 18, 1993); “Hurry Up and Wait,” Wall Street Journal (July 8, 1993).  
Wed, 08/19/2015 - 2:47pm

And speaking of tax dollars wasted here is this little titbit from a Reuters investigation by Scot Paltrow.  The Pentagon has made use of $8.5 trillion of our tax money handed over by Congress since 1996—but don’t ask what was done with the money. The Department of Defense doesn’t have a clue. It's just gone. Lost.

 Where is the demand for accountability?  Why is the first question to ANY candidate for president not "What would you do about the massive fraud and waste at the Pentagon?"  Where are the hearings, nay indictments, that are warranted when a sum equal to  1/2 of our national debt can be sent to the pentagon to never be accounted for. 

Combined "known" Pentagon waste (like the 1.5 trillion F35) with missing pentagon money and you have a good chunk of our entire national debt represented.  

1.) Republicans say body cameras for all cops will be too expensive.  How bout we find 1/10,000th of the money we sent to the pentagon to buy those cameras?

2.) Republicans say there's 500 million in provable food stamp fraud going to poor people, how bout the 8.5 TRILLION the pentagon can't account for?

3.) Republicans claim Obama care is going to cost us almost a trillion dollars over 15  years. How about the 8.5 Trillion that just disappeared into the ether at the pentagon?  What's the GOP take on that?

4.) Republicans are so concerned about deficit spending and the debt, but fully 1/3 of the national debt is money we sent the Pentagon and they can't tell us were it went.  It's just gone.

5.) Republicans say college for everyone will cost too much. Than they must be really pissed at the  8.5 Trillion, with a 't', dollars the pentagons spent and can't tell us where it went.

Bringing this "open secret" up exposes their hypocrisy and draws attention to the lack of corporate media attention to this HUGE SCANDALOUS level of waste, and the Military/Industrial/Media complex ownership of government.  It seems for a few hundred million in "be all you can be" ads you can buy the main stream media to keep it's mouth shut.  Journalists need to bring this issue front and center.   No candidate should be allowed to talk about government waste or big government or endorse cuts in social programs  without being asked  "what would you do about the massive 8.5 Trillion the pentagon can't account for?"

In short; nothing reinforces the position that the money for valuable social and infrastructure programs (that have provable returns on investment.) is actually there, despite GOP claims, than this scandal.  It's not about lack of money, but priorities. 

 Here's an additional point :   8.5 Trillion dollars represents about $70,000 from each of the 123 Million US households

 Also of note is this is a scandal because the Pentagon has been required by law to be "audit ready" since 1996 but still has no real accounting systems. Why not?

If the GOP is really the caretakers of the taxpayer dollar as they profess, they should be crying a river over this waste, but of course image is just for looks. Money spent on military=good. Money spent to feed 17 million hungry children in this country=wasteful spending.