It’s The Tax Cuts, Stupid (Reloaded)
Pundits and economists, particularly those with a leftward tilt, love to pooh-pooh the concept of supply-side economics, and there have been many studies that show that you can’t really pay for tax cuts with increased economic growth that results – but all the same, there’s this:
An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.
On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year’s levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.
Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year.
The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big rise in individual taxes on stock market profits and executive bonuses.
I am still not hearing enough trumpeting of the Bush economy from congressional Republicans – if they fail to capitalize on all of this good economic news at a time when their majority is under pressure, then I must truly gaze on them in stupified wonder…
I wrote about this article a Hang Right Politics and how the NYT took a decidedly negative view of this economic expansion depite the good news.
It’s got to be tough being a liberal economist these days.
It’s hard to take credit for this economic expansion because doing so necessitates pointing out that the rich are getting richer while the poor aren’t doing a whole lot better. Whatever your average Republican blogger might think of that, your average American Joe Sixpack doesn’t find it particularly great. Your article says it all: corporations, stock market profits, and executive bonuses. Not exactly the Holy Trinity.
Mr. Bonneville,
You have something to support the statement that Joe Sixpack isn’t better off? I mean other than just wishful thinking on your part? Home ownership is at a record high – for one example – indicates your remarks are erroneous.
I think Ryan is onto a salient point here – the average CEO is now making over 180x the average line worker’s salary, where in the past (pre – 90′s) the CEO made only 40x the average worker’s take – home pay. There’s something amiss when corporations are making record profits, while many of the same companies are jettisoning worker’s pension plans and inducing many of their front – line workers to take exit packages, many without any health care provisions for the future.
There is a basic fairness issue that’s going to come front and center into this debate, and none too soon. Sure, there is a record amount of home home ownership – but at what debt levels incurred, and at what leveraged economic indicies? Our country is taking on a record amount of foreign debt, much of which is subsidizing our extravagant lifestyles.
But don’t take my word for it – listen to a fairly respectable economist, Ben Stein, who’s about as Republican as they come:
http://www.nytimes.com/2006/07/09/business/yourmoney/09every.html?_r=1&oref=slogin
Sure, the MSM is hopelessly biased against Bush – but the sense of unease about our profligate ways is not just a function of the press, it’s a reality for many in the country at this time.
Well, no doubt the level of CEO compensation is truly sickening…but the next question is, what is the remedy? Unless and until shareholders start making a lot more noise about this, the practice will continue. I’m certainly not in favor of a government solution (i.e., a regulation on publicly held companies limiting CEO pay)…
Agreed, Mark – but you can see how hard is it for dissident shareholders to establish any type of voice on most corporate boards by witnessing the outrageous conduct of the Home Depot board of directors. This guy (Nardelli) has taken in ridiculous pay packages each year, confirmed by his (of course) handpicked and all – too – pliant board.
http://www.businessweek.com/investor/content/may2006/pi20060523_284791.htm
http://www.usatoday.com/money/companies/management/2006-05-25-nardelli_x.htm?csp=34
Have you actually looked at the shareholder proxy statements from companies whose stock you own these days? The rules for electing dissident shareholders are almost insurmountable, and it’s well near impossible for individual investors to have a voice in such matters as executive pay and relative performance. Many financial analysts are now speculating that the Federal guidelines and laws for corporate governance are far too tilted in the direction of management these days at many public companies. I don’t want to see more Federal oversight, but we may need to see a major change in the laws as currently constituted.
Your points are all good, and I certainly don’t intend to come down arguing in favor of the pay discrepancy…still, the larger economic picture is not only good, but pretty spectacular, and that’s something the Republicans need to trumpet incessantly…
Well, can’t argue that point – just bringing up some reasons why some folks may not feel all that great about their own personal financial situation.
Yeah, what dmac said. I don’t have much to add, except this:
You can see what’s happening by just using some math. The top tax rates were lowered by more than the bottom ones, but the top earners are now shouldering more of the burden than before. The only way that makes sense is for the people at the top to be increasing their income dramatically faster than those at the bottom.
No matter how rosy the picture looks from the bird’s eye view, the regular middle class person just doesn’t feel like things are really worth trumpeting about.
You mean there’s an actual middle class where you live? Around here middle class means you’re only pulling in about $100K/year, and that’s a net figure.