Thursday, July 14, 2005

What's $100 Billion Among Friends

I keep hoping that Americans will wake up from their stupor, and get past the "he said, she said" mentality of our government and the M$M that propogates it. When I read obvious erroneous posts, ones that take real time data and spin it in that "he said, she said" wheel, I just go bonkers.

Take this, for instance.

There was a bump in the tax revenues collected in June that affected the projected deficits this country is carrying. These are budgetary deficits, and they are projections, which change with the varying economic and political climate.

For the right wing nutjobs, this was "vindication" that the Bush policies, i.e. tax cuts for the wealthy, are working.

The Center on Budget and Policy Priorities states:

Strong tax collections through June have led the Congressional Budget Office to reduce its deficit estimate for 2005 to about $325 billion and the Office of Management and Budget to reduce its deficit estimate to $333 billion.

The trimming of the deficit is certainly a positive development. But this development does not lead to the conclusion that "the tax cuts are working," as some now are claiming. Furthermore, the reduction in this year’s deficit from a very large one to a large one has little bearing on the nation’s shaky long-term fiscal foundation.

A surge in economic growth is not behind the unexpected increase in 2005 revenues. Real economic growth in 2005 has not been unusually rapid, nor has it been stronger than was projected earlier this year by CBO or OMB. Thus, the unexpected gain in revenues does not reflect faster-than-anticipated economic growth. CBO has said that one possible reason that revenues are coming in faster than it forecast earlier this year is that increases in income may be more concentrated among high income taxpayers than it anticipated. High-income taxpayers pay taxes at higher rates, so an increasing concentration of income results in a higher level of revenue.

The recent revenue rebound has not made up for the large revenue shortfalls that have developed since 2000. The recent increase in revenues follows three consecutive years (2001-2003) in which revenues declined in nominal terms, an extremely rare occurrence, and a year (2004) in which revenues were lower as a share of the economy than in any year since 1959. Even with the recent increase, revenues in 2005 will remain well below the levels at which they were projected to be when the 2001 tax cut was enacted.

Many of the factors behind the increase in revenues in 2005 are temporary. The expiration of a business tax cut at the end of 2004 is leading to an increase in tax collections of about $50 billion this year, according to past estimates by the Joint Committee on Taxation. In this case, the increase in revenue stems from the termination of a tax cut, not from a tax cut’s effect in spurring the economy. The recent revenue increase also apparently reflects a rise in the stock market in 2004 that resulted in increased capital gains tax payments when tax returns for 2004 were filed earlier this year. This increase in the market, however, has not continued in 2005. Additionally, the corporate tax legislation enacted last October contained a provision (relating to profits that U.S. companies have earned abroad and kept overseas) that was designed to produce a one-time gain in revenues this year. The one-time gain will be followed by revenue losses in subsequent years. Another contributing factor may be higher-than-expected inflation, which generates higher revenues. To the extent that 2005 revenues are higher because of higher inflation, this growth would be largely offset in later years by higher expenditures, most of which also respond to inflation.

There's more, here.

So, keep the above in mind when you hear the Bush Administration touting the tax cuts for the wealthy as "working to reduce the deficit."

It's just more bullshit from that man in the White House with the dirty mouth.

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