Thursday, July 22, 2010

Pelosi: Do Not Extend Tax Cuts

As reported by Market Watch today, Pelosi has stated that she doesn't support extending the Bush tax-cuts.

In rejecting an extension of the cuts, Pelosi said they've increased the deficit "enormously." They didn't create jobs in the eight years of the Bush administration, she added.
Whether she has forgotten the last 10 years, is ignorant of history, or just plain stupid -- well, you decide. Regardless, she has her facts twisted around like a pretzel. I guess it fits in with the blame-Bush-for- everything mentality.

According to the Tax Policy Center, about 1/3 of the deficits were the result of the tax cuts. The majority of the deficits were due to economic conditions and run-away government spending. So her claim that the reduction in tax rates increased the deficit "enormously" is not true, because as more and more people were employed, tax revenues did increase, until the bubble burst.

She also claims that the lower tax rates did not have an affect on employment numbers. Yet after the 2003 tax cuts were in place, employment numbers rose, while unemployment decreased. According to the BLS, for the years 2003-2008, nearly 18 million jobs were added to the employment roles.

Then, of course, the housing bubble burst and all that bad news, and we've lost 4.6 million jobs.

The relationship between employment and taxes can be hard to track down. But looking at the history of tax cuts, growth in the economy and employment normally follows. And with growth and higher employment comes higher federal revenues, eventually.  When taxes become more of a burden (one measure is percentage of GDP), less money is available in the private sector, causing less growth, or even negative growth. Currently, our tax burden as a percentage of GDP is historically high.

Letting these tax cuts expire, which will raise taxes on nearly everyone, will put the breaks on any chance of true growth.

But with people as ignorant as Nancy Pelosi around, what can you expect? Unfortunately, there are enough sheep to believe her.

1 comment:

sundancer said...

If I recall correctly the Republicans wanted to make the "bush tax cuts" permanent but the democrats refused so they agreed on ending them at the end of 2010. Now the economy is a mess and they want to let the cuts expire, introduce more taxes with cap and trade, obummercare, VAT and etc. Yeah that will really get the economy moving.