August 30, 2012

WaPo’s Ezra Klein Pulls Out Tired ‘Bush Tax Cuts Cost Us Trillions’ Graph

Ezra Klein, the “former” head of the Journolist news coordination conspiracy (given the evidence of coordination seen during the Republican convention, it’s hard to believe it hasn’t continued in some form), rolled out a graphic yesterday at the Washington Post which he touted as “the one graph you need to see before watching” the Republican convention.

To show would be to give it more attention than it deserves. Its core contention, delivered via the lefty-driven Center on Budget and Policy Priorities, is that “Tax Cuts, Wars Account For Nearly Half of Public Debt by 2019.” They could have changed the title to “we’re going to blame Bush for eight more years.” Some of Klein’s clanking follows the jump; I’ll deal with the “Blame Bush’s tax cuts” mantra after that (the “wars” claim has been addressed several times before, and is just as dumb):

… the Republicans will end up blaming Obama for the policies they pushed in the Bush years, and the recession that began on a Republican president’s watch, and a continuation of tax cuts that they supported. They’ll have to. Because if they took all that off the debt clock, there wouldn’t be much debt there to blame him for at all.

There is no single policy we have passed that has added as much to the debt, or that is projected to add as much to the debt in the future, as the Bush tax cuts, which Republicans passed in 2001 and 2003 and Obama and the Republicans extended in 2010. To my knowledge, all elected Republicans want to make the Bush tax cuts permanent. Democrats, by and large, want to end them for income over $250,000.

To be clear, Klein is referring to every dime of “the Bush tax cuts,” which at this point really means “the federal income tax system we’ve had in place for nine years,” from the highest to lowest taxable incomes. Solely based on eyeballing the graph (it really isn’t worth digging further), the CBPP claims that the tax cuts passed in 2001 and 2003 are responsible for about 20%, or over $2.2 trillion, of the current $11.2 trillion of “debt held by the public.”

What the CBPP won’t address is how tax collections managed to go up so quickly after 2003 tax cuts, which were the ones which affected marginal income-tax rates and investment decisions, leaped after they were passed:
- Fiscal 2003 — $1.782 trillion
- Fiscal 2004 — $2.880 trillion
- Fiscal 2005 — $2.154 trillion
- Fiscal 2006 — $2.407 trillion
- Fiscal 2007 — $2.568 trillion (four-year increase of 44%)

To believe the CBPP, you have to believe that collections would have been higher in every year presented by the amount people would have willingly paid in extra taxes without changing their spending or economic behavior in any way — which is obviously sheer fantasy.

This year’s collections are on track to come in at about $2.4 trillion. That’s because economic activity is still low thanks to Obama administration policy decisions and moves which haven’t led to a legitimate recovery. That’s not Bush’s fault.

What isn’t fantasy is the the budget deficit in fiscal 2007, driven by the final budget passed by a Republican Congress, was $163 billion — within striking distance of balancing. After that, a Democratic Congress took over and the chickens of the CRA-, Freddie Mac- and Fannie Mae-driven housing bubble came home to roost. That was followed by Barack Obama, Nancy Pelosi, and Harry Reid ramping up annual federal spending from about $2.9 trillion to $3.6 trillion, and then claiming that the higher level should be the new baseline from which any cuts proposed (except to the military) are heartless, cruel and unacceptable.

The graph in question and Klein’s commentary are useless, agenda-driven, incoherent wastes of readers’ time.

Cross-posted at NewsBusters.org.

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6 Comments

  1. Tom, I attended Bureau of the Public Debt training in the mid-1970s. (I worked at one of the Federal Reserve Banks, Treasury Issues unit, during this time.

    This winter I experimented with downloading Bureau of the Public Debt debt historic statistics and put them in charts. I am copying and pasting what I produced yesterday. Everything is sourced and footnoted. I used colors on my chart to highlight the low, medium, high, and unprecedented T-bond interest rates in the past 40 years.

    40-YEAR US TREASURY DEBT HISTORY
    SOURCE: http://www.treasurydirect.gov/NP/BPDLogin?application=np

    First Column = Historic Average Auction % US Bonds

    Source: Bureau of the Public Debt
    2012 debt by pro-rate extension of 10/12 to 7/12

    2% 9/30/2012 $16,161,813,499,281 $16.16 Trillions
    2% 9/30/2011 $14,790,340,328,557 $14.79 Trillions
    3% 9/30/2010 $13,561,623,030,892 $13.56 Trillions
    3% 9/30/2009 $11,909,829,003,512 $11.91 Trillions
    4% 9/30/2008 $10,024,724,896,912 $10.02 Trillions
    4% 9/30/2007 $9,007,653,372,262 $9.01 Trillions
    4% 9/30/2006 $8,506,973,899,215 $8.51 Trillions
    4% 9/30/2005 $7,932,709,661,724 $7.93 Trillions
    4% 9/30/2004 $7,379,052,696,330 $7.38 Trillions
    4% 9/30/2003 $6,783,231,062,744 $6.78 Trillions
    5% 9/30/2002 $6,228,235,965,597 $6.25 Trillions
    9/30/2001 $5,807,463,412,200 $5.81 Trillions
    6% 9/30/2000 $5,674,178,209,887 $5.67 Trillions
    5% 9/30/1999 $5,656,270,901,615 $5.66 Trillions
    5% 9/30/1998 $5,526,193,008,898 $5.53 Trillions
    6% 9/30/1997 $5,413,146,011,397 $5.41 Trillions
    7% 9/30/1996 $5,224,810,939,136 $5.22 Trillions
    6% 9/29/1995 $4,973,982,900,709 $4.97 Trillions
    7% 9/30/1994 $4,692,749,910,013 $4.69 Trillions
    6% 9/30/1993 $4,411,488,883,139 $4.41 Trillions
    llion
    7% 9/30/1992 $4,064,620,655,522 $4.06 Billions
    8% 9/30/1991 $3,665,303,351,697 $3.67 Billions
    8% 9/28/1990 $3,233,313,451,777 $3.23 Billions
    8% 9/29/1989 $2,857,430,960,187 $2.86 Billions
    9% 9/30/1988 $2,602,337,712,041 $2.60 Billions
    9% 9/30/1987 $2,350,276,890,953 $2.35 Billions
    7% 9/30/1986 $2,125,302,616,658 $2.13 Billions
    10% 9/30/1985 $1,823,103,000,000 $1.82 Billions
    12% 9/30/1984 $1,572,266,000,000 $1.57 Billions
    10% 9/30/1983 $1,377,210,000,000 $1.38 Billions
    12% 9/30/1982 $1,142,034,000,000 $1.14 Billions
    13% 9/30/1981 $997,855,000,000 $1.00 Billions
    12% 9/30/1980 $907,701,000,000 $908 Billions
    9% 9/30/1979 $826,519,000,000 $827 Billions
    8% 9/30/1978 $771,544,000,000 $772 Billions
    8% 9/30/1977 $698,840,000,000 $699 Billions
    7% 6/30/1976 $620,433,000,000 $620 Billions
    8% 6/30/1975 $533,189,000,000 $533 Billions
    8% 6/30/1974 $475,059,815,732 $475 Billions

    6% 6/30/1973 $458,141,605,312 $458 Billions
    6% 6/30/1972 $427,260,460,941 $427 Billions
    6% 6/30/1971 $398,129,744,456 $398 Billions

    1US Treasury Debt 2000 – 2011 http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm
    2US Treasury Debt 1950-1999 http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo4.htm
    3US Bond Rates http://www.forecast-chart.com/rate-treasury-10.html
    4Debt est 9/30/2012 Pro Rate the annual debt based on the debt from Oct 2011 thru July 2012

    US Debt as of 7/31/2012 $15,933,234,637,493.50

    Bond Interest rates paid by the Bureau of the Public Debt from 1971 to 2012
    Low
    Medium
    High
    Extremely High

    Comment by Beth Martin — August 30, 2012 @ 11:27 am

  2. Beth, thanks for the detail. I will have to remember to consult it when appropriate.

    If one of your points is that we’re in a heap of trouble if interest rates start to go up, either because of general market conditions or a loss of confidence in our solvency, you are sadly right.

    Comment by Tom — August 30, 2012 @ 11:46 am

  3. Tom, Actually, things could be very bad if interest rates spike up again like they did 30 years ago.

    Under Treasury Secy Geitner, the maturity of US debt has been shortened. This cuts interest costs today, but if we have a recurrence of high inflation this will make the interest cost to the Treasury go up rapidly.

    During the late 1970s and early 1980s, the 3-month and 6-month T- bill rates were extremely volatile. Fortunately, the Federal Reserve Bank has a complete historic file of 3-month Treasury bill auction rates.

    Here’s how to get their Excel file.

    1) Go to: http://www.federalreserve.gov/releases/h15/data.htm.

    2) Under the heading US government securities, select:
    3-month (discontinued) – and select Weekly. You will get an Excel “Read only” file which is actually savable.

    To show you how volatile short-term Treasury debt rates were in the 1970s, early 1980s, here is a little history from the Federal Reserve Excel file.

    These are actual 3-month T-bill auction rates for 10 weeks out of 1979, 1980, and 1980:

    1979:

    1/5/1979 9.34
    1/12/1979 9.3
    1/19/1979 9.44
    1/26/1979 9.34
    2/2/1979 9.28
    2/9/1979 9.24
    2/16/1979 9.28
    2/23/1979 9.41
    3/2/1979 9.44
    3/9/1979 9.44

    1980:

    2/29/1980 13.78
    3/7/1980 15.37
    3/14/1980 15.32
    3/21/1980 14.76
    3/28/1980 15.55
    4/4/1980 14.78
    4/11/1980 14.3
    4/18/1980 13.57
    4/25/1980 12.18
    5/2/1980 10.47

    1981:

    1/2/1981 14.31
    1/9/1981 14.31
    1/16/1981 15.19
    1/23/1981 15.65
    1/30/1981 15.01
    2/6/1981 14.9
    2/13/1981 15.51
    2/20/1981 14.68
    2/27/1981 14.19
    3/6/1981 14.44

    No one gives Ronald Reagan credit for inheriting a Recession plus stagflation – high unemployment and high inflation.

    This history of T-bill auction yields shows he also had an extra whammy. In addition to all of those problems, the average Treasury interest rate on debt was at historic all-time highs.

    Comment by Beth Martin — August 30, 2012 @ 4:56 pm

  4. Indeed, as I have written (it’s been a while), except for deficits, Reagan faced a tougher situation than Obama (13% inflation, 20% prime, growing unemployment).

    Comment by Tom — August 30, 2012 @ 5:09 pm

  5. #3, 4, Very true. And unlike Obama, Reagan didn’t whine incessantly about the situation he was in and disavow responsibility for what occurred or didn’t occur during his term.

    Speaking of BO, what happened to “if I can’t get this done in four years, it’s a one term proposition?” He went from that, which implied he would take a certain amount of accountability for the economy regardless of what he “inherited”, to blaming Bush every day and nearly four years after Bush left office?

    Comment by zf — August 30, 2012 @ 6:04 pm

  6. #3, 4, Very true, and even so Reagan, unlike Obama, did not whine incessantly about the situation he was dealt when he took office and didn’t disavow what occurred or didn’t occur during his terms.

    Speaking of BO, what happened to “if I don’t turn this around in four years, it’s a one term deal?” He went from that, which implies responsibility for the economy regardless of what he “inherited,” to still blaming Bush almost four years since Bush was even in office?

    Comment by zf — August 30, 2012 @ 6:08 pm

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