Greenspan Says Lower Taxes Good, Outrageous Deficit Spending Bad

There were a lot of liberal blogs this weekend trumpeting Alan Greenspan’s dismissal of the conservative line that the Bush tax cuts will pay for themselves. The Huffington Post writes:

Former Fed Chairman Alan Greenspan said that the push by congressional Republicans to extend the Bush tax cuts without offsetting the costs elsewhere could end up being “disastrous” for the economy.

In an interview on NBC’s “Meet the Press,” Greenspan expressed his disagreement with the conservative argument that tax cuts essentially pay for themselves by generating revenue and productivity among recipients.

“They do not,” said Greenspan.

Greenspan said he was “very much in favor of tax cuts but not with borrowed money.”

…the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money,” he said. “And at the end of the day that proves disastrous. My view is I don’t think we can play subtle policy here.”

Indeed.

Before we go any father, let’s talk about what happened following the implementation of the tax cuts in 2003.

From 2004 to 2007, federal tax revenues increased by $785 billion, the largest four-year increase in American history. According to the Treasury Department, individual and corporate income tax receipts were up 40 percent in the three years following the Bush tax cuts. And (bonus) the rich paid an even higher percentage of the total tax burden than they had at any time in at least the previous 40 years. This was news to the New York Times, whose astonished editorial board could only describe the gains as a “surprise windfall.”

So if the tax revenues increase following the tax cuts, how did America lose the budget surplus Bush inherited from Clinton?

The best way to measure the swing from surplus to deficit is by comparing the pre-tax cut budget baseline of the Congressional Budget Office (CBO) with what actually happened. While the January 2000 baseline projected a 2006 budget surplus of $325 billion, the final 2006 numbers showed a $247 billion deficit-a net drop of $572 billion. This drop occurred because spending was $514 billion above projected levels, and revenues were $58 billion below (even after $188 billion in tax cuts). In other words, 90 percent of the swing from surplus to deficit resulted from higher-than-projected spending, and only 10 percent resulted from lower-than-projected revenues.[5] (See Chart 1.)

Here’s Chart 1:

Clearly the issue here is not that the United States government doesn’t seize enough property from the American people, but that it spends too much.

While liberal blogs want to push the idea that allowing the tax cuts to continue would be bad, the fact is the tax cuts aren’t the problem. A run away federal government is the problem.

It reminds me of a Ronald Reagan quote.

Well, like those extra fat kids everyone is screaming about, it’s time to pull the parents aside and say, “You are freaking killing your kid. Stop feeding him so much. Put him on a diet. This won’t end well if you don’t.”

We don’t need the rich paying more taxes. We don’t need the middle class paying more taxes. We don’t need anyone paying more taxes.

We need the Congress to drop the chicken nuggets, push themselves away from the table for once, and change their diaper.

In a fiscal sort of way.