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Tuesday, January 26, 2010

Pete DuPont: Coming Tax Hikes Will Cause Greater Economic Collapse Than 2008-09

Wall Street Journal op-ed, An Economic Time Bomb: Even If Congress Does Nothing, Tax Hikes Will Hit Hard a Year From Now, by Pete DuPont (Chairman of the Board, National Center for Policy Analysis):

Weather-wise it has been a very cold January, and politically the Scott Brown Senate victory has chilled Washington Democrats even further. But if the Democratic economic policies continue nevertheless, this year will be nothing like the bitter economic January we will be living in a year from now.

Government spending has already hugely increased, and so has the size and scope of government, but next year there will also be substantial tax increases for a great many Americans. ...Add on to all of these increases the biggest government deficits and spending increases (to 26.5% of gross domestic product from 21%) in half a century, the protectionism of free trade downsizing through the "buy American" requirements, China import restrictions, and the administration limitations of Columbia, South Korea, and Panama free trade agreements, and we have a very different, and not very prosperous, America ahead of us. ...

[W]hen the huge tax-increase agenda arrives a year from now, the economy will begin to decline, and will be some 3% to 4% smaller than it otherwise would have been. The artificially high growth in 2010 followed by artificially low growth in 2011 would "represent a larger collapse than occurred in 2008 and early 2009," Mr. Laffer writes.

http://taxprof.typepad.com/taxprof_blog/2010/01/pete-dupont-the.html

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Comments

The propagandists at the WSJ editorial board are at it again. In six months,they will have everyone convinced these are "Democrat" tax increases.

These are Republican tax increases, you know. About ten years ago, when Congress was passing all their irresponsible tax breaks, they made them disappear after ten years. The reason was to massage the Congressional Budget Office scoring of the cost of these tax cuts. The CBO evaluates the effect over ten years.

Posted by: jimharper | Jan 26, 2010 4:01:23 PM

Tanking the country by design. Karl Marx would be proud

Posted by: robertsgt40 | Jan 26, 2010 4:59:08 PM

jimharper - Your comment makes no sense. How does the fact that tax cuts disappear after ten years affect the estimated cost during those first ten years?

Posted by: Tom | Jan 27, 2010 3:18:35 AM

Jim Harper - so you would be in favor of the Democrats making the tax cuts permanent, then?

Posted by: kjl291 | Jan 27, 2010 3:37:44 AM

Republicans try to make these cuts permanent over and over and over again, but it's their fault Democrats blocked them? Democrats have the House, the Senate, the White House, and even had a super majority in the Senate for months, but it's the Republicans who are at fault because the Democrats never even tried to extend these cuts for another couple of years till the recession passes or trigger the sunset with some economic formula when it's safe? How deluded can you be? Do Democrats and their supporters have no sense of governance at all? No sense of responsibility? Even while they have near absolute power?

Jimharper, go back to TPM and tell them they need to give you more and better notes. Seriously. Democrats are in charge and the only thing they can do is try to run some Bizzaro World blame game. Raising taxes now is indisputably DUMB. I know you hate people with money, but for the sake of the national economy just PRETEND you care more about what's smart than you do about your ideology. Extend the sunset till the economy has stabilized and is growing again. How hard is that? I know it means you'll have to curtail some of your spending schemes, but that's just reality, that's life, you don't get everything you dream about just because you want it. It's called RESPONSIBILITY and it comes with POWER.

Posted by: The Apologist | Jan 27, 2010 4:17:05 AM

The country is spelled "Colombia." It is a common mistake. I don't know a lot about South Korea but I have been to Colombia over 20 times since 2002. The improvements in the country are manifold across the board. A once terrorized and cowed people have heroically reclaimed their country from leftist thugs and drug criminals. They are a shining example for people everywhere. The refusal of this adminstration to back the free trade agreement is a disaster at every level. When I travel there the people are completely perplexed. Why are they being punished by the U.S.? It is embarassing when I have to tell them it is all about small minded politicians doing things to gain miniscule domestic political advantage.

Posted by: Richard from Houston | Jan 27, 2010 4:20:57 AM

JimHarper,

Let's start at zero and walk through this step by step.

Step 1. Nothing happens. Therefore, the government has no money. Therefore, any spending it makes is a deficit.
Step 2. Person X and Person Y agree to trade, making them both better off.
Step 3. Government takes a piece out of Person X. Nobody is actually sure how much this improves anyone's life on net.
Step 4. Government takes a piece out of Person Y. Nobody is actually sure how much this improves anyone's life on net.
Step 5. Government spends, usually more than it takes it.
Step 6. Government agrees not to take as much out of Person Y.
Step 7. Government spends more than it takes in.

If responsible action is doing that thing which will improve people's lives on balance, then the most responsible thing here is the transaction between Person X and Person Y.

If responsible action is taking account of the conditions in front of you, then the point where this gets irresponsible is Step 7 or Step 5. Not Step 6.

You're coming from the assumption that the rate of government ordered theft was correct before the tax cut. What is the basis of that? Why isn't it possible that government was taking too much and spending too much before that? After all, government only has money to spend when it seizes it from others. Wealth starts with people, not with government.

Posted by: Amos | Jan 27, 2010 4:51:54 AM

Republican tax increases, my ass. Granted, they were Republican tax decreases because they were proposed and enacted by Republicans majorities (with bi-partisan...remember THAT? support). If taxes go up when there are Democratic majorities, with Republicans trying to retain them, they will be owned by....Democrats.

Posted by: ray | Jan 27, 2010 5:41:19 AM

This all strikes me as heavily optimistic; thinking we'll even make it to next year stoking on these fumes. The states will eat us alive before we round the sun again.

Posted by: egoist | Jan 27, 2010 5:58:58 AM

Gee JimHarper, who has been doing everything they can for the past 4 years to stop Republican proposals to make the tax cuts permanent? hmm? Your twisting of logic is typical of liberal trolls. Instead, lets triple the national debt and run the economy into the ground. That will fix everything.

Posted by: KOConnell | Jan 27, 2010 6:00:13 AM

Wow, the White House talking points came out quick. Looks like Obama is sensitive to the fact that Democrats are raising taxes in a recession to pay for bailout giveaways to unions and banks.

Posted by: Some Teabagger | Jan 27, 2010 6:02:20 AM

The WSJ op-ed doesn't even mention the AMT. If Congress doesn't "fix" the AMT for 2010, it will jump from affecting 4 million taxpayers to 25 million. I'm one of those; my taxes will jump $2000 for 2010 if the AMT exclusion is not raised. I think people will start to get worried if this goes on for a few more months, and I don't think Congress will want to be blamed for raising taxes on 25 million mostly middle-class taxpayers in an election year, but I'm going to have to start setting aside $150 a month for this if they don't. How's that for economic stimulus?

Posted by: Tom | Jan 27, 2010 7:03:23 AM

Nope,

We need to go the way of Iceland and give the Banksters a collective middle finger.... Just stop paying taxes until Government shrinks- Get rid of the IRS and the Fed. Charge up all your credit cards to the max and don't pay em a dime, hopefully this will help them to collapse.

We would be doing it for future generations not just us. No income taxes alone would steer the economy in less than a year we should also consider Property taxes as well.

Ron Paul 2012

Posted by: Paul Revere II | Jan 27, 2010 7:48:50 AM

Like JH - I blame Boooosshhhh!

Posted by: bandit | Jan 27, 2010 8:13:06 AM

Democrats have held Congress and run this country into the ground since 2006. Grow up, stop blaming others for the Democratic economic disaster. Accept responsibility.

Posted by: DaveinPhoenix | Jan 27, 2010 8:27:03 AM

Jim Harper,

This is common sense with a shout out - You're an idiot!! You are the perfect reason why trying to to reason with liberals is lunacy. Liberalism is a mental disease that causes all logic to disappear from one's faculties. For all our sake's, I hope you find a cure.

Posted by: CommonSense | Jan 27, 2010 8:32:25 AM

oh man you folks ripping up that JimHarper has made my day, thanks!

Posted by: Linda | Jan 27, 2010 9:39:45 AM

Richard from Houston - amen to that. The Bogota that I visited last summer was worlds better then the city I visited in '98 and '99. All the guns and guards on the street corners were gone. People crowded the streets at night without fear. Banners supoorting Uribe hang is every villang and town I visited. The Colombians are staunch friends of the US. They don't understand why the Dems have it in for them.

Posted by: Dotar Sojat | Jan 27, 2010 11:32:40 AM