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Thursday, July 10, 2014

Johnston: Americans Have Missed Out on $6.6 Trillion of Income Since 2000 Due to the Bush Tax Cuts

Al Jazeera:  Americans Have Lost Out on $6.6 Trillion, by David Cay Johnston:

I calculated that enormous figure by comparing the average income Americans reported on their 2000 tax returns with what they reported each year for 2001 through 2012, adjusting for inflation and the growing population. Add up the income for 12 years and it turns out to be $6.6 trillion less than if we had maintained the prosperity of 2000 for a growing population.

Why use 2000 as a benchmark? Well, first off, it marks the end of one era and the start of another. More important, that very good year economically was when George W. Bush, running for president, said American prosperity would get even better if he was elected and his tax cuts — key aspects of which he kept secret until after the election — would ensure American prosperity.

The results: The prosperity of the prior decade was lost. Job growth fell far behind population growth. The median wage (half make more, half less) has been mired since 1998 at a bit more than $500 per week. 

In 10 of the 12 years when the Bush tax cuts were in effect, the average income shown on tax returns was lower than in 2000. In the two upside years, average income rose modestly, up $504 for 2006 and $1,744 for 2007. Total those 12 years and the net shortfall per taxpayer comes to $48,010. ...

DCJ

You will not find these missing income figures in any official government report. I calculated them from IRS data. But measures like this explain why so many Americans feel they are not getting ahead, as Obama observed last week. ... There is more than enough empirical evidence to demonstrate that the Bush tax cuts failed to produce the promised result.

http://taxprof.typepad.com/taxprof_blog/2014/07/johnston-americans-have-missed-out-on.html

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Comments

Why use 2000 as a benchmark? Because that was the high water mark for the dot-com bubble.

If this article were written about Obama's policies it would have used 2007 as the baseline, since that was the high water mark for the next bubble.

The short version of this article is that bubbles pop, and it's fun to blame a policy without any plausible cause and effect mechanism. The audience will eat it up.

Posted by: AMT buff | Jul 10, 2014 11:09:08 AM

I don't get it - is he claiming that all of the economic events since 2000 that have reduced incomes, including the recession, were caused by the Bush tax cuts?

Posted by: Nathan | Jul 10, 2014 11:17:49 AM

Seems weird to write an opinion piece saying people are worse off after a tax cut and then cite their pre-tax incomes. Though the silliest move was noted by AMTbuff, that cherrypicking is partisan hackery.

Posted by: Yo Gabba Gabba | Jul 10, 2014 3:37:08 PM

How ironic that David Cay Johnston reports for Al Jazeera and that the Bush temporary tax rates, as correctly described and that he criticizes, were passed to help prop up an economy destroyed by Islamic terrorists on 9-11. Perhaps David will be kind enough to calculate for us the real and larger costs to Americans as a consequence of Muslim hatred of and attacks on the U.S., which Al Jazeera fans.

On the “tax rates,” the Democrats signed off on them, Pres. Obama continued with them, and, when the tax rates were expiring, Obama made them his own…and, importantly, made them permanent. So, what’s the problem and why is Bush being singled out for an attack? Do they no longer “cost Americans” now that the “cuts” are Obama’s?

Further, on the “analysis,” it amazes me that the Left will attribute higher taxes – principally transfers from families and small businesses to the government -- as a source of prosperity and a contributor of job growth. If that worked, wouldn’t Obama double taxes? Well, maybe he’s trying.

Another commenter on this site recently stated that Democratic supporters cannot accurately (let me emphasize “accurately”) pinpoint specific Pres. Clinton policies that created economic prosperity, and the commenter concluded that growth during Clinton’s term in office was simply serendipity.

BTW, David, the economy had already entered a recession before Clinton left office; so, is Bush to blame, too, for events before he became president, just like Obama still blames him for everything today? Maybe it’s time to grow up and quit saying everything is the fault of Bush. And, oh, get real with cause and effect on taxes and the economy and who is really responsible.

Posted by: Woody | Jul 10, 2014 9:15:15 PM

Come on Woody. Even you know that the U.S. economy was not “destroyed by Islamic terrorists on 9-11.” The Congressional Research Service, in a retrospective assessment (“The Economic Effects of 9/11: A Retrospective Assessment” available at http://fas.org/irp/crs/RL31617.pdf) of the economic effects of the attacks stated:

“The loss of lives and property on 9/11 was not large enough to have had
a measurable effect on the productive capacity of the United States even though it
had a very significant localized effect on New York City and, to a lesser degree, on
the greater Washington, D.C. area. . . .

“It was initially thought that aggregate demand was seriously affected, for while
the existing data showed that GDP growth was low in the first half of 2001, data
published in October showed that GDP had contracted during the 3rd quarter. This
led to the claim that “The terrorist attacks pushed a weak economy over the edge into
an outright recession.” We now know, based on revised data, this is not so. At the
time of 9/11 the economy was in its third consecutive quarter of contraction; positive
growth resumed in the 4th quarter.”

Simply put, the U.S. economy had begun contracting in 1Q 2001, and continued to contract in 2Q and 3Q. The 9/11 attacks had not even a “measureable” effect on our economy. Just another conservative myth used to justify the stupidity of the Bush 43 tax cuts.

Posted by: Publius Novus | Jul 11, 2014 6:40:00 AM

Typical progressive argument - start with a false premise and it gets more and more silly from that point on.

Posted by: Dale Spradling | Jul 11, 2014 7:28:52 AM

Yes, terrorists did not destroy the US economy. But the dot com bubble burst was sending the economy into a contraction. The 9/11 attack was going to aggravate that even if not by much, but worse, the unrelated contraction would be understood by much of the world to be the result of 9/11, rendering the attack successful in the eyes of billions. The cuts were designed to help prevent that from happening. Was that wise? Hard to say, and it depends on many subjective normative assumptions. But unlike Johnston's article, the cuts were not dishonest.

Posted by: Mike Petrik | Jul 11, 2014 7:56:19 AM

Quoted Report: “The loss of lives and property on 9/11 was not large enough to have had
a measurable effect on the productive capacity of the United States….”

Publius Novus: “The 9/11 attacks had not even a ‘measureable’ effect on our economy.”

Nice try.

But, you may have saved David the effort of concocting some phony analysis to defend Islamic terrorists, just so that Bush could continue to be falsely blamed for even more.


One can always count on Lefties to make up, push, and misinterpret bogus academic-style studies and political agendas posing as scientific papers to support their fantasy worlds.

The truth is that, while estimates range from $3 – $5 trillion in economic impact losses resulting from the 9-11 attack and response, the actual amount is not measurable and the costs still continue today – not to mention the costs to our freedoms.

Enjoy your next anal probe at the TSA line. (If really you do enjoy it, I don’t want to know.)

Posted by: Woody | Jul 11, 2014 8:35:08 AM


I marvel people who post here, often without reading what I wrote or not paying attention, who get it completely wrong, as well as those who bring up utterly irrelevant material to express their dislike of facts they wish did not exist. The factually wrong, bigoted and crude comments by the person who cowers behind the nom d’Internet “Woody” are particularly revealing of the breakdown of civil debate in America.

All I did was hold President Bush to HIS OWN STANDARD. Actually, I held him to a lower standard, as anyone who actually reads my carefully written and accurate column knows.

I even offered the Bush campaign the opportunity to hedge the unqualified claims that “tax relief “would produce greater prosperity than we enjoyed in 2000. I asked because it seemed a stretch given the nature of the 2000 economy, the stock market’s fall beginning in March of that year and in particular because the Bush campaign had started asserting that the economy was in, or would soon be in, a recession. (The expansion, the longest in history, began in March 1991 under President GHWBush and ended March 2001, almost seven weeks after Mr. Bush was sworn in.)

I raised the campaign’s recession talk, demographics, technology, events beyond any president’s control and policy choices that Bush might make later as president as possible reasons the promise might not work out. I asked whether the campaign wanted to qualify the promises.

The response? My questions were treated as hostile, so much so that I offered the direct dial number of the NYTimes executive editor to facilitate lodging any complaint about my questions. The response itself was that there were absolutely no ifs, ands or buts about it, the tax relief plan (much of which was still secret at that time) would make us better off in the next four or eight years (and beyond) than we were right then in 2000. I was asked when my story would run and I said in about ten years – when the data became available.

Long after being sworn in President Bush kept making unqualified statements that his tax relief plan would pave the way to more prosperity. He did not qualify his remarks in any of the numerous transcripts, recordings and written statements I reviewed.

So by merely comparing what would have happened had incomes stayed at the level of 2000, adjusted for inflation and population growth, my column actually holds President Bush to a lower standard than his own. Would that I had asked (and gotten affirm answer) on how much more income we should expect.

So the $6.6 Trillion of income NOT earned – enough to pay fedrela income and payroll taxes as well as retire every student loan, car loan and credit card debt and still leave $17,800 left over per taxpayer – measure sonly what would have happened if we had just maintained the prosperity of 2000, a lower standard than President Bush set for himself both as candidate and while in office.

I have held other politicians to exactly the same standard – their own – many times. BTW, in 2010 I wrote an earlier version of this column for Tax Analysts, examining the years through 2008 when Bush was president. This new column allows us to look at what happened with the full extension of the Bush cuts for the first half of the Obama president, during which I noted that more than half of the income that never materialized is measured.

How can rational adult possibly object to holding any politician to his or her own standard by comparing what he or she promised to actual performance?


Posted by: David Cay Johnston | Jul 12, 2014 12:04:37 PM

”Comments by the person who 'cowers' [really love his description] behind the nom d’Internet” ’ David Cay Johnston’ ”are particularly revealing of the breakdown of civil debate in America.”

David, if that’s your real name…you’ve used that line before with me, in typical leftist fashion, to try to denegrate flaws and omissions that I exposed about your article. What you did is often your first attempt to avoid admitting that what you wrote does not stand up to scrutiny. You show no cause and effect in your assumptions and conclusions, both of which are usually wrong. My comments stand without your having adequately addressed or found reasonable fault with them.

Nom d’Internet David Cay Johnston: How can rational adult possibly object to holding any politician to his or her own standard by comparing what he or she promised to actual performance? Maybe it’s time to turn to Obama: FLASHBACK: Obama: My Presidency Will Be 'A One-Term Proposition' If Economy Doesn't Turn In 3 Years

You know, you always (and I mean “always”) have to do a lot of “explaining” about your articles every time people start pointing out problems with them. Wouldn’t a good tax and finance journalist be able to write clearly, completely, and honestly enough to avoid that? Of course, given past embarrassing articles by you that brought out your weak scholarship and affected your employment, I don’t blame you for getting so defensive.

Regarding actually reading “what your wrote” vs. just the condensed version and summary, consider the first line within your article: “Why are so many Americans feeling squeezed economically even as the economy expands at an accelerating pace?" David, it’s hard to get past the initial “givens” of your articles without stopping and not reading any more. If I smell dog mess, I don’t have to go further to study it or touch it to verify that it’s dog mess.

Woody on 07/11/2011: Johnston should get the "Dan Rather Fake But Accurate Award of Journalism." – Still true today.

And, yes, Al Jazeera has fanned Muslim hatred of and attacks on the U.S.; and, rational Americans who love this country and have studied history know it’s true and should feel a sense of outrage and objection to the employer that you serve and defend.

David, I do like you personally, but I still must disagree when appropriate.

Posted by: Woody | Jul 13, 2014 1:14:49 PM

David, I felt badly about how I responded to you above and, so, I apologize. We have different perpectives, but the discussions should always be about the issues rather than take a personal nature, for which I crossed that line. Please accept my apology.

Posted by: Woody | Jul 13, 2014 7:45:08 PM