Austan Goolsbee, the former Chairman of President Obama’s Council of Economic Advisers, has a column in the Wall Street Journal that argues government spending isn’t too high.
That’s obviously a silly assertion, as I explain here, here, and here, but I want to focus on what he wrote about tax revenues.
Here’s the relevant passage from his column.
The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%.
He’s right that the main problem is in the future. As I’ve noted before, America is doomed to become Greece because of rising entitlement spending.
But he’s completely wrong when he implies that the problem is because taxes will stay below the long-run average of 18 percent of economic output. Here’s a chart I posted last year showing that tax receipts will soon rise above the long-tun average – even if the 2001 and 2003 tax cuts are made permanent. And these numbers are from the left-of-center Congressional Budget Office.
It’s rather shocking that a former Chairman of the Council of Economic Advisers isn’t aware of this CBO data. Or, if he is aware of the data, it’s unseemly that he would deliberately mislead readers.
But let’s set aside any discussion of why Goolsbee made such a fatuous claim about revenue. What really matters is that this is a debate about fiscal policy and the size of government.
The folks on the left want to convince us that inadequate revenue is causing deficits, both in the short run and long run.
We can see that they’re wrong in the short run.
But what’s especially remarkable is that they are wildly wrong about the future. The long-run data from the Congressional Budget Office shows that the federal tax burden over the next 70-plus years will jump to more than 30 percent of GDP.
This CBO baseline data assumes the 2001 and 2003 tax cuts expire, so it exaggerates the increase in the future tax burden compared to current policy. But even if you correct for this assumption and reduce tax receipts by about 2-percentage points of GDP (and presumably even more than that in the long run), it’s clear that the tax burden will be far above the historical average of 18 percent of GDP.
It’s easy to understand why Goolsbee ignores this data. After all, why report on information that completely debunks the left-wing argument about the supposed need to increase the tax burden.
But this isn’t the first time Goolsbee’s been wrong about tax policy. Let’s dig into the 2010 archives and share this video, which takes apart his arguments for class-warfare tax policy.
So what’s the bottom line? Well, we know Goolsbee and other leftists are being deceptive about taxation.
But my main takeaway is that I wish the left would be honest and admit that taxes already are projected to increase. And I’d like them to level with the American people and admit that they want the tax burden to climb even faster because they want government to get even bigger.
Gasp! CBO claims that it will take a whole 70 years for taxation to rise to 30% ??!
The decline will be much swifter.
The CBO, in its static (Rahn curve oblivious way) overlooks the fact that the US is in the grips of the vicious cycle – past the point of no return.
The still moderate decline in growth rate brought by current policies will bring a gloomier US environment, which, in turn, will trigger more majoritarian calls for redistribution, central planning and government “care” packages, then in turn even slower growth, more gloom, more bad policies. Yes, the US made mistakes in the past but at that time the freedom advantage that the US maintained since its inception, compared to the rest of the world, was enormous. This margin of advantage has finally worn very thin, the rest of the world (mostly the three billion people of the developing world) have partially woken up, and so now American mistakes put the US past the tipping point of permanent loss of competitiveness.
In 20 years Americans will have 50% of their economy communally managed, i.e. the government will control 50% of the economy, and individual Americans will be operating under French incentives to produce — which means that the rich will be at the top of the Laffer Curve, the poor will be paying VAT, the country will be way past the maximum on the Rahn Curve, and, in summary, the US economy will be riding a perpetual 1-2% annual growth trendline to decline, in a world that will continue to grow at a 5-6% average rate. World growth will be in large part fueled by ex-western world citizens fleeing to whichever country and environment evolves into letting them keep the fruits of their labor. That is already happening with Europe and is set to accelerate dramatically in the next few years as Europe cements its path to decline. The genie is out of the bottle, technology has now made goods, services and people mobile in production, wealth and physical presence. The upcoming groundswell of demand for letting competent people keep the fruits of their labor will be met by supply by someone somewhere in the world. It is already happening in small countries like Switzerland, Singapore, Hong Kong etc. but with demand increasing other environments will join as the benefits of flouting international OECD style cartels start outweighing the costs.
For the US, the arguments presented by Goldsbee are part of a well oiled and tried script. Just remember that virtually EVERY single country in Europe – even before the EU which may today impose uniform solutions – representing very different once independent cultures, all, more or less independently, bought the Welfare State “shortcut” to prosperity. What makes anyone think that Americans are that different and immune to these well tried and deceptive arguments about prosperity through mandatory collective action? Are Americans that different? Watching 90% of Americans rest their hopes for maintaining their 6x world average standard of living on either Obama, Romney or Santorum, convinces me that Americans have already bought the script to collectivism – and decline.
The decline will be much swifter – 70 years is way out of line. Americans will be well on their way to joining average worldwide standards of living before Al Gore declares another 0.5C rise in world temperature.
Ditto’s, Zorba!
[...] Daniel J. Mitchell says that “Austan Goolsbee’s Budget Math is Wrong — More than 100 percent of Long-Term Fiscal [...]
As Frederick Bastiat stated in his epic, “The Law”, when there is plunder by Government it will always result in Economic problems.
Bastiat says,“See if the law takes from some persons what
belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another
by doing what the citizen himself cannot do without committing
a crime.”With such an accurate description of legalized plunder,
we cannot deny the conclusion that most government activities,
including ours, are legalized plunder, or for the sake of modernity,
legalized theft.”
[...] I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more [...]
[...] I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more [...]
[...] I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more [...]
[...] 4. Tax revenues already are projected to significantly increase over the next few decades because of “real bracket creep,” meaning than a rising burden of spending accounts for more than 100 percent of America’s long-run fiscal chal…. [...]
[...] I’ve already explained that more than 100 percent of America’s long-fun fiscal challenge is government spending. So why reward politicians for overspending by letting them confiscate more [...]
[...] bottom line is that more than 100 percent of America’s fiscal problem is because of too much spending. As such, even though higher taxes theoretically could be part of a grand bargain to address the [...]
[...] bottom line is that more than 100 percent of America’s fiscal problem is because of too much spending. As such, even though higher taxes theoretically could be part of a grand bargain to address the [...]
[...] though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax [...]
[...] though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax [...]
[...] problem, the unfortunate impact of too many people being exempt from the income tax, the fact that America doesn’t suffer from inadequate taxation, the role of Bush’s reckless big-government fiscal policy, and the fact that higher taxes [...]
[...] though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax [...]
[...] though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax [...]
[...] would have liked to make two final points. First, that all of our long-run fiscal challenge is the result of built-in growth of government spending, and second, that balancing the budget is easily achievable in just 10 years if policy makers limit [...]
[...] already corrected this myth earlier this year when I debunked some disingenuous comments by Obama’s former CEA [...]
[...] of economic output. That’s unfortunate, but it’s even worse than it seems since the tax burden already is scheduled to rise to record levels because of what’s called “real bracket creep.” The Simpson-Bowles tax hikes would [...]
[...] though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax [...]
[...] this year, I explained that tax revenues would soon climb above their long-run average of 18 percent of GDP, even if the 2001 and 2003 tax cuts were made permanent. In other words, the nation’s fiscal [...]
[...] this year, I explained that tax revenues would soon climb above their long-run average of 18 percent of GDP, even if the 2001 and 2003 tax cuts were made permanent. In other words, the nation’s fiscal [...]
[...] this year, I explained that tax revenues would soon climb above their long-run average of 18 percent of GDP, even if the 2001 and 2003 tax cuts were made permanent. In other words, the nation’s fiscal [...]
[...] this year, I explained that tax revenueswould soon climb above their long-run average of 18 percent of GDP, even if the 2001 and 2003 tax cuts were made permanent. In other words, the nation’s fiscal [...]
[...] of government will exceed the levels that currently exist in every single European welfare state. Tax revenues also will climb as a share of GDP thanks to “real-bracket creep,” so there is no plausible argument that the long-run [...]
[...] of government will exceed the levels that currently exist in every single European welfare state. Tax revenues also will climb as a share of GDP thanks to “real-bracket creep,” so there is no plausible argument that the long-run [...]
[...] of government will exceed the levels that currently exist in every single European welfare state. Tax revenues also will climb as a share of GDP thanks to “real-bracket creep,” so there is no plausible argument that the long-run problem is [...]
[...] though America’s fiscal problem is entirely the result of too much government spending, I wrote earlier this year that there were all sorts of scenarios where I would agree to a tax [...]
[...] We also know that tax revenues, measured as a share of GDP, will soon be above their post-World War II average and that the tax burden is expected to increase in coming decades. [...]
[...] We also know that tax revenues, measured as a share of GDP, will soon be above their post-World War II average and that the tax burden is expected to increase in coming decades. [...]
[...] Goolsbee’s recent columns have been less impressive, perhaps because he feels the need to defend [...]
It’s going to be finish of mine day, but before finish I am reading this impressive paragraph to increase my knowledge.
[...] But there were lots of fatal flaws in the Bowles-Simpson plan. It included a big tax increase, even though America’s fiscal problem is entirely the result of too much spending. [...]
[...] The most important, powerful, and relevant argument against the value-added tax in the long run is that more than 100 percent of America’s long-term fiscal problem is too much spending. [...]
[…] 18 percent of economic output. That’s unfortunate, but it’s even worse than it seems since the tax burden already is scheduled to rise to record levels because of what’s called “real bracket creep.” The Simpson-Bowles tax hikes would be an […]
[…] of government will exceed the levels that currently exist in every single European welfare state. Tax revenues also will climb as a share of GDP thanks to “real-bracket creep,” so there is no plausible argument that the long-run problem is […]