patrick.net

Everyone pulls this from Reagan basically. It's not true. Reagan raised taxes in many categories that were less obvious and dropped tax rates in a way that was more obvious. The lemmings say "look taxes dropped, and the economy grew." Not true. Reagan probably passed one of the biggest tax increases ever, and that's how revenue magically went up.

Then those same lemmings ignore the fact that tax rates went up under Clinton, and the economy soared.

Then those tax rates were cut under Bush and we had an enormous credit bubble that popped and sent us into the worst economy since the Depression.

It's just people talking out of their ass. Taxes are merely one factor that determines economic growth. It's much more complex than the way these lemmings simplify it, and the echo chamber just repeats it in the hopes that repeating it means its true. It often works, unfortunately because the people that listen to these echo chambers don't think particularly critically.

Reagan was far more of a pragmatist than these pretenders.

http://www.cbpp.org/cms/?fa=view&id=692

addresses this topic directly. One thing they missed is the true nature of the Bush Boom. I didn't see it in realtime either so I guess they get a pass.

This statement:

"The economic growth fueled by tax relief has helped send our tax revenues soaring.”"

was issued by Team Red on July 11, 2006.

What is undeniable is the housing bubble was peaked right then:

http://research.stlouisfed.org/fred2/series/SPCS20RSA

so that's one thing the tax cuts helped produce.

But what also happened in mid-2006 was Peak Debt:

http://research.stlouisfed.org/fred2/graph/?g=32Y

shows that home debt grew by almost $1.2T YOY by 1Q06.

It was the home ATM and general housing mania that created everything good about the Bush years!

Here's a more detailed analysis:

http://research.stlouisfed.org/fred2/graph/?g=330

red is Federal surplus (down is deficit).
blue is YOY household debt change.

One can see how the $1T/yr+ of new household debt 2004-2007 eventually started closing the deficit, slightly.

And one can also clearly see how when the home ATM failed, everything failed.

Yet even such center-left stalwarts as CBPP, Drs Krugman andDelong don't really see this.

Same thing with the Reagan-era tax cuts too.

http://research.stlouisfed.org/fred2/graph/?g=32Z

shows how systemic debt sharply rose from 1.7X to 2.3X GDP during the Reagan years.

The curve continuing is the truest picture of WTF has been happening in this economy since then.

Scary stuff, really. I think we're probably more screwed than Japan. At least they have a trade surplus, more or less. We're totally reliant on the kindness of others for our national survival.

Have I mentioned how much I love the St Louis Fed? I've found dozens of answers to crucial questions that I've been unable to find anywhere else . . .

I bet you use the data from the St. Louis Fed more than the people who work at the St. Louis Fed...