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UNIVERSITY OF COMPASSIONATE CONSERVATISM (what is this?) 

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COMPASSIONATE CONSERVATISM 202A*
*Bush administration lies and deception moral clarity, honesty and integrity 
on the
Economy, Budget and Taxes - Part I

In this course you will learn about the abundant lies, deception or intent to deceive moral clarity, honesty and integrity displayed by compassionate conservative2 President George W. Bush (and his administration speaking on his behalf) on the issue of the Economy, Budget and Taxes - Part I. This part covers his (Government's) statements on the 2001 Tax Cuts, Estate Tax, Social Security/Medicare and Budget Deficits. Make sure you drop by again when the Election 04 (2004) campaign starts picking up steam, so that you can refresh your memory on his compassion. 

Please note that the statements made by Bush or his spokespersons/administration3 - as cited in column 3 of the tables below - are by default extracted from one or more of the links shown in column 4. If the source of the statements is different from the link(s) in column 4, then a URL is explicitly provided in column 3. For feedback and corrections, please go here.

A detailed acknowledgement of the sites from which the information below was obtained is listed at this location. In particular, I would like to acknowledge the following sites where I got the vast majority of links from: PK archiveAtrios/Eschaton, Politics, Law and Autism, Calpundit, Buzzflash, Daily Howler, Thinking it Through, BushwatchSpinsanity

Total Compassion Con credits 2 available from this course to date = 150

Last Update: 10/28/2003

 

Please select one of these sections

Once you are done with the above sections, you may choose another course by picking one of the options below

 

 

2001 TAX CUTS and 2001-2002 "STIMULUS"<go back to the top>

Compassion Con credits total = 64

# Topic Bush's or his representative's Compassionate statement Some Uncompassionate Facts Compassion Con Credits
TA1-01 A reason for (2001) Tax Cuts Bush

"...also echoes a favorite GOP line that the budget surplus constitutes an "overcharge" that must be returned to the taxpayers, in the same way that a restaurant would be obliged to give you a refund if it miscalculated your bill..."

Jonathan Chait (The New Republic):
"...This suggests some interesting implications. One is that it is inherently immoral to pay down the national debt. Another is that a budget deficit--should one reappear--constitutes an "undercharge" and is thus proof of the need for a tax increase. The main point of this silly analogy, of course, is to make tax-cutting seem like a foreordained conclusion (Oops! Overcharged ya--here's your refund!) rather than a conscious democratic choice, to be weighed against alternatives, such as paying down the debt or expanding health care coverage..."
1
TA1-02 A reason for (2001) Tax Cuts Bush administration

"...for example, Karl Rove explained that the tax cut...was designed to cope with the current recession. "All the signs were there in the second, if not the second, the third quarter of 2000," Mr. Rove said..."

Paul Krugman (New York Times):
"...Karl Rove explained that the tax cut, although originally proposed amid an economic boom, was designed to cope with the current recession. "All the signs were there in the second, if not the second, the third quarter of 2000," Mr. Rove said. When a questioner gently pointed out that Mr. Bush had laid out his tax plan way back in 1999, Mr. Rove brushed him aside..."

Paul Krugman (New York Times):
"...Of course, you might wonder why Mr. Bush himself didn't have second thoughts -- why he thought that the exact same tax plan he proposed in the feverish bull-market days of late 1999 was still appropriate in the post-bubble economy of 2001. And his officials surely knew that tax receipts were dropping like a stone even as they were reassuring a docile Congress that everything was just fine.
But one thing we have learned about this administration is that it never responds to altered circumstances by changing its plans; all it does is change the sales pitch. So the tax cut was relabeled as a recession-fighting measure, a task for which it is peculiarly ill-suited..."

0

(This is covered again in CC202B)

TA2-01 2001 Tax Cuts and Democrats Bush

"...A corollary of Bush's false assertion that his tax cut would help everyone, but especially the poor, is that the Democrats' proposals might help the poor but wouldn't help every one else. "To me, the best tax policy is to treat everybody fairly and to say if you pay taxes, you get relief," the president likes to declare..."

also said, "...Democrats were intent on "targeting people in and targeting people out" of tax relief..."

Jonathan Chait (The New Republic):
"...But the corollary is wrong as well. Democratic proposals do give tax relief to everyone. For low-income workers who owe payroll taxes but not income taxes, the Democrats (unlike Bush) offer tax credits. And for everyone else, including the wealthiest Americans, the Democrats offer--yes--an income tax cut. One Democratic scheme would confine its income tax cuts to the lowest tax rate, and news reports often state, erroneously, that this would help only the lower and middle classes. That's not true: Even if you're in the top tax bracket, you pay the top rate on only the portion of your income above about $300,000 per year. Below that level, your income is taxed at lower rates. This means that all income taxpayers pay the lowest rate on at least some of their income, and cutting that lowest rate would benefit them all. So Bush's line is a complete inversion of the truth: Democrats are the ones who give a break to every taxpayer, and Bush is the one who leaves some out..."

Also see: Jonathan Chait (TNR)

(1 for mis- representing compassion on Democratic proposals and 1 for lying about  compassion on his own plan)

TA2-02 2001 Tax Cuts and Democrats Bush

Stating (about Democrats), "..."There is an amazing new kind of economic theory working its way through Washington, and it said that tax relief causes recessions," the president declared. "The worst thing you can do is raise taxes during a recession."..."

Bush

"..."[t]here's going to be people who say, we can't have the tax cut go through anymore. That's a tax raise." He added: "Not over my dead body will they raise your taxes."..."

Lindsey for Bush

"...Mr. Lindsey fell back on his usual argument: that the tax cut is needed to support the economy...he was defending those future tax cuts. "A repeal of the scheduled tax cut would hit the economy at precisely the wrong time," he declared..."

  Jonathan Chait (The New Republic):
"...Consider the various dishonesties packed into these two short sentences. The first is that Democrats believe Bush's tax cut precipitated the recession, a canard that has since reverberated through the echo chamber of the conservative punditry. Bush is distorting a speech given two days before by Daschle, who argued not that the tax cut caused the recession, but that it failed to avert it (as Bush had promised it would) and may make it longer...
Then there's Bush's claim that Democrats want to raise taxes during a recession. Now, it's true that Daschle and Co. have been extremely slippery about their desire to undo the Bush tax cut, couching their plans in euphemisms like "restore fiscal responsibility." But when it comes to which elements of the plan they propose to undo--er, restore to fiscal responsibility --they explicitly say only those that will take effect after this year. After all, a huge portion of the Bush tax cut won't take effect until his second term, by which time the recession will almost certainly have ended...
But the silliest claim peddled by Bush and his allies is that Democrats want to "raise taxes" at all. The liberal position, remember, is to cancel out those portions of the Bush tax cut that have yet to take effect. Tax cut proponents insist that this constitutes a tax hike...
When you tell most people they're getting a tax increase, of course, they think their tax rate is going to go up. Canceling the unimplemented portions of the Bush tax cut would do no such thing. It would merely give people a smaller tax cut than they had been promised. You could argue that once the government has promised a future tax cut, any downward deviation from that promise counts as a tax increase--and indeed this seems to be the position that Republicans are taking. But it's a spectacularly dishonest one, for two reasons. First, to minimize its ten-year budgetary cost, the Bush tax cut is scheduled to phase out entirely after 2010, at which point (barring what tax-cutters hope will be a routine extension) taxes will revert to their pre-Bush level. So, according to the logic being used against Democrats, supporters of the Bush tax cut actually voted for the largest tax increase in American history..."

Joel Friedman and Robert Greenstein (CBPP):
"...All of the budget proposals currently under discussion to stimulate the sagging economy call for cutting taxes, not raising them. The Administration's plan, the House-passed bill, and the Senate Finance Committee proposal all include tax cuts. In his January 4 speech, Senate Majority Leader Daschle reiterated his support for temporary tax cuts to help revive the economy and proposed a new tax cut aimed at lowering the cost of labor for businesses. There are no proposals on the table to raise taxes to eliminate near-term deficits; a tax increase of this kind runs counter to a broad consensus of economic advice concerning the appropriate fiscal policy to undertake when the economy is in recession.
To be sure, some in Washington have called for deferring or cancelling some portions of last year's tax-cut legislation that have not yet gone into effect. The most widely discussed proposal is to defer or cancel implementation of scheduled future reductions in some of the upper-bracket tax rates. Those rate reductions are not scheduled to take effect until 2004 and 2006, long after the recession is expected to be over. As a result, deferring or cancelling those rate reductions would not affect tax collections during the current downturn.
Nor would such proposals raise tax rates above their current levels. The top tax rate was reduced from 39.6 percent to 38.6 percent in 2002. Under the tax cut enacted in June, this rate would be reduced further in future years, falling to 35 percent in 2006. Cancelling these future reductions — which would affect only the top one percent of tax filers — would maintain the top rate at its current level of 38.6 percent. Such an action, which would save about $90 billion through 2011, would not increase tax rates above today's levels.
Finally, even if one labels the cancellation of a future rate reduction a "tax increase," it cannot be equated with an immediate increase in taxes. The impact on the economy of cancelling a future rate reduction is very different from the impact of instituting a tax increase today..."

Paul Krugman (New York Times):
"...In other words, we don't dare undo tax cuts that aren't supposed to happen until 2006 — or in the case of the estate tax, 2010 — for fear of depressing consumer spending right now. As soon as one puts his argument this way, of course, it becomes hard to take seriously. How many families base their current spending on news about tax changes that won't take place for five years?..."

Also see: Joel Friedman, Robert Greenstein and Andrew Lee (CBPP), Paul Krugman (New York Times)

3
TA2-03 2001 Tax Cuts and Democrats Bush

"...Some are arguing that maybe we ought to roll back the taxes. I guess they're saying that. They're now against tax relief, and if you're against tax relief, it must mean you're for maybe rolling it back..."

"...I call upon the leadership on both sides of the aisle not to fall prey to a false set of economic assumptions that say if you raise taxes it'll help the economy. It will hurt the economy..."

Ben Fritz (Spinsanity):
"...President Bush used one of our favorite illogical spin techniques, the "maybe ... therefore" clause. Here’s how it works. Generalize or hypothesize about your opponents’ agenda by using a phrase like "apparently," "seems to," or, if you’re a Texan like our president, "reckon," and then make your argument as if that uncertainty "maybe" is a fact.
In an effort to paint all who question his tax cut's impact on the deficit and economy as proponents of a tax increase, President Bush actually used the "maybe ... therefore" three times during his photo op today. The first use came in his initial remarks, while the second and third examples came in response to reporters' questions:
1) Some are arguing that maybe we ought to roll back the taxes. I guess they're saying that. They're now against tax relief, and if you're against tax relief, it must mean you're for maybe rolling it back. I think that would be terrible for the economy. Most Americans understand that as well.
2) And I repeat, I reckon some of them up here want to roll it back. But they're going to meet strong opposition, I know, from the White House and I know from Senator Lott as well.
3) And of course, there will be second-guessers here in Washington. And I suspect those who are second-guessing really are saying, we'd like to get rid of that tax relief, we'd like to roll back the tax relief. And I'm going to resist that mightily, and I call upon the leadership on both sides of the aisle not to fall prey to a false set of economic assumptions that say if you raise taxes it'll help the economy. It will hurt the economy.
"Some" ... "maybe" ... "guess" ... "reckon" ... "suspect" ... President Bush doesn't seem confident of his opponents’ intentions. He suddenly becomes sure, though, when he states twice that this hypothetical move will hurt the economy and that he will resist...Rather than put words into his opponents' mouth in order to set up an easy argument, Bush should argue for his policies and only criticize Democrats for what they actually say. Then we won't have to worry about what some of them apparently might be suspected of saying, we guess."

Compassiongate
If raising taxes "will hurt the economy", then Bill Clinton was never President, nor was Reagan who was responsible for one of the biggest tax increases ever in 1982! As Joe Conason points out in Big Lies (page 77): "In October 1994 the Wall Street Journal explained: 'Contrary to Republican claims, the 1993 package is not the 'largest tax increase in history'. The 1982 deficit reduction package of President Reagan and Sen. Robert Dole in a GOP-controlled Senate was a bigger tax bill, both in 1993-adjusted dollars and as a percentage of the overall economy.'..."

2
TA2-04 2001 Tax Cuts and Democrats Treasury Dept. for Bush

 In response to Sen. Kennedy's (D-MA) proposal

"...first three points in the press release assert that two-thirds of families with children would be hurt by reinstating the marriage penalty, reducing the child credit, and repealing the scheduled rate reduction to 25 percent...The Treasury materials discussed the impact of rolling back most of the major tax reduction enacted last year..."

Joel Friedman, Robert Greenstein and Andrew Lee (CBPP):
"...To keep the Kennedy proposal in perspective, it is instructive to compare it to the tax increases that followed the enactment in 1981 of the tax cuts championed by President Reagan. About one third of the 1981 tax cuts were offset the following year — by rolling back enacted tax cuts that had already gone into effect, cancelling some that had not yet taken effect, and increasing existing taxes. By comparison, Senator Kennedy's proposal would cancel only about one-fifth of the tax cut enacted last year and would do so without increasing any taxes above their current levels...
The Treasury Department's Office of Public Affairs released information to coincide with the Kennedy speech, giving the impression that it was intended to respond to his proposal; however, much of the information in the press release had nothing to do with the Kennedy proposals. For instance, the first three points in the press release assert that two-thirds of families with children would be hurt by reinstating the marriage penalty, reducing the child credit, and repealing the scheduled rate reduction to 25 percent. Senator Kennedy proposed none of these changes.
The Treasury materials discussed the impact of rolling back most of the major tax reduction enacted last year, while the Kennedy proposals are far more targeted. Kennedy has called for postponing future rate reductions in the top three income tax brackets — those brackets in which the 39.6 percent, 36 percent, and 31 percent rates applied prior to the enactment of the tax bill. (In 2002, all of these rates are one percentage point lower.) Further rate reductions are scheduled to occur in 2004 and 2006. According to Congressional Budget Office estimates, only 4.4 percent of tax filers are in these top three brackets and thus would be affected by Senator Kennedy's proposal to cancel future tax reductions in these brackets; the other 95 percent of tax filers would be unaffected by this proposal.(1)
Kennedy calls for no changes in the vast majority of the enacted tax provisions — such as those increasing the child tax credit, providing marriage penalty relief, or expanding pension and education tax breaks. Many of these provisions also benefit upper-income taxpayers. (In some cases, as with many of the pension provisions, they benefit high-income taxpayers disproportionately.) As a result, all taxpayers — including those with the highest incomes — would continue to see their taxes reduced over the decade as these provisions continue to phase in (see table on following page)..."
4
TA2-05 2001 Tax Cuts and Democrats  In response to Sen. Kennedy's (D-MA) proposal

O'Neill for Bush

"...80 percent of the higher income taxes that he proposed would be paid by business owners who file individual returns..."

Lindsey for Bush

"..."[m]illions of small businesses would see their taxes increased under the Kennedy plan. More than 7 million returns are likely to be affected..."

Joel Friedman, Robert Greenstein and Andrew Lee (CBPP):
"...
Both O'Neill and Lindsey chose their words carefully, to create the impression that vast numbers of small businesses would be affected by the Kennedy proposal. In fact, what their statements really signify is simply that a high percentage of the 5 percent of tax filers who would be affected by the Kennedy proposal show some business income on their income tax returns. This should not be surprising; many wealthy investors who do not own or operate small businesses have some business income.
To gain some perspective on this issue, one should ask what proportion of small businesses would actually be affected by the Kennedy proposal. Contrary to the impression that O'Neill and Lindsey have sought to foster, most small businesses and their owners would be entirely unaffected by the Kennedy plan. An analysis by the Citizens for Tax Justice finds that only 8.3 percent of sole proprietorships with positive income in 2001 — or about 1.1 million small businesses — paid taxes in the top three brackets, and thus would be affected by the proposal to postpone the scheduled reductions in these brackets. According to CTJ, this business income is actually one of the smallest components of income for those paying taxes in the top three brackets — representing only about four percent of the total income of taxpayers in these brackets.(2)...
Moreover, O'Neill and Lindsey are using an expansive definition of "small business" that includes, for instance, partnerships and S corporations. These types of businesses are often passive investment vehicles. Those who include this income on their tax forms are generally not the proprietors of struggling mom-and-pop businesses. Overall, the Administration has simply revived the exaggerated claims related to small businesses that it used to promote its favored top-bracket reductions last year.(3)"
2
TA3-01 Proposed 2001 Tax Cut Plan: beneficiaries Bush

"...Bush's favorite example of who would benefit from his tax cut--repeated countless times over the last 18 months--is a single waitress with two kids who earns around $20,000 per year. "Under my plan," he likes to boast, the waitress "will pay no income tax at all."..."

Lindsey for Bush

"...If you don't pay taxes it's very hard to get a tax cut..."

Robert Greenstein and Isaac Shapiro (CBPP):
"...The plan does not reduce taxes for everyone who pays taxes. Many low-income working families that do not owe income tax pay significant payroll taxes, even when the effects of the Earned Income Tax Credit are considered; these families are not aided by the plan...A single mother with two children who works full time and earns $22,000 would receive no tax cut whatsoever under the Bush plan. This may be the reason that after citing such a mother on February 2, the President retooled his example the next day..."

Jonathan Chait (The New Republic):
"...That's true. Because the waitress almost certainly doesn't pay any income taxes to begin with. (The only exception would be if she had no child care expenses at all--unlikely for a working single mother of two--in which case she would owe no more than $120.) It is typical of the duplicity Bush has brought to the subject that the people whom he claims would benefit most from his tax cut would not, in many cases, benefit at all...
When pressed on this, the White House has responded with a shrug. "" But this is another deception--while low-income workers may not owe income taxes, they do owe payroll taxes. Nearly 80 percent of the workforce, in fact, owes more in payroll taxes than in income taxes. If Bush truly wanted to help the working poor get ahead, he would propose cutting payroll taxes. But these are among the few federal taxes Bush has shown no interest in cutting..."

Isaac Shapiro, Allen Dupree and James Sly (CBPP):
"...About 12 million low- and moderate-income families with children — nearly one in every three U.S. families — would not receive any assistance from the tax provisions that President Bush is likely to send to Congress on February 8. An estimated 24 million children under age 18 — one in every three children — live in these families...
Even the Bush proposal to double the child tax credit — the feature of his tax plan that one might expect to provide the most assistance to children in low- and moderate-income families — would be of little or no help to many of them. This proposal would provide the largest tax reductions to families with incomes in the $100,000 to $200,000 range and confer a much larger share of its benefits on upper-income families than on low- and middle-income families...
The level at which families now begin to pay federal income taxes is approximately 130 percent to 160 percent of the poverty line, depending on family type and family size. For example, in 2001, a two-parent family of four does not begin to owe income tax — and thus does not begin to benefit from the Bush plan — until its income reaches $25,870, some 44 percent above the poverty line of $17,950..."

2
TA3-02 Proposed 2001 Tax Cut Plan: beneficiaries Bush

stated that "I agree with my critics, however, that those on the bottom end should get the most help."

later "...affirmed that "by far the vast majority of my tax cuts go to the bottom end of the spectrum."

Robert Greenstein (CBPP):
"...
The CTJ analysis of the tax proposal that President Bush presented in the campaign finds the following results (these results reflect the tax cuts when fully in effect):

  • The bottom 40 percent of tax filers would receive four percent of the tax cuts. The average tax cut for this group would be $115.

  • The bottom 60 percent of filers would receive 13 percent of the tax cuts, receiving an average of $227 each. The bottom 80 percent of taxpayers would receive 29 percent of the tax cuts.

  • The 20 percent of filers exactly in the middle of the income spectrum would receive eight percent of the tax cuts and get an average tax reduction of $453.

  • By contrast, the richest one-percent of Americans would receive 43 percent of the total tax cuts, receiving an average tax cut of $46,000 each. The top five percent of filers would garner a little more than half of the tax cuts...

...another way to estimate the effect of the Bush tax cut on different income groups is to take the CTJ estimate and modify it by substituting the Treasury estimates on the incidence of the estate tax for those in the ITEP model. Under this approach, the top one percent of the population is estimated to receive 36 percent of the tax cuts under the Bush plan, rather than the 43 percent the CTJ analysis estimates (and to receive an average tax cut of $39,000 rather than $46,000). The top 20 percent of the population still is found to receive 71 percent of the tax cut, the same percentage as under the CTJ analysis. Similarly, the bottom 40 percent of the population still is found to receive four percent of the tax cut. Under either approach, the tax cut is found to be tilted heavily toward those with very high incomes and to provide only a modest percentage of its tax-cut benefits to the types of families that the White House appears to be touting as major beneficiaries..."

Paul Krugman (New York Times):
"...Basically, there are three federal taxes on individuals. The payroll tax...income tax...[and] inheritance tax, which applies only to estates of more than $675,000 (twice that for couples)...a tax on only the very well off: a mere 2 percent of estates pay any tax, and most of the tax is paid by a few thousand multimillion-dollar estates each year. Now for the salami tactics. 
Conservatives who decry the burden of taxes always include the payroll tax in their calculations. And when arguing for tax cuts, the administration starts with numbers that include the whole salami. Again and again we hear about that projected surplus of $5.6 trillion. You shouldn't believe that projection, but for what it's worth more than half of it (the more credible half) comes from Social Security and Medicare — programs financed by payroll taxes.
When it comes to tax cuts, however, Mr. Bush's people ignore the payroll tax — that is, they propose no cut in the tax that is most of what most families pay, while demanding a large cut in the income tax, which falls mainly on the affluent. And they want to eliminate the inheritance tax, which is overwhelmingly a tax on the downright wealthy. By proposing to eliminate a tax that falls entirely on the rich, to cut a tax that falls mainly on the well off, but to ignore the main tax paid by most people, the administration has made a deliberate decision to tilt tax relief strongly toward the top of the scale...
Last week Treasury Secretary Paul O'Neill declared that the plan "would focus on helping those people who are close to the low-income and middle-income brackets," adding that "it would affect every American that currently pays taxes." This statement isn't technically a lie: "close to" need not actually mean "in," and "affect" need not mean that a family's taxes are actually reduced. But one has to say that Mr. O'Neill, whom the press has portrayed as a straight talker, is learning his new trade very quickly..."

1
TA3-03 Proposed 2001 Tax Cut Plan: beneficiaries Bush and his team

"...When President Bush unveiled his tax cut in 1999, Citizens for Tax Justice calculated that more than 40 percent of it would go to the richest 1 percent of Americans...Bush's minions... emphasize that the tax cut would increase the proportion of income taxes paid by the rich..."

Also

"...According to Bush's calculations, just 22.3 percent of the benefits from Bush's tax cut go to the top 1 percent of taxpayers..."

Jonathan Chait (The New Republic):
"...That's literally true--the top 1 percent pay 31.5 percent of income taxes now and would pay 32.6 percent under Bush's plan--but extremely misleading. Three-quarters of all workers pay most of their taxes in payroll taxes--a regressive levy labeled "FICA" on your paycheck. Bush's plan wouldn't touch payroll taxes. Instead, Bush has chosen to cut the income tax, which disproportionately affects the rich, and to completely abolish the estate tax, which affects the even richer. It doesn't matter if you cut rates more at the bottom if you're cutting only the most progressive taxes. The top 1 percent may pay a slightly higher share of income taxes under Bush's plan, but they would pay a significantly lower share of total taxes. The Bushies frequently make the first point, clearly hoping the media will mistake it for the second. And it does..."
"...The JTC found that Bush's plan would give just 22 percent of its benefits to the top 1 percent. But the study had two crucial flaws. First, it only went up to the year 2005, before many of the upper-income tax cuts are fully phased in. Second, and more importantly, it examined only the income tax portion of the plan, ignoring the estate tax repeal, the most regressive feature. The study, in other words, did not even attempt to gauge the distribution of Bush's total tax cut. It merely demonstrated that Bush's tax cut is not that heavily tilted to the wealthy if you ignore the portions of it that are most heavily tilted toward the wealthy..."

Also see: Daily Howler

3
TA3-04 Proposed 2001 Tax Cut Plan: beneficiaries Bush economic team

"...During the presidential campaign, the Bush campaign staff used a competing set of figures that purported to show that the share of the tax cut going to high-income individuals would not be any larger than the share of taxes these individuals pay..."

Robert Greenstein (CBPP):
"...One common justification for tax cuts heavily geared toward those at the top of the income spectrum is that high-income individuals pay a disproportionate share of taxes and hence should receive a corresponding share of the tax cuts. When applied to the Bush tax cut, however, this rationale falls short.
First, the Bush tax plan showers tax cuts on high-income individuals far out of proportion to the taxes they pay. The previously noted Treasury Department study shows that the wealthiest one percent of Americans pay 20 percent of all federal taxes. As this Center report explains, however, the top one percent would receive at least 36 percent of the tax cuts under the Bush plan...
The Treasury analysis also indicates that the top five percent of taxpayers pays 36.5 percent of federal taxes. This group would receive at least 49 percent of the tax-cut benefits under the Bush plan.
During the presidential campaign, the Bush campaign staff used a competing set of figures that purported to show that the share of the tax cut going to high-income individuals would not be any larger than the share of taxes these individuals pay. The figures that the campaign issued to make this point, however, obfuscated rather than illuminated the issue.
Those figures showed the share of federal income taxes that different income groups paid, omitting payroll, estate, and other taxes. This made the share of taxes said to be paid by those at the top of the income spectrum into a larger percentage. The campaign then compared these figures to the percentage of the tax cut that each income group would receive when the proposal to repeal the estate tax was omitted, even though repeal of the estate tax represents nearly one quarter of the total Bush tax cut by 2010, according to Joint Committee on Taxation estimates. This made the share of the tax cut that would to go high-income individuals look smaller than it actually is..."

1
TA3-05 Proposed 2001 Tax Cut Plan: beneficiaries Bush

"...asked what his administration plans to do in the face of high gasoline prices. "Let me say it again, see if I can be more clear," he replies. "To the Congress, who is interested in helping consumers pay high gas prices: `Pass the tax relief as quickly as possible.' We've set aside $100 billion to help consumers with high energy prices. That's the quickest way to help consumers..."

Paul Krugman (New York Times):
"...the poorest families, who are most affected by the gasoline price spike, will receive no tax cut under the Bush plan. Also, that $100 billion that Mr. Bush says he has set aside "to help consumers with high energy prices" is the short-term tax cut that his Congressional allies tried to eliminate from the budget resolution..."
2
TA3-06 Proposed 2001 Tax Cut Plan: beneficiaries Bush

"...The average relief for a family of four with two children will be $1,600..."

  Daily Howler:
"...Krugman discussed one of the very claims mentioned by Bernasek:
KRUGMAN (3/7): We keep hearing about the "typical" family that will receive a $1,600 tax cut. Now it’s true that under Mr. Bush’s plan a median-income family of two adults and two children under the age of 17 would get a $1,600 cut starting in 2006. Most of that, however, comes not from lower tax rates but from an increased child credit. A couple whose children are grown (or even college-age) get only $600, a widow or widower gets only $300. So for middle-income baby boomers, there just isn’t much of a tax break. (You can also start to see why 88 percent of families will get less than that "typical" $1,600 break, in most cases much less.)..."
1
TA3-07 Proposed 2001 Tax Cut Plan: beneficiaries Bush

"...the presidential campaign and early into the new Presidency, President Bush and his advisors have cited the need to reduce the high marginal tax rates that many low-income working families face as one of their tax plan's principle goals. They have observed that a significant fraction of each additional dollar these families earn is lost as a result of increased income and payroll taxes and the phasing out of the EITC..."

Isaac Shapiro, Allen Dupree and James Sly (CBPP):
"...
Ironically, however, a large number of low-income families that confront some of the highest marginal tax rates of any families in the nation would not be aided at all by the Bush plan.
Analysts across the ideological spectrum have long recognized that the working families who gain the least from each additional dollar earned are those with incomes between about $13,000 and $20,000. For each additional dollar these families earn, they lose up to 21 cents in the EITC, 7.65 cents in payroll taxes (15.3 cents if the employer's share of the payroll tax is counted), 24 cents to 36 cents in food stamp benefits, and additional amounts if they receive housing assistance or a child care subsidy on a sliding fee scale or are subject to state income taxes. Their marginal tax rates are well above 50 percent. Yet the Bush plan does not provide any assistance to them.
Ways to reduce marginal tax rates for such families are available and not especially expensive. They basically entail raising the income level at which the EITC begins to phase down as earnings rise, and/or reducing the rate at which the EITC phases down. Bipartisan legislation introduced last year by Senators Rockefeller, Jeffords, and Breaux follows such a course, as do proposals made by Rep. Ben Cardin and the Clinton Administration..."

Robert Greenstein and Isaac Shapiro (CBPP):
"...Despite substantial focus by the White House on the need to reduce marginal tax rates among low-wage workers, the proposal does not reduce marginal rates at all on those working poor families that face the highest such rates of any families in the nation — working families with children that have incomes between about $13,000 and $20,000. The proposal also departs from a bipartisan Congressional consensus of the past two years by failing to include any marriage penalty relief for low-income working families, even though as a group such families face some of the largest such penalties of any families..."

1
TA3-08 Proposed 2001 Tax Cut Plan: beneficiaries Bush

"...Administration has used the example of a waitress who is a single-mother with two children and earns $25,000 a year..."

Bush

"...In his Saturday radio address on February 3, the President pointed to a waitress with two children who earns $25,000 a year. He portrayed the hypothetical waitress as being a partner in the tax cut with a highly-paid attorney making $250,000 a year who is the waitress' customer at a diner..."

Isaac Shapiro, Allen Dupree and James Sly (CBPP):
"...
Consider two types of families earning $25,000 a year in 2001, an income level the Administration has used in some of its examples:

  • A two-parent family of four with income of $25,000 would pay $3,825 in payroll taxes (again, counting both the employee and employer share) and lesser amounts in gasoline and other excise taxes. The family pays various state taxes as well. The family's Earned Income Tax Credit of $1,500 would offset well under half of its payroll taxes. Even if just payroll taxes and the EITC are considered, the family's net federal tax bill would be $2,325. Nonetheless, this family would receive no tax cut under the Bush plan. 

  • The Administration has used the example of a waitress who is a single-mother with two children and earns $25,000 a year. If this waitress pays at least $170 a month in child care costs so she can work and support her family — an amount that represents a rather modest expenditure for child care — she, too, would receive no tax cut under the Bush plan despite having a significant net tax burden. In her case as well, her payroll taxes would exceed her EITC by $2,325..."

 

Robert Greenstein and Isaac Shapiro (CBPP):
"...In his Saturday radio address on February 3, the President pointed to a waitress with two children who earns $25,000 a year. He portrayed the hypothetical waitress as being a partner in the tax cut with a highly-paid attorney making $250,000 a year who is the waitress' customer at a diner. This portrayal is questionable.

  • If the waitress is married and her family's income is $25,000, she, too, would receive no tax cut under the Bush plan. Yet her family pays a substantial amount of federal taxes, including $3,825 in payroll taxes (including both the employee and employer share; most economists concur that the employer's share of the payroll tax is passed along to workers in the form of lower wages) and lesser amounts in gasoline and other excise taxes. The family's Earned Income Tax Credit of $1,500 would offset well under half of those taxes.(2)

  • Similarly, if the waitress is a single mother who pays at least $170 a month in child care costs so she can work and support her family — an amount that represents a rather modest expenditure for child care — she would receive no tax cut under the Bush plan despite having a significant net tax burden. If her child care costs are $100 a month, she would receive a small tax cut — less than $200 a year.(3)

  • By contrast, the attorney with a $250,000 income with whom the waitress is said to share in benefitting from the tax cut would receive a tax reduction of approximately $3,100 per year, assuming the current law Alternative Minimum Tax. If, however, the AMT were eliminated, her tax cut would equal an estimated $8,400.(4)..."

2
TA3-09 Proposed 2001 Tax Cut Plan: beneficiaries Bush

"...the Administration is touting its proposals to create a new 10 percent bracket and to double the child credit as proposals designed in substantial part to benefit lower-income working families and help them enter the middle class..."

Robert Greenstein and Isaac Shapiro (CBPP):
"...
In fact, only a modest share of the tax-cut benefits from these proposals would go to low- or moderate-income families; much larger shares would go to high-income families. Approximately one-third of all children in the United States would fail to benefit from either proposal.
Consider the proposal to raise the child credit from $500 per child to $1,000. Under the Bush plan as outlined during the campaign, this proposal would cut taxes for families with children that have incomes up to $200,000. Those who would benefit most are filers with incomes in the $110,000 to $200,000 range; they would receive the largest tax cuts under this proposal because the Bush plan not only would double the child credit but also would raise the income level above which the child credit phases out from $110,000 to $200,000, thereby extending the credit for the first time to those in this income category. For many of these relatively affluent taxpayers, the child credit thus would rise from zero to $1,000 per child. For millions of children in low- and moderate-income working families, by contrast, the child credit would remain at zero or at its current level of $500 per child or rise to less than $1,000 per child (because their families would have insufficient income tax liability against which to apply the increase in the child credit).
As a consequence, when the increase in the child credit is fully in effect:
  • Some 82 percent of the benefits from the child credit proposal would accrue to the 40 percent of families with children with the highest incomes.(5) Only three percent of the benefits from this proposal would accrue to the bottom 40 percent of such families.

  • The top 20 percent of families would receive 46 percent of the tax-cut benefits from this proposal, a larger share than any fifth of the population would receive..."

 

CBPP:
"...
The new analysis, "More Than Half of Black and Hispanic Families Would Not Benefit From Bush Tax Cut," finds that 53 percent of black and Hispanic families with children would receive no tax reduction if the Bush plan were enacted. About three in four of these families include someone who is working.
The six million black and Hispanic families that would receive no benefit from the proposal include 6.1 million black children and 6.5 million Hispanic children — or 55 percent of all black children and 56 percent of Hispanic children.
The outcome reflects a Bush Administration decision not to provide relief to low- and moderate-income working families that do not earn enough to owe federal income tax but pay substantial amounts of payroll and other taxes. Millions of black and Hispanic families fall into this category. They are among the 74 percent of American families that pay more in payroll taxes than income taxes..."

1
TA3-10 Proposed 2001 Tax Cut Plan: beneficiaries O'Neill for Bush

"...Q. Mr. Daniels, the Senate minority leader also says that 43 percent of the tax cut goes to the upper 1 percent. If that's the wrong number, what's the right number? What proportion of the 1.6 trillion goes to the top 1 percent?
In response, Treasury Secretary Paul O'Neill harshly questioned whether reporters had examined the assumptions behind that estimate saying:
"So they're playing games with the numbers. What I'm trying to flush out is for somebody to write down the assumptions underneath this mantra that [CBPP Executive Director] Bob Greenstein created for people and trying to make the point that all those people who are asking questions about it haven't examined the assumptions. And so it doesn't seem to me legitimate to even try to respond to a question that's based in a fiction of combining not just income taxes, but payroll taxes and cobbling up a bunch of other pieces of stuff to make a populist point that has no basis in fact, because the fact is, what the president has proposed for tax changes moves the incidence of taxes proportionally to the higher-income group, not to the lower-income group."..."

CBPP:
"...The 43 percent figure comes not from the Center but from an analysis conducted by Citizens for Tax Justice, using the well-regarded Institution for Taxation and Economic Policy (ITEP) model. In testimony the Center's executive director Robert Greenstein presented to the House Ways and Means Committee on February 13, he explained the Center's analysis on this issue...
"...The best data available on who pays what share of all federal taxes — including income, payroll, estate, excise, and other taxes — come from a major study conducted by Treasury career staff and released in September 1999. The study shows that the top one percent of families pays 20 percent of all federal taxes.(1)...
The data presented here on how the benefits of the Bush tax cut would be distributed come from two sources: an analysis by Citizens for Tax Justice, using the Institute for Taxation and Economic Policy (ITEP) model, and the aforementioned Treasury study on how the burdens of various taxes are apportioned among various income categories...The CTJ analysis of the effect of the plan, when the plan's provisions are fully in effect, finds that the top one percent of families would receive 43 percent of the tax cuts and would receive more in tax cuts than the bottom 80 percent of the population. Some supporters of the Administration's proposal have cited alternative figures from the Joint Tax Committee that are said to show the proportion of the tax cut that would go to the top one percent of families would be significantly smaller. Those figures, however, do not actually show that to be the case. The JCT figures in question do not include the effects of repealing the estate tax, which accounts for about one-quarter of all tax reductions in the plan when the plan is fully in effect. The JCT figures also do not include the effects of any provisions in the plan that take effect after 2005. Part of the tax-rate reductions would not take effect until 2006. The figures that Citizens for Tax Justice has produced do not suffer from these omissions. Even so, the findings of the CTJ and JCT studies of the distributional effects of the income tax changes in the Bush plan are similar.  The main issue this leaves is how to distribute the effects of estate tax repeal...Under either approach, the tax cut is found to be tilted heavily toward those with very high incomes and to provide only a modest percentage of its tax-cut benefits to the types of families the White House last week presented as major beneficiaries..."

Jonathan Cohn (The New Republic):
"..."Why would anyone who believes in accuracy buy that number?" asked Daniels. O'Neill concurred, calling the figure "a nonsense set of statistics," and accusing the Center on Budget and Policy Priorities, which originally provided the figure to the Democrats, of "playing games with the numbers." (The numbers were actually calculated by Citizens for Tax Justice.) 
Two days later, the White House released this chart that purported to back up the claim. At first blush, it does seem to undermine the Democrats' charge. According to Bush's calculations, just 22.3 percent of the benefits from Bush's tax cut go to the top 1 percent of taxpayers.
But there are two big problems here. First, note the title: "Income Tax Burden by Income for Calendar Year 2005." The timing is not accidental. Bush's tax cut phases in, and the cuts for 2006 are likely to benefit the wealthy even more disproportionately than those in the previous years. By excluding tax cuts after 2005, the Bush Administration makes the tax cut seem more progressive than it really will be.
Second, check out the last footnote. The one about how these estimates "exclude the Estate Tax and R&E Credit." The estate tax, you may recall, is also part of Bush's tax cut plan. Not coincidentally, the estate tax is also skewed to the wealthy: It kicks in at $675,000, and is already scheduled to rise to $1 million in 2006, which is why 98 percent of Americans pay no estate tax at all. Again, leaving it out makes the Bush package look like a much better deal for low- and middle-income taxpayers..."

Also see CBPP.

2
TA3-11 Proposed 2001 Tax Cut Plan: beneficiaries Bush

Said "...According to the Treasury Department, nationwide there are more than 17.4 million small business owners and entrepreneurs who stand to benefit from dropping the top rate from 39.6 to 33 percent."..."

CBPP:
"...
This new claim, which has received substantial attention, is inaccurate. It misrepresents the Treasury Department's figures.
A Treasury press release issued the same day states that "many" of these 17.4 million individuals pay the top rate. The press release, as well, is likely to create a mistaken impression. In fact, only about one percent of these 17.4 million small business owners and entrepreneurs pay the top rate. IRS data show that only a total of 691,000 taxpayers in the country — including taxpayers who are not small business owners — paid the top rate in 1997, the latest year for which these data are available...The Treasury Department failed to disclose a specific figure for the number of such taxpayers who actually pay the top rate. This leaves it to the reader to guess how many is "many" and whether or not the typical small business owner pays this rate..."

Isaac Shapiro and Robert Greenstein:
"...
In fact, small business owners would be far more likely to receive no tax reduction whatsoever from the Administration's tax package than to benefit from a reduction in the top rate. Moreover, small business owners would be much more likely to benefit from an increase in the Earned Income Tax Credit — a tax credit for low- and moderate-income workers and self-employed individuals — than from a reduction in the top rate. The President's plan includes no improvement in the EITC.

* For every small business owner who would benefit from reducing the top income tax rate of 39.6 percent, there would be 15 small business owners who would not benefit from the Administration's tax package.(3) 

* For every small business owner who would benefit from reducing the top rate, there are 12 small business owners who receive the Earned Income Tax Credit and could benefit from an improvement in it.
As Table 1 below indicates, only 1.4 percent of small business owners with positive business income are subject to the top rate of 39.6 percent. Another 2.3 percent are in the 36 percent bracket. By contrast, 21 percent do not earn enough to owe federal income tax. (They pay payroll and other taxes.)
Moreover, a total of 69 percent of small business owners either are in the 15 percent tax bracket or are not subject to income tax because their earnings are too low. A substantial number of these owners qualify for the Earned Income Tax Credit; about one of every six small business owners with positive business income qualifies for the EITC..."
1
TA3-12 Proposed 2001 Tax Cut Plan: beneficiaries Bush Treasury Dept.

"...issued a press release entitled "Small Businesses Gain Big Benefit From the President's Tax Relief Proposal: 77% of the tax relief associated with cutting the top rate would go to small business owners and entrepreneurs."(1) The press release also claims that "business owners make up 63% (about .8 million) of the 1.3 million tax returns that will benefit from the new 33% rate."..."

Robert Greenstein and Isaac Shapiro (CBPP):
"...
The figures in the Treasury press release and the Center analysis seem to contradict each other. Closer examination of the claims in the Treasury press release shows, however, that the release is carefully crafted to create an impression that lowering the top rate would do far more to help small business owners than is actually the case.
  • First, the figures in the Treasury release do not simply reflect the effects of lowering the 39.6 percent tax rate. These figures also include the effects of lowering the 36 percent rate.

  • Second, the 800,000 figure that the press release says is the number of small business owners who would gain from lowering the top rate includes large numbers of individuals who are not small business owners. The figures in the Treasury release includes many individuals who, as a Wall Street Journal article recently reported, are not active small business owners but rather are affluent investors who "receive income from partnerships or Subchapter S corporations — entities that are often used for passive investment vehicles."(3) The numbers of small business owners cited in the press release also include lawyers, doctors, and others who operate partnerships. (The Treasury press release counts as a small business owner or entrepreneur "any taxpayer that reports income from a sole proprietorship, farm proprietorship, partnership, S-corporation, or rental activities.")

  • Third, even if one uses the press release's creative (and misleading) definition of a small business owner, it remains true that only a tiny fraction of such individuals— three percent of them — pay either the 36 percent or 39.6 percent rate. Treasury data indicate that 26.2 million taxpayers fall into the so-called small business owner and entrepreneur category, as the press release defines it. The 800,000 taxpayers said to have small business income and to be in either the 36 percent or 39.6 percent bracket constitute just three percent of these 26.2 million filers. The numbers of taxpayers with these forms of business income who are subject to the 15 percent rate — or who do not earn enough to owe any federal income tax and thus would receive no tax reduction from the Administration's plan — are many times larger than the number who are in either of the top tax brackets. 

  • Finally, the 800,000 figure includes taxpayers whose small business income is negative. These are taxpayers who have some business losses but secure so much income from other, non-small business sources that they are in the 36 percent or 39.6 percent bracket. Such individuals generally are not small business owners; they are much more likely to be high-income individuals who have some business investments but whose high incomes come from other sources. These are not the types of individuals the public has in mind when it hears the Administration argue that small business owners would gain greatly from dropping the top rate. (Other Treasury data show that one-fourth of the 800,000 "small business returns" that the Treasury press release cites as paying the 36 percent or 39.6 percent rate are returns filed by individuals who incur losses from small business income sources and who are in the top brackets because of high incomes from other sources.)

To gain a sense of the degree to which the Treasury public affairs office has taken liberties with the data to inflate these figures, consider the following. Internal Revenue Service data and analysis of that data by Citizens for Tax Justice indicate that, as noted above, only one percent of small business owners pay the 39.6 percent rate..."

4
TA4-01 Cost of 2001 tax cuts Fleischer for Bush

"..."The latest set of estimates reinforces how much room there is in the federal budget to cut taxes while securing other priorities," crowed Bush spokesman Ari Fleischer to The New York Times. "We can pay down the debt and cut taxes."..."

The New Republic:
"...But wait a minute. Haven't the Bushies spent the past few weeks claiming that their tax cut is needed specifically because the country is headed for a recession? But the surplus projection has been increased precisely because the government isn't predicting a recession; it's projecting about 3 percent GDP growth next year and beyond. According to the Bushies' tangled logic, either we can afford a tax cut we won't much need (if you believe the surplus figures), or we need a tax cut that we really can't afford (if you believe we're headed into a recession). We're eager to hear their choice..."
1
TA4-02 Cost of 2001 tax cuts Bush admin

"...responded by saying that the cost of the tax cut is only one percent of GDP (rather than 1.6 percent)..."

CBPP:
"...On August 2, the Center issued an analysis showing that...the cost of the tax cut amounts to 1.6 percent of the Gross Domestic Product (GDP) over 75 years...The Bush Administration responded by saying that the cost of the tax cut is only one percent of GDP (rather than 1.6 percent) ...The Administration's response is noteworthy...
  • Administration officials have often portrayed the tax cut as modest and fiscally responsible but the Social Security shortfall as massive and a risk to the nation's future fiscal health. In its response to the Center's analysis, the Administration itself indicates that the revenue loss from the tax cut is as large as the Social Security shortfall. The Administration claims both costs are about 1.0 percent of GDP.

...How did the Administration come up with the lower figure of 1.0 percent of GDP for the cost of the tax cut when phased in fully? The answer is that it didn't. The Administration's 1.0 percent of GDP figure turns out not to be an estimate of the full cost of the tax cut, when fully phased in and with all provisions extended, but rather the cost of the tax cut, as enacted, in 2010. That figure reflects only a little more than half of the full cost of the tax cut. The Administration's figure provides a deceptively low estimate of the full cost of the tax cut, with all provisions extended, for three reasons.

  • The Administration's estimate assumes that the provisions of the tax cut artificially slated to expire in 2004, 2005, and 2006 actually die — including the provision that provides relief through 2004 from the mushrooming Alternative Minimum Tax. The Administration's estimate thus assumes that 35.5 million taxpayers will be subject to the AMT in 2010, as compared with 1.4 million today. No credible observer believes Congress will fail to act on this issue and will simply allow the AMT-relief provision of the tax cut to expire — and AMT relief to die — in 2004.

  • The Administration's estimate also does not include the cost of estate tax repeal. Under the new tax law, the estate tax will not be repealed until 2010. As is well known by tax analysts, the cost of a change in the estate tax does not show up until a year or two after the change takes effect. This is because there is normally a lag of a year or so between the time an individual dies and the time that individual's estate is settled and tax is paid on it. Thus, the estimate for the cost in 2010 of the estate tax provisions of the new tax law largely reflects the cost of the estate tax provisions in effect in 2009, before estate tax repeal has occurred.

  • Of lesser importance, the cost estimate for 2010 reflects only a modest fraction of the cost of raising the child tax credit from $800 per child in 2009 to $1,000 per child in 2010. Most of the cost of this increase in the child tax credit will not show up until 2011, because some of the child tax credit that many families receive is provided in tax refunds the families receive the following year, after they file their taxes.

In short, the Administration's estimate that the cost of the full tax cut is 1.0 percent of GDP relies upon gimmicks embedded in the tax bill to make that cost appear lower than it actually is. The Center's estimate, which reflects the Joint Tax Committee's estimate of the cost of the tax cut if all provisions of the tax cut are extended, is the legitimate estimate of the tax cut's long-term cost if it is made permanent. The Administration's attempt to defend its tax cut by claiming that the Center overstated the tax cut's costs and underestimated the size of the Social Security shortfall does not withstand scrutiny. Unfortunately, it is the Administration that has manipulated the numbers..."

4
TA5-01 2001 tax cuts Bush

referred to the $300/$600 checks sent out by the IRS in 2001 as rebate checks

Daily Howler:
"...KRUGMAN: Finally, there’s line 47. You haven’t heard about that, but you will. Here’s the story. The Bush administration didn’t want to give those famous $300 rebate checks; its original plan would have pumped hardly any money into the economy last year. Under prodding from Democrats the plan was changed to incorporate immediate cash outlays. But those outlays were included only grudgingly, and with a catch: they really weren’t rebates. Instead, they were merely advances on future tax cuts..."
1
TA5-02 2001 Tax cuts Bush

"...Last year, some in this hall thought my tax relief plan was too small, some thought it was too big. But when those checks arrived in the mail, most Americans thought tax relief was just about right..."

Daily Howler:
"...Thank you, Goldilocks! Fairy tales aside, at least two parts of that presentation are true. Some did think Bush’s plan was too small. And some did think that the plan was too big. And it may be true that, when those rebate checks arrived in the mail, most Americans thought the plan was just right.
But they shouldn’t have. In fact, the rebate checks have nothing to do with whether Bush’s plan is too big or too small. You simply can’t judge the size of the plan based on those checks from last summer. Most American don’t know that, of course, and Bush took this opportunity to mislead them in his SOTU address (CG emphasis). It looks like certain habits die hard, even at a time when people, badly frightened, deserve something better from their prez..."
1
TA5-03 2001 Tax Cut Bush administration

"...The National Taxpayers Union (NTU) recently released a report arguing that President Bush's proposed tax cut is far smaller than the 1981 Reagan tax cut and other historical tax cuts.(1) Some Administration officials and Members of Congress have echoed these claims and suggested this shows the proposed tax cut is of a responsible size..."

  Peter R. Orszag (CBPP):
"...
Careful examination, however, shows the arguments in the NTU paper reflect apples-to-oranges comparisons.
If the cost of the Reagan tax cut is adjusted for the impact of inflation and the subsequent 1982 tax increase (which scaled back the 1981 tax cut), the net tax cut is moderately larger as a share of the economy (2.1 percent of GDP) than the proposed Bush tax cut would be (1.5 percent of GDP), rather than being several times the size of the Bush tax cut as the NTU has claimed. Furthermore, the Reagan tax cut occurred when marginal tax rates were higher than today. A reduction in marginal tax rates is therefore not as significant today as in 1981. Finally, the Reagan tax cut was a major factor in generating large budget deficits, from which the nation took more than decade and a half to recover...
Before 1985, frequent tax cuts were necessary just to prevent large tax increases over time because the tax code was not indexed to inflation [CG emphasis]. The result was a natural upward "creep" in tax collections over time...As the Congressional Budget Office noted when the Reagan tax cut was first proposed, "While the Administration proposal would reduce revenues by large amounts in those years, it is important to keep in mind that, without a tax cut, income taxes rise continually because of the effects of inflation on the graduated income tax rate schedule...a large share of the Administration's proposed tax cut would simply offset these tax increases [emphasis added]...
The 1981 tax cut was excessive, a conclusion to which David Stockman and others in the Reagan administration came not long after its enactment. As a result, the Reagan administration worked to scale back the tax cut one year later [CG emphasis]. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) increased revenue by closing some loopholes broadened in the 1981 act, altering depreciation deductions, tightening safe harbor leasing rules, and making several other changes. As CBO noted, these "tax increases partly offset the revenue effects of ERTA [the 1981 act] by offsetting almost two-thirds of the ERTA corporate income tax reductions and about 10 percent of the ERTA individual income tax reductions."(6) The net cost of ERTA and TEFRA is a more appropriate measure of the Reagan tax cuts than the cost of ERTA alone..."
1
TA6-01 2001 Tax Cut impact on budget projections Fleischer for Bush

"...When specifically asked if the tax cut had any role in the deficit, White House Spokesman Ari Fleischer replied that, in 2001, the surplus had dropped by $154 billion, while the tax cut was only $40 billion, so "something else was going on. That something else, we now know, is a recession."..."

Jonathan Chait (MSN/Slate): 
"...This bit of analysis is flawed in so many ways I almost don't know where to start. First, Fleischer seems to be admitting, without realizing it, that the tax cut is at least 25 percent (40 out of 156) responsible for the deficit. Second, Fleischer only mentions the budget numbers for this year. But deficits are projected to begin starting next year. And the tax cut is structured so that it costs relatively little at first, but soars later. In 2010, according to congressional estimates, it will reduce federal revenues by $260 billion.
Third and most important, it's bizarre for Fleischer to deny that the tax cut is going to reduce tax revenues, since that was the point of it: Bush said over and over that "Washington" would spend the surpluses unless they were returned to the people as tax cuts. This contradicts not only what the administration is saying now about the looming deficit but also its case for a second tax cut, the "stimulus bill." That case is essentially the old free lunch: Cutting taxes will increase tax revenues. "Surpluses are returned through strong growth," Fleischer maintains, "In the absence of a stimulus package, there is a strong possibility, according to private sector forecasters, that the economy will come back with only low to perhaps moderate growth." So the previous tax cut was supposedly needed to make the surplus disappear. The next one is needed to bring it back. Whatever..."
1
TA6-03 2001 Tax Cut impact on budget projections Daniels for Bush

"...submitted written testimony that claimed "this year's 10-year baseline surplus forecast is just as big as that of 2 years ago ... If we had taken a one-year timeout from 10-year guesswork, no one would say that anything was missing."..."

Brendan Nyhan (Spinsanity):
"...But something is missing. Even if the estimate hadn't been announced last year, it would still be $1.7 trillion lower now than if the tax cut had not been enacted. Instead of a projected surplus of $1.6 trillion, we would be looking at a projected surplus of over $3 trillion. Daniels is attempting to shift the focus of the debate to changing surplus projections and thereby obscure the cost of the tax cut..."
1
TA7-01 2001 Tax Cut support from economists Bush administration spokesman

"...White House's Scott Stanzel told the Washington Times that "[a]lmost every leading economist believes the tax cut was the best way to stimulate growth in the slow economy that the president inherited."..."

Ben Fritz (Spinsanity):
"...In fact, however, just a cursory search reveals that a large number of economists, many of them "leading", were on record opposing the Bush tax cut. For instance, over 100 economists, including eight Nobel Prize winners, signed a statement saying that the Bush tax cut is "is too large, too skewed to the wealthy, and arrives too late to head off a recession." 
Another example: In a January article, Larry Kudlow of the National Review observed that "all the liberal economists oppose George W. Bush's tax cut," noting such prominent names as Paul Krugman, Laura Tyson and Alan Blinder..."
1
TA8-01 2001/2 "stimulus" Bush

"...The income tax rate reduction [27 percent income tax rate to 25 percent in 2002] affects those making $27,000 to $65,000 a year, hardworking Americans who could use help coming into the holiday season..."

Robert Greenstein and Joel Friedman (CBPP):
"...[The] President declared that this rate reduction "affects those making $27,000 to $65,000 a year."(1) The President's statement conveys the impression that many or all families in this income range would benefit, while families above this income range would not. For families with children, however, almost the opposite is true. The President's statement was misleading for several reasons.
  • The $27,000 figure is the level of taxable income at which the 27 percent begins for a single individual. The level of taxable income at which the 27 percent bracket begins is higher than this for other tax filers — married couples filing jointly and single parents.

  • Furthermore, a filer's taxable income is considerably lower than his or her full income...To have a level of taxable income of $27,000 in 2002, a single person would need actual income of at least $34,700. For tax filers who are not single individuals, the difference between their taxable income and their full income is considerably greater, because they qualify for larger standard deductions and more personal exemptions.

  • For example, a married couple with two children does not face the 27 percent tax rate (that is, does not have taxable income of at least $46,700) until its full income exceeds $66,550. (An income of $66,550 minus the standard deduction of $7,850 for a married couple and $12,000 for four personal exemptions equals $46,700.) If such a family itemizes its deductions rather than taking the standard deduction, the level of income at which it first becomes subject to the 27 percent rate generally is higher than $66,550.

The President's statement also implied that those with incomes above $65,000 would not benefit from the rate reduction. A literal reading of Mr. Bush's statement would lead one to believe this is a tax cut from which the wealthy would not secure a gain. Yet taxpayers in higher brackets would benefit. In fact, the group of taxpayers that would benefit the most are those in tax brackets higher than the 27 percent bracket — a group that consists of the five percent of Americans with the highest incomes...
Congressional Budget Office data demonstrate that more than three-quarters of all tax filers would receive no benefit from this proposal.(2)..."

3
TA8-02 2001/2 "stimulus" Bush administration

"...argued that a stimulus package should consist overwhelmingly of tax cuts because the stimulus measures that have already been enacted consist primarily of spending measures..."

"...officials presented the plan as being half tax cuts and half spending provisions..."

Robert Greenstein and Joel Friedman (CBPP):
"...The Administration counts as stimulus the expenditures expected to occur in 2002 from recent legislation to boost funding for defense, security and counter-terrorism, rebuilding New York and the Pentagon, and bailing out the airlines. Under this Administration accounting, the defense spending increases the Administration proposed last June when there was little sign of recession are counted as stimulus. But when claiming that the stimulus measures enacted to date are overwhelmingly spending measures, the Administration fails to count the tax rebates sent out this summer, the first round of tax rate reductions that took effect on July 1, or the additional tax cuts that take affect on January 1, 2002. These tax cuts total $112 billion in 2001 and 2002.
Furthermore, in describing the cost of its new stimulus proposals, the Administration tends to talk only of their cost in fiscal year 2002. Nearly 50 percent of the cost of the Administration's tax proposals, however, would occur after 2002. The Administration's tax proposals have four components: accelerating the reduction in tax rates scheduled for 2004 and 2006, partial expensing of business purchases for the next three years, permanent elimination of the corporate alternative minimum tax, and the provision of a tax rebate to lower-income workers who received no rebate or only a partial rebate this summer. Both the cost estimates for these four provisions that the Joint Committee on Taxation has issued in recent weeks and the cost estimates contained in a document circulated by Senate Republicans and obtained by the Bureau of National Affairs show that the cost of these tax provisions is just under $90 billion in fiscal year 2002 and $175 billion over ten years..."

CBPP:
"...Administration package is said to include $60 billion for tax cuts and $15 billion for programs for the unemployed. To justify its claim that this package is balanced, the Administration combines this $15 billion in new spending with the $45 billion in expenditures estimated to occur in 2002 from recent legislation to boost funding for defense, security, and counter-terrorism, provide funds to rebuild New York and the Pentagon, and bail out the airlines. 
The claim that the plan is evenly split between spending and tax cuts rests on budgetary sleight-of-hand. Many of the proposed tax cuts are permanent, yet the Administration's $60 billion tax-cut figure includes the cost of the tax cuts only in their first year or two (it is not clear which). Over the long term, the proposal is more than 90 percent tax cuts and less than 10 percent aid to the unemployed. Furthermore, the Administration's spending total includes the defense spending increases it proposed last June, when there was little sign of recession, but its tax cut total does not include the $38 billion in tax rebates sent out this summer or the additional tax cuts that took effect on July 1 or will take effect on January 1..."

3
TA8-03 2001/2 "stimulus" Bush administration

"...plan includes $3 billion in grants to state and local workforce boards through a National Emergency Grant program...The Administration says these funds could be used to cover up to 75 percent of the cost of health insurance premiums through COBRA for laid-off workers..."

Robert Greenstein and Joel Friedman (CBPP):
"...Yet the amount of funding that would be made available would be sufficient to cover such costs only for a small fraction of laid-off workers. A proposal developed by Senator Max Baucus, chairman of the Senate Finance Committee, that would subsidize 75 percent of COBRA premium costs but be available to all laid-off workers who qualify for COBRA — and that would be supplemented by granting states a temporary Medicaid option to cover low-income unemployed workers who cannot afford the remaining 25 percent of the COBRA premium or are ineligible for COBRA because they worked for a small business or for a firm that did not offer insurance — would cost about $15 billion..."
1
TA8-04 2001/2 "stimulus" Bush administration

"...plan also purports to make up to $11 billion in "unused" funds in the State Children's Health Insurance Program available to cover unemployed workers...."

Robert Greenstein and Joel Friedman (CBPP):
"...This proposal is more public relations than substance. It is not a new proposal but a restatement of current policy that allows a state to seek a waiver to use some of its SCHIP funds to serve groups other than children. This proposal is likely to be of little value in covering the unemployed (unless states are willing to take risks with the future health care needs of low-income children).
The notion that there are large amounts of unused SCHIP funds that can be shifted to coverage of unemployed workers is incorrect and is belied by data the Office of Management and Budget released earlier this year. States do have unspent SCHIP funds from the early years of SCHIP when states were just gearing up their programs. But most of these funds are slated to be used in the next few years. The 1997 law that established SCHIP sought to balance the budget by 2002. To meet that goal under the budget forecasts in use at that time, policymakers wrote into the law a 26 percent cut in SCHIP funding starting in fiscal year 2002. Projections that OMB released this spring show that the effects of this cut will be delayed a few years because states will draw down the unspent SCHIP funds in the interim but that eventually states will cut their programs and insure fewer low-income children. Specifically, OMB projected that the number of children insured through SCHIP will be reduced by 400,000, starting in 2005.
Even that figure may prove to be optimistic; the cutbacks could start earlier than 2005 if the recession makes more children eligible for SCHIP and causes more children to enroll now..."
1
TA8-05 2001/2 "stimulus" Hubbard [op-ed] for Bush

"...Tax Cuts are the Best Stimulus...it is a major fallacy to praise new spending plans as 'stimulus'... The Hubbard op-ed recapitulates many of the arguments that various Bush Administration officials have been making in recent weeks..."

Peter Orszag and Joseph Stiglitz (CBPP):
"...Mr. Hubbard's own figures reveal the weakness of his reasoning. In the op-ed, he claims the President's stimulus plan would create 300,000 more jobs. The Joint Tax Committee has estimated that the tax-cut components of the Administration's plan would cost more than $90 billion in fiscal year 2002. The cost for each job created or saved under the Administration's stimulus package thus would exceed $300,000. The reason that the cost per job created or saved would be so high is that the Administration's package is poorly designed to provide short-term stimulus to the economy...
The principal reason that Mr. Hubbard's arguments are misguided — and the main reason the Administration's package would be relatively ineffective as a stimulus measure — is that they largely ignore the central feature of a recession: lack of demand. In a recession, the primary problem is that the nation's firms face a reduction in demand for their products — not that they lack available workers, equipment, or anything else needed to produce goods and services. Indiscriminately injecting cash into such firms through tax breaks, without linking the tax breaks to new business activity, would do little if anything to address the underlying difficulty..."
1
TA8-06 2001/2 "stimulus" Hubbard [op-ed] for Bush

"...Tax Cuts are the Best Stimulus..."

Peter Orszag and Joseph Stiglitz (CBPP):
"...a key theme of the Hubbard op-ed — that temporary spending increases would be ineffective as stimulus but pose longer-term dangers to the economy — is without foundation. So is another basic theme of his article: that corporate tax breaks would automatically constitute effective stimulus...
To be sure, some corporate tax breaks would boost spending. particular, temporary corporate tax breaks that are tied to new investments by firms can help to spur more short-term spending by the firms...Two final points relating to Mr. Hubbard's article are worth noting. First, many of the Administration's stimulus measures appear to be focused more on longer-term considerations than short-term stimulus. Any contention that we need more tax cuts to strengthen the economy's long-term prospects, however, would be inconsistent with Mr. Hubbard's statement that the recent terrorist attacks "did not undermine long-term productivity growth, so economic fundamentals remain strong." If the long-term fundamentals remain strong and the problem is that the economy is weak in the short run — a sound assessment of our circumstances — why isn't the Administration focusing on spurring the economy now when it needs help? Why is its stimulus package dominated by permanent and multi-year tax cuts that would produce little or no short-term stimulus?...the Administration's proposed tax cuts do not respond to changes in economic activity in this manner. In fact, many of the Administration's tax proposals — such as the proposal to accelerate reductions in marginal tax rates for higher-income taxpayers — would grow more costly if the economy experiences a strong recovery than if it does not..."
1
TA8-07 2001/2 "stimulus" Hubbard [op-ed] for Bush

"...argues against increasing expenditures on government programs as part of a stimulus package for two reasons. First, he contends, "a dollar spent by the government is one fewer that can be spent by private businesses." Second, he argues that, "new spending programs almost never go away...""

Peter Orszag and Joseph Stiglitz (CBPP):
"...
Both of these assertions make catchy sound-bites. In the context of an economic downturn, however, neither is correct.
The notion that a dollar spent by the government "crowds out" one dollar of spending by private businesses is correct only when the economy's resources are fully utilized; in that case, additional demand on those resources by the government necessarily reduces the demands that can be placed on them by the private sector. But when the economy's resources — our workers and plants and equipment — are not fully utilized, government spending does not displace private-sector resources on a dollar-for-dollar basis. Indeed, during an economic downturn, government spending can "crowd in" additional private-sector activity by spurring overall demand and thereby making it more likely that firms will be willing to make new investments. Mr. Hubbard's argument about government spending fully crowding out business spending thus is puzzling; it would be valid only if the economy were fully utilizing its resources, which is clearly not the case now.(3) 
The latest data, for example, show that the capacity utilization rate — the proportion of plant and equipment capacity being used in production — fell to 74.8 percent in October, its lowest level since 1983. Furthermore, any implication that the economy is fully utilizing its resources would be inconsistent with another statement Mr. Hubbard makes — namely, that "the economy needs help now." Mr. Hubbard's second argument against including expenditure increases in a stimulus package — that "new spending programs almost never go away…" — also is unfounded. This statement implies that federal spending tends to rise inexorably over time and that program expansions initiated in response to recessions inevitably continue after the economy recovers. Congressional Budget Office data show, however, that total federal spending has fallen from 22.3 percent of the economy (i.e., of the Gross Domestic Product) in 1991 to 18.2 percent in 2000, and that federal spending is significantly lower now, as a share of the economy, than it was during the 1980s.(4) 
Furthermore, under almost any plausible budget scenario for coming years, federal spending is projected to decline further as a share of the economy after the downturn ends and by 2010, to reach its lowest level since 1965.(5) 
In addition, Congressional leaders who have proposed including increases in program expenditures in a stimulus package have called for making such measures temporary; Administration rhetoric to the contrary, no permanent entitlement increases are being proposed.
.."
3
TA8-08 2001/2 "stimulus" Hubbard [op-ed] for Bush

"...argues that the Senate Finance Committee legislation would raise taxes on employers..."

Peter Orszag and Joseph Stiglitz (CBPP):
"...This argument is misleading with respect to the version of the legislation that the Finance Committee approved, and is simply incorrect with respect to the version of the legislation that was considered on the Senate floor.
The version of the legislation the Finance Committee approved would have financed its temporary expansions in unemployment insurance benefits out of the Federal Unemployment Insurance Trust Fund. Under a statute known as the Reed Act, when reserves in that trust fund surpass certain levels, the additional reserves must be transferred to state unemployment accounts. States can effectively use the transferred funds for several purposes, one of which is to reduce unemployment insurance tax rates...
To the extent that the Finance Committee provisions would cause the ensuing reductions in state unemployment insurance taxes to be smaller than would otherwise be the case, however, the change would occur in future years, not today. Mr. Hubbard misleadingly implies in his op-ed that the Finance Committee bill would result in counterproductive tax increases that would occur now while the economy is weak. Furthermore, under the bill the Finance Committee approved, states would still be expected (according to Congressional Budget Office estimates) to receive approximately $20 billion in these "excess" federal unemployment funds over the next 10 years, which they could use to cut unemployment insurance taxes...
Because of fears that the Finance Committee's action would be criticized as ultimately resulting in a tax increase, the Senate Democratic leadership changed this provision of the legislation when the Finance Committee bill came to the Senate floor shortly before Thanksgiving. In the version of the legislation placed before the full Senate, the temporary unemployment insurance expansions would be financed from general revenues rather than from the Federal Unemployment Insurance Trust Fund. As a result, the transfers of "excess" trust fund revenues to the states would be unaffected...
As a result, the misleading argument that Mr. Hubbard employed in his article is not applicable to the legislation the full Senate considered. In short, there is no basis for concluding that the Senate Finance Committee legislation, as placed before the Senate, would raise taxes on employers. Mr. Hubbard's assertion on this matter is incorrect..."
2
TA9-01 Industry lobbying for additional tax cuts Daniels for Bush

"...In a Feb. 1 letter to the Washington Post, Daniels denied that Enron CEO Ken Lay lobbied him to retroactively repeal the corporate alternative minimum tax during an Oct. 11 phone call, saying Lay only asked about the prospects of an economic stimulus bill in Congress. Moreover, Daniels said, the provision "had not even surfaced [at the time of the call], and neither I nor anyone else to my knowledge had even heard of the idea."..."

Brendan Nyhan (Spinsanity):
"...This is absurd.
First, Lay surely had a purpose in calling -- according to the Wall Street Journal, Enron "headed the lobbying coalition of companies seeking repeal" of the tax. On Oct. 3, the Journal had reported that lobbyists were "making the case on Capitol Hill" for retroactive relief, an idea Daniels denies anyone had "even heard of." And just one day after the Daniels-Lay call, the retroactive repeal provision -- which would have refunded corporations for credits they received under the alternative minimum tax -- passed a key House committee as part of the stimulus legislation. As the administration's chief budget officer, Daniels was surely following the progress of this key economic legislation and understood Lay's interest in its prospects..."
1
TA10-01 Impact of 2001 tax cuts Bush

"...“They tell me it was a shallow recession,” he said. “It was a shallow recession because of the tax relief. Some say, well, maybe the recession should have been deeper. That bothers me when people say that.”..."

"...[said] he would address head-on the loss of what he said were "thousands of manufacturing jobs" in recent years..."

Self-made Pundit:
"...Although this tale of Machiavellian advice is fast becoming Bush’s favorite lie in defense of his administration’s record of lob losses, Bush does have trouble keeping his story straight. As the Self Made Pundit discussed last month, Bush claimed at first that it was one evil adviser that urged Bush to push for higher unemployment:
"Someone said, well, maybe the recession should have been deeper in order for the rebound to be quicker."
Within a few days, however, this heartless adviser had morphed into a hypothetical consultant:
“Economic historians would say that the recession of 2001 was one of the more shallow recessions. Some would probably say, well, maybe you shouldn't have acted and let the recession go deeper, which would have made – may have made – for a more speedy recovery,” Bush told reporters after meeting with his Cabinet.
When reporters pressed White House Spokesman Scott McClellan to explain Bush’s evolving tale, McClellan seemed truly befuddled as to the identity or even the reality of Bush’s phantom of economic doom:
As to whether any particular individuals had actually urged Bush to deliberately let economic conditions worsen, McClellan said: “This goes back to conversations that people have said publicly and that – I don't know the specific person, though. I couldn't tell you.”
Proving that he is the living embodiment of Lincoln’s adage that no man has a good enough memory to be a successful liar, Bush now recalls multiple evil advisers, claiming that “people” said “maybe the recession should have been deeper.”...
Unfortunately, the approximate number of “thousands of manufacturing jobs” lost during the Bush administration is 2,500 thousand. As the Times reports, while Bush may only be aware of a loss of thousands of manufacturing jobs:
In fact, around 3 million jobs have been lost since Mr. Bush took office, about 2.5 million of them in manufacturing."

Berkshire Eagle:
"...Mr. Bush told the crowd he inherited an economic downturn, though reputable independent economists date the recession to the spring of 2001, and claimed his tax cuts that have helped manufacture the largest budget deficit in American history had prevented the downturn from being worse. He offered no documentation of his claim that his tax cuts had made for a shallow recession other than to note that "they tell me" that was the case without identifying the mysterious "they."..."

2

 

BUDGET DEFICITS/SPENDING <go back to the top>

Compassion Con credits total = 59

# Topic Bush's or his representative's Compassionate statement Some Uncompassionate Facts Compassion Con Credits
BD1-01 Use of budget surplus Bush

"..."The surplus," Bush likes to say, "means government has more money than it needs."...As Bush explains it, there are not three options for using the surplus but two: "Do we keep it in Washington to expand the reach of the federal government, or do we give it back to the taxpayers?"..."

Jonathan Chait (The New Republic):
"...Even the GOP rank and file like it--as became apparent when Arizona Senator John McCain's call for debt reduction outpolled George W. Bush's tax-cut plan among Republican primary voters. So the fledgling Bush administration, along with its allies in Congress, has devised a new argument: Gee, we'd love to reduce the debt, but, sadly, it can't be done. So the only option for the surplus is, alas, to cut taxes...If, as he puts it, the government only "needs" to cover the costs of its outlays in the current year, then by definition it cannot "need" to retire its debts or guard against future liabilities...
Bush is absolutely right when he says we can't pay down the debt because politicians in Washington want to spend it. He just neglects to mention that the politician in Washington most responsible for this state of affairs is Bush himself.
Bush's self-fulfilling argument against debt reduction finds its clearest rebuke in the record of the previous administration. When surpluses first appeared three years ago, Congress buzzed with plans to divvy them up. President Clinton put that talk to an immediate halt, declaring the money off-budget and insisting that Congress "save Social Security first." In response, Congress agreed to put Social Security's surplus in a "lockbox," where it would be saved for use only in reducing the national debt. Clinton followed that by taking Medicare off budget, too, resulting in even more debt reduction. The genius of lockboxes is this: They keep politicians from spending the surplus out of fear that they will be accused of raiding Social Security or Medicare. For the few years they've been in effect, these lockboxes have worked pretty well, resulting in $363 billion in debt reduction since 1998. Now Bush, in his lust for tax cuts, is bent on dismantling them..."

Also see: Paul Krugman (New York Times)

1
BD1-02 Use of budget surplus Bush

"..."The surplus," Bush likes to say, "means government has more money than it needs."...As Bush explains it, there are not three options for using the surplus but two: "Do we keep it in Washington to expand the reach of the federal government, or do we give it back to the taxpayers?"..."

  Dwight Meredith (Politics, Law and Autism):
"...when money is borrowed, it must be repaid with interest. Interest payments reduce either consumption or savings. We prefer to forgo current consumption in order to maximize savings and consumption over the long run. 
The same is true of government budget deficits. Those deficits are simply borrowing that must be repaid with interest. The payment of interest on the debt results either in higher taxes or lower government services...
Of the forty-five budgets submitted from FY 1960 through FY 2004, the fifteen worst deficits (as expressed by percentage of GDP) occurred under budgets submitted by Republican presidents...
Since Ronald Reagan’s first budget, every budget submitted by a Republican president has resulted in a deficit. Each of those deficits was at least 2.8% of GDP except for FY 2002 when our current President was in the process of turning a surplus of 2.4% of GDP in FY 2000 into a deficit of 4.2% in FY 2003. 
Many of those deficits were incurred despite the fact that the economy was doing well. In 1984, Ronald Reagan ran a deficit of 4.8% of GDP while the economy grew at a rate above 7%. George W. Bush proposes to run a deficit of $475 billion (plus the cost of operations in Iraq) next year while estimating that the economy will grow at a 3.7% clip. 
From Ronald Reagan’s first budget through George W. Bush’s FY 2004 budget, the total debt incurred under Republican-submitted budgets is $3.54 trillion dollars. By way of comparison, the debt incurred under budgets submitted by Presidents Carter and Clinton was $192 billion, or about 1/18th of that incurred under Presidents Reagan, Bush and Bush. 
How much interest do we pay each year on that $3.54 trillion? For FY 2002, we paid interest on the national debt at a rate of about 5.3%. See here and here for the data from which the interest rate can be calculated.
At that rate, the interest on the debt amassed under Presidents Reagan, Bush and Bush runs about $187 billion per year. Interest on the Carter and Clinton debt is about $10 billion per year.
Interest on the RBB debt is more than three times the amount the Federal government spends on education. It is larger than President Bush’s 2001 tax cut (over the ten-year period of the tax cut). It is about 250 times the amount spent on autism research.
The interest on the RBB debt is greater than the combined discretionary spending for the Departments of Agriculture, Commerce, Energy, Homeland Security, Interior, Justice, Labor, Transportation, Treasury, the Corps1 of Engineers, EPA, the National Science Foundation, NASA, and the Small Business Administration.
President Bush is fond of reminding us that he cuts taxes because “it’s your money.” The debt is yours, too. There are about 100 million households in the United States. On average, each household pays $1,870 per year (or about $150 per month) for interest on the RBB debt..."
1
BD2-01 Budget surplus Bush administration

"...During the debate over George W. Bush's tax cut, administration officials told wavering supporters not to worry. The Congressional Budget Office, they insisted, was underestimating future surpluses; in fact there would be plenty of money, even after the tax cut, for other priorities..."

Paul Krugman (New York Times):
"...Whoops. No sooner had Mr. Bush signed that tax cut into law than those same officials began admitting that the budget outlook wasn't that rosy after all. In fact, revenue is dropping like a stone. A suspicious man might wonder about the timing: isn't it strange that the bad news on revenue came to light only after the tax cut had passed?...
Of course, administration officials play down the sudden budget deterioration, saying that the surplus will return once the economy recovers. But it won't. Yes, corporate profits taxes — the big item in this year's revenue slump — will bounce at least partway back. But income tax receipts will steadily decline, as those huge tax cuts for the rich phase in. And the spending assumptions used to justify those tax cuts already look ludicrously low. In particular, the Bush administration has already asked for far more defense spending than it admitted it wanted before the tax cut passed, and Defense Secretary Donald Rumsfeld hasn't even started on his real shopping list..."
1
BD2-02 Budget Deficits Bush admin

claimed in July 2002 that the budget will be back in surplus by 2004

Paul Krugman (New York Times):
"...August 2002: The nonpartisan Congressional Budget Office issues a much grimmer projection, with a 2003 deficit twice that predicted by the administration, and deficits persisting until 2006. Moreover, the C.B.O. is required by law to make unrealistic assumptions that cause it to understate future deficits. A new analysis by Goldman Sachs, which is not under these constraints, predicts deficits well over $100 billion each year for the rest of the decade..."
1
BD3-01 Reason for budget surplus deteriora-
tion
Mitch Daniels (for Bush)

"...when questioned about the reliability of surplus forecasts [claimed] "We've been underestimating revenue by as much as eighty billion [dollars] a year. And we are likely to continue doing that."...[later...] As Daniels put it last week, the surpluses of the late '90s were "more closely tied to the stock market run-up than perhaps was thought at the time," so when the stock market dropped, federal tax revenues fell far more than anticipated. "No one as far as I know really saw this coming. [our emphasis]"..."

Jonathan Chait (MSN/Slate) via Bushwatch:
"...Where they go wrong is portraying this as an unforeseeable event for which the White House can't be held responsible. When the Bush tax cut was being debated, one of the key points made against it was that it left no room for error in case budget projections turned out to be too optimistic or some unforeseen crisis arose. Indeed, just about every speech or op-ed criticizing the tax cut made this argument in some form. And just about every time Bush and his spokespeople were presented with this objection, they would reply that they had erred on the side of caution. Here, to take one of many examples, is what Daniels said on Nightline last February when Ted Koppel questioned his rosy assumptions: 
Well, we really can't miss here. … We've been underestimating revenue by as much as $80 billion a year. And we are likely to continue doing that. … We've constructed a budget very carefully, on very conservative assumptions, and leaving lots of room for the unforeseen contingencies of the future.
The entire public rationale for the tax cut was not merely wrong or reckless, but outright dishonest..."

Jonathan Chait (The New Republic):
"...Actually, many economists (the primary exceptions being those employed by, or shilling for, Bush) worried it might. In Fuzzy Math, his primer on the Bush tax cut, Paul Krugman warned that "the high tax take in recent years has had a lot to do with the bull market on Wall Street ... in light of the market's plunge, [the surplus projection] does not seem like a safe, or even a reasonable, assumption." But the Bushies blithely disregarded such warnings. And far from learning its lesson, the White House is using the same Pollyannaish forecasting today. Despite the tanking stock market and wave of business scandals, the White House assumes corporate profits will shoot up 70 percent by 2005--an estimate wildly more optimistic than most private-sector forecasts. "If you compare their projections to ours," explains Andrew Hodge, the chief U.S. economist for DRI-WEFA, the largest econometrics firm in the United States, "they have a dollar level that's close to thirty percent higher."..."

2
BD3-02 Reason for budget surplus deteriora-
tion
Lindsey for Bush

"...[T]he previous Congress last year, to get out of town, spent $30 billion more than what they had agreed they were going to spend..."

Richard Kogan and Robert Greenstein (CBPP):
"...Some members of the Administration have attempted to blame the previous Congress and administration for the reduction in the 2001 surplus, pointing out that last fall, Congress increased funding for appropriated (or "discretionary") programs.(2) While true, this is not relevant; the Bush Administration's April prediction of a $125 billion surplus already accounted for all the funding and tax decisions made last fall by the previous Congress. Clearly, the level of spending enacted last fall does not explain why predictions made this April were off base...[CG emphasis]
Some $95 billion of the deterioration in the 2001 surplus from last July to this August is due to legislation enacted last fall or so far this year. Of that $95 billion, the vast bulk — 85 percent — is the result of laws passed by this Congress and signed by President Bush. (See Tables 2 and 3.) These data suggest that, even using last year rather than this year as the reference point, it is difficult to blame the deterioration of the 2001 surplus primarily on the prior Congress or the prior administration...
It also should be noted that although the Bush Administration apparently finds it useful to castigate the program increases enacted last fall, it is far from clear that the Administration really objects to those increases. The Administration had the opportunity this spring to request the rescission of some amounts enacted last fall. It chose not to do so. Furthermore, of the $434 billion in ten-year expenditure increases enacted last fall, about 60 percent occurred in three areas of the budget: health research and training, defense, and education. In this year's budget, the Administration requested further funding increases for 2002 in all three of these areas [CG emphasis] — an 8 percent funding increase for health research and training, a 7 percent funding increase for defense, and a 4 percent increase for education, compared with the levels needed to cover inflation. In these areas, the Bush Administration appears to believe the previous Congress did not raise spending sufficiently and further increases are needed..."
2
BD3-03 Reason for
Budget deficits
Bush Admin/Mitch Daniels 

Claiming (in 2002) that the main reason for the  long-term budget deficits is recession and "war"/"terrorism"

Bush

"...In his stump speech, Bush asserts over and over, "We got into deficit because the economy went into the recession," and, "We have got a recession because we went to war."..."

McClellan for Bush

"...Asked about the new deficit figures, McClellan said the following: "Now, we had a recession. We also had declining revenues because of that. And we had a war on terrorism. That's what led to the deficit that we are in today."..."

Brendan Nyhan/Bryan Keefer (Spinsanity) 1, 2 (2002)
"...His [Mitch Daniels] written testimony was only slightly  less misleading, claiming that "changed economic and  technical factors reduced the surplus by $1.345 trillion" and calling the recession "the largest but not the only economic  factor reducing estimated surpluses." But according to  the nonpartisan Congressional Budget Office (CBO), Daniels  is wrong. The tax cut's total cost came to $1.7 trillion (including  increased interest payments), which was the single largest  factor in the decline of the projected 10-year budget surplus.  By contrast, economic and technical factors combined caused  the surplus to decline by $1.6 trillion (including increased  interest costs). Moreover, as Daniels should know, it is  misleading to attribute technical adjustments to the recession  when they are actually unrelated to economic growth..."

Paul Krugman (New York Times) (2002):
"...Recently four independent projections were made of the budget surplus over the next decade: one each from the Democratic and Republican staff of the House and Senate. All four projections marked down previous surplus estimates by two-thirds; all four attributed about 45 percent, or $1.7 trillion, of the decline to the tax cut. Everyone expects the estimates that the nonpartisan Congressional Budget Office will release tomorrow to look very similar..."

Bryan Keefer (Spinsanity) (2003):
"...Notably missing from Bush's explanation for the present deficit is any mention of how tax cuts have contributed to the shortfall. A paper based on Congressional Budget Office data by the well-respected liberal analysts at the Center on Budget and Policy Priorities notes several factors have reduced anticipated revenues for fiscal 2003 relative to what the CBO projected they would be in 2001. The largest factor is the recession and technical adjustments, which account for a reduction of $340 billion. Tax cuts come in second at a cost of $205 billion. This is more than ten times the estimated $20 billion cost of the Iraq war, and nearly three times the estimated $70 billion cost of all other measures related to the war on terror for fiscal 2003. While it is true that the budget would be in the red even without the tax cut enacted in 2001, Bush's explanation of what contributed to the deficit is woefully inadequate..."

Bryan Keefer (Spinsanity) (2003):
"...Bush has repeatedly suggested that the war is in large part responsible for the current budget deficit, while carefully avoiding any mention of tax cuts. For example, on May 6 he stated:
And, yes, we've got a deficit because we went through a recession. You see, a recession means you get less money coming into your treasury. When the economy goes down, there's less tax revenues coming to the Treasury.
Secondly, we've got a deficit because we're at war. And one thing is for certain about this Commander-in-Chief, we will spend whatever is necessary to win the war. We owe it to every soldier in the American military to make sure they've got the best pay, best equipment, best possible training. We owe it to the families of the military to make sure that they're as well protected as possible. So our expenditures went up because of the emergency in war, and revenues went down. That's the ingredients for what they call a deficit.

As with the examples above, what Bush is saying isn't technically untrue. But the detailed enumeration of the expenditures for the war, combined with his conclusion "So our expenditures went up because of the emergency in war, and revenues went down," not only omits the second-largest cause of the deficit - tax cuts - but also suggests that without the spending on the war, there would be no deficit (which is untrue). The casual listener would be left with the impression that it is the war in Iraq that is in large part responsible for the deficit. (Bush made nearly identical claims in speeches on April 24 and May 5)..."

Jonathan Chait (The New Republic) (2003):
"...In fact, neither of these statements is true. The White House's own budget shows it running deficits into perpetuity, even after the economy recovers. And the war in Iraq imposed a one-time cost of $80 billion out of a deficit expected to exceed $400 billion this year alone. Do the math..."

Richard Kogan (CBPP):
"...The President has blamed the war and the recession for the turnaround in the nation’s fiscal fortunes, ignoring the role of tax cuts.[1]  Yesterday, White House spokesman Ari Fleischer again suggested the war is the culprit.[2]  Congressional Budget Office data show, however, that the tax cuts enacted since 2001 will cost nearly three times as much over 2003 and 2004 as the combined costs of the fighting and occupation in Afghanistan and Iraq, the costs of reconstruction and relief after the September 11 terrorist attacks, increased expenditures for homeland security, and the cost of dealing with terrorism on a worldwide basis.  The degree to which the cost of the tax cuts exceeds the cost of the war on terrorism will grow still larger in years after 2004..."

Further update on McClellan's comment
Ben Fritz (Spinsanity):
"...This is patently ridiculous. Newly released budget information from the OMB demonstrates that the 2001, 2002 and 2003 tax cuts cost a total of $177 billion in 2003, a sizable chunk of the $455 billion deficit..."

Los Angeles Times (7-31-03):
"...President Bush acknowledged for the first time [CG emphasis] Wednesday that the three tax cuts he propelled into law have contributed to the federal budget's swing from surplus to deficit during his administration.
Asked at a news conference whether his tax cuts were at least partly responsible for the fiscal turnabout, Bush said, "Part of the deficit, no question, was caused" by them.
At his news conference, he attributed about one-quarter of the swing toward deficits to his tax cuts..."

2

(being very very compassionate)

BD3-04 Reason for
Budget deficits
Bush

"...In his stump speech, Bush asserts over and over, "We got into deficit because the economy went into the recession," and, "We have got a recession because we went to war."..."

Bush 2003 budget

"...In the 1997 Budget, rising deficits were forecast totaling $1.4 trillion over a 10 year horizon. By the 2002 Budget steadily rising surpluses were projected over a 10 year period, totaling $5.6 trillion. Due to the events of last year, the latest projections are in between these wildly divergent estimates..."

Michael Kinsley (Time):
"...
A recession, as Bush says, "mean[s] three quarters of negative growth." The economy grew through the end of 2000, then growth turned negative in the first three quarters of 2001, including three weeks of Clinton and more than eight months of Bush. That is what allows Bush to say he inherited a recession. (CG note: While this may allow him to say it, it is still false compassionate, as shown in CC202B OT1-01) But growth turned positive in the last quarter of 2001, beginning Oct. 1, so it is bizarre to blame the recession on the events of 9/11--which occurred 19 days before the recession officially began to turn around. It is even more bizarre for Bush to blame the recession on money spent fighting the war on terrorism. War spending is historically a way out of a recession, not into one..."

Compassiongate
: A chart of U.S. real GDP growth from Economagic shows positive GDP growth since Q4 2001. So, by Bush's definition of recession, should we have been out of deficits after then? (Also see BD3-03 above). Secondly, by his definition of recession, we appear to have gotten out of it in Q4, 2001 when the war in Afghanistan started. So how could we have "got"[ten] a recession because "we went to war"?

Brendan Nyhan (Spinsanity):
"...President Bush unveiled his budget for fiscal year 2003 yesterday. Regrettably, the document contains a number of deceptive claims, including attempts to obscure the effect of the Bush tax cut and an unreasonable assumption that a tax provision will be allowed to raise taxes for millions of Americans. Efforts to avoid issues that could be politically damaging to the administration are especially frequent in the section called "Budget Implications of the War" (a title that sets the tone for spin to come). For example, in discussing the effect of the tax cut on projected ten year surpluses, the administration makes this tricky claim (CG: see text on the left)...

The phrase "events of last year" suggests that the terrorist attacks are responsible for the deterioration in the projected surplus, while obscuring the fact that the CBO estimates that 41% of the total surplus reduction is attributable to the tax cut. Notice how carefully this statement is constructed - the tax cut was an "event" that did take place last year, so the statement is technically true.
The administration also claims in the same section that "the budget should be back in surplus by 2004 or 2005," but this too is deceptive. A provision protecting millions of middle income taxpayers from the alternative minimum tax (AMT) expires at the end of 2004, as Glenn Kessler points out in the Washington Post. Virtually everyone acknowledges that this will have to be corrected, but including the $200+ billion cost of this provision would eliminate the projected surplus of $61 billion in 2005. As a result, the budget does not include AMT relief. (In fact, as Robert Greenstein of liberal Center on Budget and Policy Priorities points out, the assumption that AMT relief will be allowed to expire is just one of many accounting devices used in the budget to obscure the costs of tax cuts.)..."

Bryan Keefer (Spinsanity):
"...
In two other cases, Bush has even suggested that the war is responsible for the recession itself. On May 2, he claimed that "A recession means the economy has slowed down to the extent where we're losing revenues to the federal Treasury. We got a recession because we went to war." And on May 12 he made a nearly identical statement that "We have got a recession because we went to war." Not only is such a claim false - an official committee at the National Bureau of Economic Research has dated the beginning of the recession to March 2001 - but it also contradicts a series of questionable claims by Bush that the recession started in January 2001..."

3
BD3-05 Reason for
Budget deficits
Daniels for Bush

"...explained away the large deficits he leaves behind as in no way the result of his administration's obsessive tax-cutting. "I don't think there was an option but to pursue these policies," he told the Post. "Okay, have it your way--no tax cuts! We'd still have a great big deficit."..."

The New Republic:
"...Not exactly. Yes, we'd still have a deficit this year. But both liberals and conservatives support running a deficit during the current economic slowdown. The real issue is that, thanks to the administration's reckless tax cuts, we're projected to continue running large deficits long after the economy recovers. But don't take our word for it. Listen to the Office of Management and Budget (OMB), from which Daniels just stepped down. OMB's decidedly sanguine projection earlier this year was that, if there were no further tax cuts, the federal budget would be out of deficit by 2006 and posting a $51 billion surplus in 2008. But, thanks to the White House's latest round of tax cuts and spending, OMB projects that in 2008 the deficit will still be $190 billion, actually increasing from the previous year. (While OMB coyly declines to project budget numbers more than five years out--a Daniels innovation--it's safe to say the Bush deficits would extend far beyond.) Give Daniels this: He departed his job in the same way he performed it--with bald-faced dishonesty..."
1
BD3-06 Reason for
Budget deficits

(trifecta)

Bush 

"...I remember campaigning and  somebody said, Would you ever deficit  spend? I said, only if there was a  war, or a recession, or a national  emergency. I didn't think we  were going to get the trifecta..."

Spinsanity:
"...As the New Republic's Jonathan Chait first reported  and Spinsanity, among others, also covered, Bush's claim  that during a 2000 Chicago campaign stop he listed three  exceptions under which he would run deficits -- war, national emergency or recession -- is blatantly false.  No one has found any evidence that Bush made such  a statement, and the White House has pointedly  failed to provide any. What makes this revisionist history  so egregious is that Bush had actually promised that  he would protect the Social Security surplus and  not support deficit spending...Milbank has unraveled  part of the mystery of the "trifecta" in a followup piece.  It turns out that Vice President Al Gore - not Bush -  listed the exceptions in three 1998 speeches..."

Also see: Daily Howler

2

(1 for lying compassion and 1 for plagiarism more compassion)

BD3-07 Reason for
Budget deficits

(trifecta)

Bush

"...I want to remind you what I told the American people, that if I'm the president--when I was campaigning, if I were to become the president, we would have deficits only in the case of war, a recession, or a national emergency. Never did I realize we'd get the trifecta...."

  Jonathan Chait (The New Republic):
"... Bush offered up what has in recent months become his all-purpose escape clause: "I want to remind you what I told the American people, that if I'm the president--when I was campaigning, if I were to become the president, we would have deficits only in the case of war, a recession, or a national emergency." Bush, somewhat morbidly, plays this line for laughs in his speeches, chuckling, "Never did I realize we'd get the trifecta." But this escape clause is not only a falsehood; it's actually a revision of a previous falsehood, which itself was consciously designed to cover up the fact that the budget is in far worse shape than Bush lets on...
Bush's original promise on the budget was extremely clear: He would devote the entire Social Security surplus to debt reduction...Not only did Bush make no exception for emergencies, but he specifically promised that even if emergencies arose, they would not force him to break his pledge...It was only last summer--as it became obvious that the administration would have to dip into the Social Security surplus to pay its bills--that Bush invented his escape clause [CG emphasis]. As TNR's Ryan Lizza reported at the time (See "Raising Keynes," September 10, 2001), in an August 20 speech Bush hinted that he could tap the Social Security surplus in case of recession or war....In recent weeks Bush has rewritten his budgetary history yet again. Now the president tells audiences he has always said that in a time of recession, war, or national emergency, he could not only borrow from Social Security's surplus but could run overall budget deficits..."
2
BD4-01 Accuracy of budget deficits O'Neill for Bush

"...people who believe as a religion in 10-year numbers haven't lived in the real economy....And so to make a big deal out of 10 years seems to be to be a false idea..."

Evans for Bush

"...Exactly what the budget is going to be over the next three to five years, you know, is pure speculation at this point..."

Joel Friedman and Robert Greenstein (CBPP):
"...To be so dismissive of the budget projections for the next decade, however, ignores an important point... Because the bond market responds to changes in projected government borrowing, the high cost of the tax cut when it is in full effect — which will slow efforts to reduce the debt and thereby increase the government's need to borrow funds in the bond market — has helped to keep long-term interest rates higher than they otherwise would be. These higher long-term interest rates have an immediate impact; they raise the cost of borrowing for mortgages and various other investments and thus dampen current economic activity...
Furthermore, efforts by the Administration to denigrate ten-year budget projections stand in stark contrast to the Administration's own position a year ago. At that time, when President Bush was presenting his new budget, the Administration pointed to the large surpluses projected over the next ten years as justification for its policies. In fact, the Administration expressed strong concern that by the end of the decade, the large surpluses would cause the government to retire all of the available debt, thereby forcing it to purchase private assets with its excess cash, an option the Administration vigorously opposed. The Administration's first budget document, "A Blueprint for New Beginnings," stated that the Administration was proposing its large tax cut as part of "an agenda for gradually reducing the on-budget surplus in order to minimize the risks of a build-up of excess cash and Government purchase of private assets in the future." Moreover, in his first major address to Congress and the nation on February 27, 2001, President Bush stated that the nation had ample funds to establish a Medicare prescription drug benefit, increase funding for education and various other initiatives, pay down most of the debt, and still finance his tax cut. The basis for this claim was the Administration's ten-year budget estimates..."
2
BD4-02 Accuracy of budget deficits O'Neill for Bush

"...people who believe as a religion in 10-year numbers haven't lived in the real economy....And so to make a big deal out of 10 years seems to be to be a false idea..."

Evans for Bush

"...Exactly what the budget is going to be over the next three to five years, you know, is pure speculation at this point..."

Joel Friedman and Robert Greenstein (CBPP):
"...If ten-year projections are so uncertain as not to be worthwhile, there was little basis last spring for the magnitude of the Administration's ten-year tax cut. Last year, however, the Administration seemed to have few doubts about the validity of ten-year forecasts. Many budget watchdog organizations, such as the Concord Coalition and the Center on Budget and Policy Priorities, warned at that time that considerable uncertainty surrounded these ten-year estimates and that it would be far more prudent to enact a smaller tax cut until it was clear the projected surpluses would actually materialize. At the time, the Administration brushed aside these concerns, claiming that "there are convincing reasons to assume that higher revenues are more likely than lower revenues and a larger, not smaller, surplus lies ahead." It is only now that the ten-year projections are not so rosy — and that the projections suggest the tax cut was excessive — that the Administration seems to have lost faith in them..."
2
BD4-03 Accuracy of budget deficits Bush admin

"...[budget] replaces traditional 10-year budget projections with five-year ones, claiming the longer-term numbers were unreliable..."

Russ Baker (MSN/Slate):
"...In a superb analysis of the budget in the June Harper's, Thomas Frank noted that in 2002 the administration declared an $18 trillion shortfall in Social Security and Medicare—about five times the current national debt. Frank notes that in order to arrive at the $18 trillion figure—since Social Security is currently in surplus—the administration used a "cumulative seventy-five-year estimate [Frank's itals] based on extreme long-term projections ... ." Meanwhile, even as it relies on 75-year projections for Social Security, the same document replaces traditional 10-year budget projections with five-year ones, claiming the longer-term numbers were unreliable..."

Joel Friedman and Robert Greenstein (CBPP):
"..."Exactly what the budget is going to be over the next three to five years, you know, is pure speculation at this point."
Commerce Secretary Donald Evans, January 6, 2002, on CNN Late Edition..."

1
BD4-04 Accuracy of budget deficits Bush

"...when newspapers reported that this year's deficit is estimated to be about $100 billion--twice as large as previous forecasts had suggested. President George W. Bush immediately offered..."Of course, it's all speculative to begin with," he told reporters. "I don't know the models that they guessed [sic], but it's guesswork thus far."..."

Jonathan Chait (The New Republic):
"...President George W. Bush immediately offered a multilayered defense packed with jaw-dropping mendacity. First came denial. "Of course, it's all speculative to begin with," he told reporters. "I don't know the models that they guessed [sic], but it's guesswork thus far." (Actually, this year's revenue forecast, which is based on tax returns that have already come in, is fairly reliable [CG emphasis]. What's unreliable are the ten-year budget forecasts, which Bush was only too happy to treat as money in the bank while selling his tax cut last year.)..."
1
BD5-01 Budget Deficits Bush and others'

Changing story of deficits

Jonathan Chait (The New Republic):
"...Perhaps the hardest part of criticizing the Bush administration's economic logic is simply keeping track of it from week to week. Consider President Bush's view of deficits. His initial position, while peddling his tax cut on the campaign trail and in the first months of his presidency, was that a return to deficits was inconceivable. "We can proceed with tax relief without fear of budget deficits, even if the economy softens," he said in March 2001. "The projections for the surplus in my budget are cautious and conservative." When, in the late summer and early fall of that year, budget forecasts first showed deficits on the horizon, he dismissed them as "speculative" and "guesswork." When finally forced to acknowledge the inevitability of deficits last spring, he insisted they would be "small and temporary." Meanwhile, he'd begun laying the groundwork to shift the blame away from his tax cut and onto such factors as the September 11 attacks, the recession, and big-spending Democrats. But, with the recession and the terrorist attacks now receding into the past and unified control of the government in GOP hands, deficits are still projected to remain a large and permanent feature of the Bush presidency. And so it has become necessary for the administration to retreat to yet another new line of defense: Deficits don't matter...."

Also see: Paul Krugman (New York Times)

1

(being very very very compassionate)

BD6-01 Budget Deficits and Interest Rates Bush admin

Claiming that there is no link  between budget deficits and interest rates

Cheney for Bush

"...said during a January 10 speech that "[t]hey argue that increased deficits necessarily lead to increased interest rates, which, in turn, slows economic growth. But the argument has one slight flaw. The evidence of recent years simply doesn't support it." He then cited the low interest rates seen today despite federal budget deficits..."

Daniels for Bush

"...Well, the idea that there is some connection between deficits and interest rates is an article of faith for some people, but I say "faith" because there's just no evidence, zero...We've gone from surplus to deficit, and interest rates have gone down. So I do not see that correlation..."

Hubbard for Bush

"...joined Cheney and Daniels in castigating the view that higher budget deficits increase interest rates and therefore hurt economic growth, calling it "nonsense" and "Rubinomics" (referring to former Treasury Secretary Robert Rubin) [Wall Street Journal online subscription required]. He also told the New York Times in November, "As an economist, I don't buy that there's a link between swings in the budget deficit of the size we see in the United States and interest rates. There's just no evidence."..."

Spinsanity:
"...Last week, President Bush's Council of Economic  Advisors (CEA) released the 2003 Economic Report  of the President (ERP) to little notice from the press  or public...Yet the report, which is produced by the  professional economists and staff of the CEA, directly  contradicts a number of public statements by the  President and other administration officials  on two key economic issues: the effects of tax cuts on  revenue and the relationship between budget deficits and  interest rates...
...when he's being less rhetorical, Hubbard  has admitted some connection between the two.  UC-Berkeley economist and former Clinton administration  official Brad DeLong points out (here and here) that  Hubbard's statements contradict those he has previously  made in his economics textbook...
The ERP expresses a similar view, again in contradiction  with the administration's talking points, conceding that a  relationship exists between deficits and higher interest  rates but describing it as a "modest effect"..."

William Gale (Washington Post):
"...Rubin is right--deficits matter. They reduce future national income. This can have a big effect. The decline in fiscal outlook since January 2001 implies that future national income will be lower by about $800 per person by 2012...the evidence suggests that (a) controlling for other factors, like inflation, monetary policy, state of the economy, etc. and (b) looking at anticipated future deficits, there is an impact of deficits on interest rates...lots of other things ALSO affect interest rates. That's fine. No one ever said that deficits are the ONLY thing that affects interest rates.
Again, to emphasize, it makes no sense to look at correlations between ONLY interest rates and deficits not controlling for anything else. If we wanted to play that game, one could look at the decline in investment over the last few years and the decline in interest rates and erroneously conclude that investment does not depend on interest rates..."

Also see William Gale (The Brookings Institution)

Jonathan Chait (The New Republic):
"...Last spring, Bush said, "I'm mindful of what overspending can mean to interest rates or expectations of interest rates." As recently as September, he argued, "For the sake of fiscal sanity, the United States Senate must ... get us to head towards a balanced budget." But, since Republicans took the Senate in November, the White House has begun arguing that it makes no macroeconomic difference whether the budget is balanced or not. The point man for this argument is R. Glenn Hubbard, the chairman of Bush's Council of Economic Advisers..."

Paul Krugman (New York Times):
"...Economics aside, the administration's ever-changing rationale for tax cuts says a lot about its character. If the Bush team never cared about deficits, Mr. Bush's promises of fiscal responsibility were dishonest. On the other hand, if administration officials didn't decide that deficits are O.K. until that belief became convenient, that suggests that they're tough talkers who make excuses when confronted with real problems..."

3
BD7-01 Budget projections Bush' WH OMB on 2002 budget

"...in July, the Office of Management  and Budget issued a press release  that severely underestimated the  percentage decline in the 10-year  federal budget surplus caused by  the Bush tax cut (apparently an  inadvertent error)..."

"... Trent D. Duffy, the Communications Director of the Office of Management and Budget (OMB), defends his agency against criticism from columnist Paul Krugman. At issue is what Duffy calls an "error" in a July 12 press release that was "retracted weeks ago when noticed"..."

Brendan Nyhan (Spinsanity):
"...In a letter to the New York Times Saturday, Trent D. Duffy, the Communications Director of the Office of Management and Budget (OMB), defends his agency against criticism from columnist Paul Krugman. At issue is what Duffy calls an "error" in a July 12 press release that was "retracted weeks ago when noticed". As I've pointed out, however, the alleged retraction apparently took the form of posting an edited version (Adobe PDF file) of the release on OMB's website with no disclosure that it has been altered. There has been no formal public admission of error that I know of.
Also, Duffy writes that the release "assigned a true number to the wrong time frame" -- specifically, that "[t]he 2001 tax relief law had a very small, less than 10 percent, effect on the change in our fiscal picture from 2001 to 2002" and that the first release "mistakenly applied the 10 percent figure to the 10-year estimated surplus, rather than to 2002."
But he's spinning again. The original release actually claims that the tax cut "generated less than 15% of the change" in the 2002-2011 surplus, not 10%. So OMB's error in the original release was apparently twofold -- the Mid-Session Review that the release was previewing states very clearly that the tax cut's accounted "for less than 10 percent of the $448 billion total shift in expected surpluses for 2002." And so it becomes clear why Duffy uses the strange locution "true number" -- "less than 10 percent" is "less than 15%", so the number in the original release was technically true for the change from 2001 to 2002. But it wasn't accurate, as he wants you to think..."

Brendan Nyhan (Spinsanity):
"...Rather than admit its mistake publicly, OMB  deleted the error and posted an altered version of the  release (Adobe PDF file) on its Web site with no  indication that it had been changed. After my initial report  on this was picked up by New York Times columnist Paul Krugman, OMB was finally forced to add a  disclosure to the release (Adobe PDF file)..."

3

(1 for falsely accusing compassion for Krugman)

BD7-02 Budget projections Bush 2002 budget

"...projects a return to budget balance in fiscal year 2005 and a $1 trillion total budget surplus over the next ten years, although it also projects that all of the surplus will be due to Social Security and that the budget outside Social Security will run a $1.5 trillion deficit over this period..."

Robert Greenstein (CBPP):
"...These projections, however, are not realistic. They are based on an array of budget devices and implausible assumptions that mask hundreds of billions of dollars of tax reductions and government expenditures that are virtually certain to occur but are omitted from the budget. 

  • The budget proposes to make permanent the tax cuts that expire in 2010. However, it conveniently fails to include the cost of extending a certain-to-be-renewed provision of last June's tax cut that is scheduled to expire at the end of 2004...the provision that prevents the individual Alternative Minimum Tax from exploding into the middle class. 

Because the Administration's budget omits extension of this provision, the revenue numbers in the budget are based on the implausible assumption that the number of taxpayers subject to the AMT will swell from 1.4 million in 2001 to 39 million by 2012...There is, of course, no possibility that the Administration or Congress will allow this to happen...Joint Tax Committee estimates indicate that the cost of addressing this problem amounts to several hundred billion dollars over the next ten years, a cost the Administration's budget conveniently omits. Moreover, assuming that a swollen AMT is in effect in 2011 and 2012, as the budget does, helps the Administration in a second way — it reduces the costs shown in 2011 and 2012 for extending the tax cuts scheduled to expire in 2010, since the AMT is implausibly assumed to cancel out a significant share of these tax cuts..."

2
BD7-03 Budget projections Bush 2002 budget

"...projects a return to budget balance in fiscal year 2005 and a $1 trillion total budget surplus over the next ten years, although it also projects that all of the surplus will be due to Social Security and that the budget outside Social Security will run a $1.5 trillion deficit over this period..."

Robert Greenstein (CBPP):
"...These projections, however, are not realistic. They are based on an array of budget devices and implausible assumptions that mask hundreds of billions of dollars of tax reductions and government expenditures that are virtually certain to occur but are omitted from the budget...

  • ...the budget proposes to extend for two years various popular tax credits that always are extended when they are scheduled to expire. Although it is a virtual certainty these tax credits will be extended throughout the ten-year period, the budget assumes they will expire after two years. Using this assumption enables the Administration to avoid showing the cost of these provisions for the final eight years of the ten-year period. 

  • The budget also understates the costs of the plethora of new tax cuts it proposes. To make these tax cuts appear less costly then they actually are, the budget uses the same devices that last year's tax cut used: some tax cuts would be phased in very slowly so their full costs would not appear until late in the decade — the proposed deduction for charitable contributions, for example, would not become fully effective until 2012 — while other tax cuts are assumed to terminate after a few years despite their likely extension at that time..."

2
BD7-04 Budget projections Bush 2002 budget

"...projects a return to budget balance in fiscal year 2005 and a $1 trillion total budget surplus over the next ten years, although it also projects that all of the surplus will be due to Social Security and that the budget outside Social Security will run a $1.5 trillion deficit over this period..."

Robert Greenstein (CBPP):
"...These projections, however, are not realistic. They are based on an array of budget devices and implausible assumptions that mask hundreds of billions of dollars of tax reductions and government expenditures that are virtually certain to occur but are omitted from the budget...

  • The budget shows its tax-cut proposals as costing $665 billion between 2003 and 2012. (Some news accounts have reported a $591 billion cost, but that figure fails to include the refundable component of the Administration's health insurance tax credit and a few smaller credits. The budget documents show the Administration is $665 billion as the full cost of the tax proposals.(1)) The actual cost, however, would be much larger...

  • Moreover...the cost of extending the tax cut and making it permanent (including the AMT provision), along with the costs of the new tax cuts the Administration is proposing, would amount to between $4 trillion and $5 trillion in the second ten-year period, from 2013-2022. (This is based on Joint Tax Committee estimates of the cost of the tax cut enacted last year when it is fully in effect.)... 

End Note: 
1. This figure does not include the cost in fiscal year 2002 of the tax cuts the Administration is proposing as part of a stimulus package..."

1
BD7-05 Budget projections Bush 2002 budget

"...projects a return to budget balance in fiscal year 2005 and a $1 trillion total budget surplus over the next ten years, although it also projects that all of the surplus will be due to Social Security and that the budget outside Social Security will run a $1.5 trillion deficit over this period..."

Robert Greenstein (CBPP):
"...These projections, however, are not realistic. They are based on an array of budget devices and implausible assumptions that mask hundreds of billions of dollars of tax reductions and government expenditures that are virtually certain to occur but are omitted from the budget...

  • The budget also understates the likely course of government spending. For example, the budget appears to understate Medicare costs substantially. It assumes an extraordinarily low rate of growth in Medicare costs and shows Medicare costs under current law as being $300 billion below what the Congressional Budget Office projects for the next ten years. It also assumes nothing will be done to avert various reductions in Medicare home health and physician payments that are scheduled to occur in the next two years under current law, despite the near-certainty that these scheduled cuts will be moderated or repealed. 

  • In addition, the budget proposes and shows costs for only a one-year extension of Transitional Medical Assistance. Established under welfare reform legislation that Ronald Reagan signed into law in 1988, TMA provides up to a year of health insurance to families that work their way off welfare. It is an established program that is broadly supported on both sides of the aisle and by governors. It is considered an integral part of welfare reform. There is no possibility that Congress and the Administration will allow it to die after a year. By including only a one-year extension in the budget, the Administration is able to leave out its costs for the nine succeeding years. 

  • The levels the budget includes for non-defense discretionary programs in years after 2003 are unrealistic as well. The budget shows overall expenditures for non-defense discretionary programs — a part of the budget that includes homeland security, most education programs, the National Institutes of Health and veterans programs, among others — falling in inflation-adjusted terms in every year after 2003. The Administration's budget does not include specific programmatic reductions to achieve these "out-year" savings. Historical experience strongly suggests these savings will not materialize.

By omitting or understating various costs and understating the ultimate costs of the tax cuts, the Administration presents a much rosier picture than is warranted..."

3
BD7-06 Budget projections Bush 2008 budget

"...In the Administration’s just-released Mid-Session Review, deficits are projected to shrink from $455 billion in 2003 to $226 billion in 2008, or from 4.2 percent of Gross Domestic Product this year to 1.7 percent in 2008..."

Richard Kogan and Robert Greenstein (CBPP):
"...The 4.2 percent of GDP deficit in 2003 — and the deficits in general — are described as manageable, while cutting the deficit in half by 2008 is portrayed as a victory.  This treatment is misleading in several respects.
  • At 4.2 percent of GDP, the 2003 deficit is quite high.  During Franklin Roosevelt’s first two terms — from 1933 through 1940, during the Great Depression, when unemployment ranged from 14 percent to 25 percent — deficits averaged 3.5 percent of GDP.  More important, the deficit outside Social Security will equal 5.7 percent of GDP this year, the second highest such level in the past 57 years.  (The highest level, 6.0 percent of GDP, occurred in 1983.)  Looking at the deficit outside Social Security is useful to gain a sense of the long-term problems the budget faces, because the Social Security surpluses are a temporary phenomenon and will disappear as the baby boomers retire.

  • In addition, the Administration’s deficit projection for fiscal year 2008 — $226 billion — is not credible.  It omits the costs of a number of the Administration’s own policies.  For example, the projection omits most of the cost of addressing the swelling Alternative Minimum Tax.  It assumes that the AMT-relief provisions of current law will be extended only for one year and then simply expire at the end of 2005, and that the number of taxpayers subject to the AMT consequently will jump from about two million today to more than 26 million in 2008.  Of course, this is not what the Administration favors, and no knowledgeable observer expects it to occur.  Gregory Mankiw, the Chairman of the President’s Council of Economic Advisers, wrote just this week in the Washington Post that the AMT problem needs to be addressed.[2]  An AMT measure that continues the current AMT relief policies beyond 2005 so that the percentage of filers subject to the AMT remains steady (which is probably the least expensive course the Administration will propose) would add $50 billion to $60 billion in cost in 2008..."

1
BD7-07 Budget projections Bush 2008 budget

"...In the Administration’s just-released Mid-Session Review, deficits are projected to shrink from $455 billion in 2003 to $226 billion in 2008, or from 4.2 percent of Gross Domestic Product this year to 1.7 percent in 2008..."

Richard Kogan and Robert Greenstein (CBPP):
"...The 4.2 percent of GDP deficit in 2003 — and the deficits in general — are described as manageable, while cutting the deficit in half by 2008 is portrayed as a victory.  This treatment is misleading in several respects...
  • The figures in the Administration’s budget forecast also lowball the cost of defense spending in coming years, leaving out of the budget projection for 2008 an estimated $40 billion to $45 billion needed to fund the Administration’s Future Year Defense Plan.[3] The new Administration budget figures unrealistically assume that defense expenditures will fall by $15 billion in 2004, then rise by only $3 billion in 2005, and rise after that at a slower rate than the economy.  This is inconsistent both with recent history — defense spending grew $43 billion in 2002 and another $76 billion in 2003 — and with the Administration’s future-year defense plan. 

  • In addition, the Administration’s 2008 deficit estimate assumes there will be no hurricanes, floods, or other natural disasters requiring federal relief in 2008.  Historically, an average of $8 billion a year has been provided for this purpose..."

3
BD7-08 Budget projections Bush 2008 budget

"...In the Administration’s just-released Mid-Session Review, deficits are projected to shrink from $455 billion in 2003 to $226 billion in 2008, or from 4.2 percent of Gross Domestic Product this year to 1.7 percent in 2008..."

Bush 2008 budget

"..."we've got a plan to reduce the deficit in half in five years," alluding to administration budget projections that the deficit will shrink by half without any policy changes..."

Richard Kogan and Robert Greenstein (CBPP):
"...The 4.2 percent of GDP deficit in 2003 — and the deficits in general — are described as manageable, while cutting the deficit in half by 2008 is portrayed as a victory.  This treatment is misleading in several respects...
  • Another problem is that the budget projection for 2008 assumes levels of expenditure for domestic discretionary programs that are $15 billion below what is needed to maintain current real per-person appropriation levels for these programs, which include education, biomedical research, and infrastructure.  History suggests these funding levels will at least stay even in real (i.e., inflation-adjusted) per-capita terms.

  • The 2008 estimates also do not include the cost of any extension of the “bonus depreciation” business tax break slated to expire at the end of 2004.  While it is not certain the Administration and Congress will extend this tax break in full, the tax break is likely to be extended in some, at least partial, form.  If it is extended in full, revenue in 2008 will be reduced another $50 billion or more..."

2
BD7-09 Budgeted spending Bush

"...says he is proposing a four percent increase in funding for appropriated programs (i.e. for programs that are not entitlements). He terms this a "healthy" increase and has stated that "my budget blueprint will ... meet growing needs with a reasonable 4 percent growth rate, which is a little more than inflation."..."

"We have increased spending by a very reasonable four percent, [which is] above the rate of inflation."

  Cynthia Perry and Richard Kogan (CBPP):
"...readers may infer that the President wants to increase non-defense appropriations by four percent in the coming year. That, however, is not the case; the claimed four-percent increase does not apply to non-defense appropriations. Funding for these programs would rise only 1.1 percent in fiscal year 2002. After adjusting for inflation, funding for these programs would fall 1.6 percent. After adjusting for both inflation and population growth, the decline would be 2.5 percent. The funding level assumed for non-defense discretionary programs in the Congressional budget resolution is modestly higher; funding for these programs would increase 2.7 percent before inflation is taken into account. After accounting for inflation, these programs are left with no increase over 2001 levels. After accounting for population growth as well as inflation, these programs would face a 0.9 percent funding reduction. 
Even these figures make the funding levels sound more realistic and attainable than they are likely to be, since these figures represent an average across all non-defense discretionary programs. Within these averages, certain program areas — such as congressional operations, health research, education, and expenses for the White House and supporting agencies — would see increases. Other areas — such as energy, community and regional development, and natural resources and environment — would experience significant decreases..."
3
BD7-10 Budgeted spending Bush

"...says he is proposing a four percent increase in funding for appropriated programs (i.e. for programs that are not entitlements). He terms this a "healthy" increase and has stated that "my budget blueprint will ... meet growing needs with a reasonable 4 percent growth rate, which is a little more than inflation."..."

"We have increased spending by a very reasonable four percent, [which is] above the rate of inflation."

  Cynthia Perry and Richard Kogan (CBPP):
"...[The] often-cited four-percent-increase figure, which is supposed to apply to discretionary funding as a whole rather than to non-defense discretionary funding in particular, is derived through a methodology that contains several significant distortions...
  • The figures used to generate the four-percent-increase figure rely on inconsistent treatment in 2001 and 2002 of funding for relief from natural disasters.

  • A second problem occurs since the amount that the last Congress appropriated for discretionary programs for 2001 is artificially low — this results from the use by that Congress of "timing shift" gimmicks. Under these gimmicks, some of the funding that would normally have been recorded as being provided for certain programs in 2001 (but not spent until 2002) was instead recorded as being provided for 2002, through the mechanism of "advance appropriations." The sole function this maneuver served was to make 2001 funding look smaller on paper than it actually is. As a result of this gimmick, increases in 2002 in the Administration's budget in several program areas appear larger than they actually are...

  • The figures used to generate the four-percent-increase figure also contain a distortion related to low-income housing programs. Some low-income housing assistance is financed by multi-year contracts that were funded in full many years ago. Because these housing contracts were funded in the past, their funding was recorded in the past. As a result, funding levels for low-income housing are understated for both 2001 and 2002. However, the understatement for 2001 is larger than the understatement for 2002, because more of the old, multi-year contracts are expiring in 2002 and being replaced with new, one-year contracts, which are recorded as new funding even though that funding does not increase the size of the low-income housing programs..."

3
BD7-12 Government spending Bush administration (OMB)

claim that "government spending exceeds family income growth"

  Paul Krugman:
"...The home page of the Office of Management and Budget home page currently carries a chart purporting to show that government spending has raced ahead of personal income, comparing growth in department budgets with median household income. Two problems:
1. Median household income is income per household - it grows much more slowly than total income in part because the number of households is growing. Shouldn't the other numbers be spending per household?
2. Median income also grows more slowly than average income because of growing inequality. In fact, when touting tax plans the Bushies always use averages - that way they obscure the fact that most of the tax cut goes to a few wealthy families. But now, suddenly, they've become proponents of the median ...The New Republic had it right: Bush claimed to be a uniter, not a divider. One thing's for sure: he and his people aren't adders or subtracters..."
2
BD8-01 Impact of budget deficits Bush OMB

"..."Although the resulting deficits [over the next few years] are manageable by any reasonable standard, they are cause for legitimate concern and attention," contends the administration's Office of Management and Budget in an essay, "The Real Fiscal Danger," published last February. "But whatever judgment one reaches about the deficit of this year or even the next several years combined, these deficits are tiny compared to the far larger built-in deficits that will be generated by structural problems in our largest entitlement programs."..."

Jonathan Chait (The New Republic):
"...This is a strange argument to begin with: Yes, we're spending beyond our means now, but in the future we're really going to spend beyond our means, so why sweat it? Moreover, its premise isn't even accurate. According to a calculation by the Center on Budget and Policy Priorities, the long-term cost of Bush's tax cut exceeds the long-term deficits of Social Security and Medicare combined. In other words, if we rescinded all the Bush tax cuts, we could preserve both Social Security and Medicare and have money left over. So, if the entitlement deficits represent a "financial threat," as the administration concedes, what do we call the Bush tax cut?..."
2
BD9-01 Balanced budget and restraining spending Daniels for Bush

"A balanced federal budget remains a high priority for this president."

David Rosenbaum (New York Times) via Bushwatch:
"...The budget differs from those of other recent presidents in two important ways. Nowhere does Mr. Bush make balancing the budget an important goal. And he makes no claim that the era of big government is over, or even nearing an end. "This is a president of big projects and big ideas," his budget director, Mitchell E. Daniels Jr., said today....Paying no heed to the notion of a balanced budget, Mr. Bush advocates deep tax cuts on top of the large ones enacted two years ago. By contrast, when big deficits began to appear after President Ronald Reagan drove tax cuts through Congress in 1981, Mr. Reagan approved offsetting tax increases....Mr. Daniels said this morning, "A balanced federal budget remains a high priority for this president." But unlike the submissions of recent predecessors, this budget describes no plans to reach that goal..."
1
BD9-02 Balanced budget and restraining spending Bush

WH: "...History has shown that—unlike tax cuts—spending increases, once made, are rarely reversed. This pattern cannot long continue without jeopardizing our Nation's long-term goals..."

WH: "...We must remember the lessons of the past. In the 1960s, increased spending required by war was not balanced by slower spending in the rest of the government. As a result, in the 1970s we faced unemployment and growing deficits and spiraling inflation..."

"...Mr. Bush has even promised to be the enforcer of spending discipline: The President will enforce fiscal discipline on Congress, because when spending is out of control, deficits increase and our economic growth is hindered. Congress must control its enormous appetite for excessive spending, so we can meet our national priorities without undermining our economy..."

Bush

"...Bush said yesterday, praising Daniels as "a really good watchdog of the taxpayers' money."..."

Dwight Meredith (P.L.A.):
"...With Daniels’ resignation, it seems appropriate to assess Bush’s performance in restraining spending. The administration certainly likes to talk about restraining spending...Jimmy Breslin recently asked for his readers to "tell me if you ever heard of anybody with as powerful a resistance to shame as Bush."
In no area is Mr. Bush’s lack of shame more apparent than in the disparity between his rhetoric and his actions with regard to government spending. Given the rhetoric, one may presume that federal spending would decrease under a Bush administration. Despite having Republican control over both Houses of Congress, that assumption would be false.
Under the last Clinton Budget (FY 2001), the Federal Government spent (see table 1.1) $1.863 trillion. In the first year of a budget prepared by Mr. Bush (and passed by Republican majorities in both Houses of Congress) spending was $2.010 trillion, in increase of almost 8%.
In the 2003 Budget (again prepared by Mr. Bush) spending is estimated to increase again to $2.140 trillion (plus the cost of the war in Iraq). That is an increase of about 6.5%. If $80 billion is added for the war, the increase is in excess of ten percent.
For 2004, Mr. Bush proposes (see table S-1) to increase spending yet again to $2.229 trillion, an increase of 4.2% (not including any supplemental spending required by the rebuilding of Iraq). Indeed, the budget projections provided by Mr. Bush propose to increase spending each and every year through FY 2008. If Mr. Bush has his way, by FY 2008, the federal government will have increased spending by about 46% over the last Clinton budget.
Even if we eliminate defense, Social Security, Medicare, Medicaid and interest on the national debt from the calculations, Mr. Bush proposes to increase total non-military discretionary spending (See table S-2) each year through FY 2008.
In the FY 2001 budget submitted by President Clinton about $349 billion was allocated to non-defense discretionary spending. By FY 2008, under Mr. Bush’s proposals, $466 billion will be spent on non-defense discretionary spending. That represents an increase of about 34%.
The Blade was too dull to restrain spending. He may have a reputation as being frugal but his boss is not. Like so many areas, Mr. Bush simply says one thing and then does another. When the consequences of his actions become apparent, he blames someone else for his own failures. Breslin is right, George W. Bush has a truly remarkable resistance to shame..."

Dana Milbank (Washington Post):
"...The 54-year-old former aide to Ronald Reagan infuriated lawmakers in both parties with his incessant criticism of their spending habits. He [Daniels] scolded Congress for strapping "Lilliputian do's and don'ts" on federal agencies and said New Yorkers were involved in "a little money-grubbing game" for pursuing $20 billion to recover from the Sept. 11, 2001, attacks. He suggested a motto for lawmakers: "Don't just stand there, spend something." And he was criticized for dismissing saving the Social Security surplus by saying, "All the dollars are fungible."...
Sen. Ted Stevens (Alaska), the top Republican on the Senate Appropriations Committee, said, "The president is ill-served" by Daniels. He said the White House budget office was consumed with "blind adherence" to a bottom-line number "without regard to the needs of the country at all."...
For all his stated devotion to spending restraint, Daniels presided over a large expansion in federal spending. The federal budget swung from surplus to deficit on his watch because of antiterrorism spending, the recession and tax cuts. "By OMB's own estimates, Daniels has presided over an era which has seen a projected $5.6 trillion surplus in 2001 turn into a $2.2 trillion projected deficit today," said David Sirota, Democratic spokesman for the House Appropriations Committee. "In short, Mitch Daniels is the clown that turned our fiscal house upside down."..."

2

 

ESTATE TAX <go back to the top>

Compassion Con credits total = 3

# Topic Bush's or his representative's Compassionate statement Some Uncompassionate Facts Compassion Con Credits
ET1-01 Estate tax Bush

Pushing BET CEO Robert Johnson's lies/ad and stating that "...As Robert Johnson of Black Entertainment Television argues, the death tax and double taxation weighs heavily on minorities..."

Michael Kinsley (Washington Post) via Bushwatch:
"...The group was organized by Robert L. Johnson, chairman of Black Entertainment Television. The ad declared: "The estate tax is unfair double taxation since taxpayers are taxed twice -- once when the money is earned and again when you die."
A Times article yesterday about the ad noted correctly that this "repeats one of President Bush's familiar themes." Indeed it is probably the most tediously repeated sound bite of the estate tax debate. It is also false. Not "controversial" or "disputed" or "misleading" but out-and-out false. Most of the accumulated wealth that is subject to the estate tax was never subject to the income tax. This is so obviously, overwhelmingly true that anyone with the slightest business or financial experience surely knows it. Even George W. Bush. Well, probably even Bush. Yet he keeps on repeating the lie..."

Joshua Green (The American Prospect):
"...Johnson's ad repeated the arguments estate-tax opponents commonly employ to sway public opinion to their side: The tax hurts small businesses and farmers; it represents a "double tax" on wealth; and it is levied "simply because you die." Each of these points is misleading and easily refuted [see "Meet Mr. Death" and "The Estate Tax as Robin Hood?" TAP, May 21, 2001]. But Johnson's group added a new argument: The estate tax discriminates against African Americans...
Falsehood 1: Repealing the estate tax would help blacks close the wealth gap.
This is preposterous. Estate-tax repeal would blow the gap wide open. Only the richest 2 percent of Americans pay the tax -- and this group is white by a margin of more than 10 to one. So eliminating the tax (estimated to cost $662 billion over 10 years) would amount to an enormous tax cut for the wealthiest Americans, few of whom are black. Moreover, to recoup the revenue shortfall that would result from estate-tax repeal, the government would have to shift the tax burden to all Americans, causing many more blacks (and whites) to be hit with a new tax. Thus, eliminating the estate tax would likely raise taxes for most blacks. 

Falsehood 2: Blacks who pay the estate tax suffer more than whites who pay it.
The tax is levied on wealth, not on race...
Falsehood 3: The estate tax will especially hurt African-American small businesses and farmers.
This is a version of the canard that estate-tax opponents frequently trot out; and it's no less fraudulent when applied to blacks than to whites. Few small businesses or farmers were ever subject to the tax in the first place, and the tax code was amended in 1997 to protect farms and small businesses. As a result, only 2 percent of estate-tax revenue collected last year came from these sources, a tiny fraction of which came from blacks. Opponents counter that eliminating the estate tax will "permit wealth to grow" in black communities. It will -- if you're already rich. But if the goal is to create new black businesses, as Johnson's ad suggests, there are much more efficient ways to do so...
"

Jonathan Chait (The New Republic):
"...Johnson's campaign to abolish the estate tax was more than just a way to save a few million bucks. It was the beginning of a political partnership between the CEO of BET and the president of the United States, one that has now turned its attention to an even grander cause: the privatization of Social Security. On May 2, Bush appointed Johnson to his commission charged with transforming the popular program...That the administration has entrusted Johnson with this task, despite his lack of expertise (and, indeed, his lack of any history of public interest in the issue), is a measure of the ideological reliability with which it now regards him..."

2
ET1-02 Estate tax Bush

"..."To keep farms in the family, we are going to get rid of the death tax," President Bush vowed a month ago; he and many others have made the point repeatedly..."

David Kay Johnston (New York Times) via Bushwatch:
"...Harlyn Riekena worried that his success would cost him when he died. Thirty-seven years ago he quit teaching to farm and over the years bought more and more of the rich black soil here in central Iowa. Now he and his wife, Karen, own 950 gently rolling acres planted in soybeans and corn. The farmland alone is worth more than $2.5 million, and so Mr. Riekena, 61, fretted that estate taxes would take a big chunk of his three grown daughters' inheritance...But in fact the Riekenas will owe nothing in estate taxes. Almost no working farmers do, according to data from an Internal Revenue Service analysis of 1999 returns that has not yet been published. Neil Harl, an Iowa State University economist whose tax advice has made him a household name among Midwest farmers, said he had searched far and wide but had never found a farm lost because of estate taxes. "It's a myth," he said. Even one of the leading advocates for repeal of estate taxes, the American Farm Bureau Federation, said it could not cite a single example of a farm lost because of estate taxes. The estate tax does, of course, have a bite. But the reality of that bite is different from the mythology, in which family farmers have become icons for the campaign to abolish the tax. In fact, the overwhelming majority of beneficiaries are the heirs of people who made their fortunes through their businesses and investments in securities and real estate..."
1

SOCIAL SECURITY/MEDICARE AND SURPLUSES <go back to the top>

Compassion Con credits total = 24

# Topic Bush's or his representative's Compassionate statement Some Uncompassionate Facts Compassion Con Credits
SS1-01 Social Security Surplus 
(2001)
RNC for Bush

"...Bush, according to a current GOP-sponsored TV commercial, has "protected every penny of Medicare and Social Security and still left the second biggest surplus in history."...."

Jonathan Chait (The New Republic) - 9/01:
"...This is a rather counterintuitive claim, given that the Congressional Budget Office last week estimated that President Bush's budget will dip into the Social Security surplus and that even the administration's in-house Office of Management and Budget analysis says he'll use virtually all of the Medicare surplus. So the Republican National Committee has supplied some documentation to support the assertion. The RNC fact sheet points out that the government posted a small surplus during the month of July. This is perfectly true; but, since month-to-month surpluses vary wildly, it's wholly irrelevant...Bush's second, contradictory explanation is that, yes, the surplus is gone, but it's the fault of big-spending Democrats. "The surplus this year is $34.5 billion smaller than it should be," argued White House spokesman Ari Fleischer last month, "because Congress last year busted the budget." The operative words here are last year. The spending increase Fleischer described took place under a previous Congress, and the Bushies knew about it before taking office. It's true that the surplus would be bigger if not for last year's spending boost. It would also be bigger if not for the Vietnam War. Neither event has anything to do with the drop in the surplus under Bush's watch. Perhaps recognizing the inadequacy of these first two arguments--Nobody Blew the Surplus, Congress Blew the Surplus--the White House has fallen back on a third: The Surplus Doesn't Matter..."
2
SS1-02 Social Security Surplus (2001) Mitch Daniels for Bush

"...today's surpluses don't have anything to do either with the long-term problems of Social Security or Medicare, or the solvency [of those programs] or our ability to pay those bills as they come due..."

Bryan Keefer (Spinsanity):
"...This, as I explained above, is simply untrue; using the surpluses to retire debt has a major effect on the government's interest payments and ability to borrow. For Daniels to claim otherwise is simply deceptive..."
1
SS1-03 Cost of social security shortfall Bush admin

"...responded by saying that the...Social Security shortfall is...close to one percent of GDP (rather than 0.7 percent)..."

CBPP:
"...On August 2, the Center issued an analysis showing that...the 75-year shortfall in Social Security...equals 0.7 percent of GDP...The Bush Administration responded by saying that the...Social Security shortfall is, likewise, close to one percent of GDP (rather than 0.7 percent)...
  • ...the Administration's figures for...the size of the Social Security shortfall...[is] not valid. The Administration's Social Security estimate differs from that issued by the Social Security Trustees...

The Administration claims the Center has underestimated the Social Security shortfall by reporting it as 0.7 percent. The 0.7 percent figure comes directly from the 2001 Social Security Trustees report.(3) ...This figure was prepared by the highly respected Office of the Chief Actuary at the Social Security Administration. Treasury Secretary Paul O'Neill and several other cabinet officers are among the Trustees who signed the report. How did the Administration alter the actuaries' estimate and come up with its own estimate that the Social Security shortfall equals nearly one percent of GDP? The Administration did so by ignoring the assets of the Social Security Trust Fund and effectively assuming that the Trust Fund's $1.1 trillion of Treasury bonds cannot be used to finance Social Security benefits. This contradicts the long-established practice of the Social Security actuaries and other analysts in producing estimates of the Social Security system. As the actuaries and other analysts have long recognized, these Treasury bonds are backed by the full faith and credit of the U.S. government and surely will be honored, just as the Treasury bonds that private investors hold will be.(4) A second problem with the Administration's estimate is that it relies on a methodology that is internally inconsistent and technically flawed...
First, it ignores the contributions that past and current Social Security surpluses have made to national saving. The Social Security program has contributed to national saving by accumulating reserves. Such increased saving will make it easier for the government to meet its future obligations. The balance in the Trust Fund thus is both an asset to the Social Security system (as noted above) and a reflection of the economic contribution that the partial advance funding of Social Security has made to national saving. The increased saving expands future output and also future revenues for the government as a whole. By ignoring the Trust Fund balance, the Treasury analysis is implicitly assuming that the Social Security system has contributed nothing to national saving.
Second, the Treasury calculations contain a technical inconsistency...the Treasury analysis is assuming that future Social Security surpluses (or deficits) entail interest income (or costs), but that past Social Security surpluses did not generate interest income..."

2
SS2-01 Social Security Commission "findings" Bush WH

"...the plans laid out by Mr. Bush's Commission to Strengthen Social Security... involve both severe benefit cuts and huge "magic asterisks," infusions of trillions of dollars from an undisclosed location. The extent of the damage is documented in a new Center on Budget and Policy Priorities report by Peter Diamond of the Massachusetts Institute of Technology and Peter Orszag of the Brookings Institution...But in a way, the most interesting thing about the new report is the administration's reaction. Charles Blahous, who was executive director of the commission and is now on the White House staff, quickly responded with a memo best described as hysterical...Among other things, he angrily accuses Mr. Diamond and Mr. Orszag of failing to address [certain] issues..."

Paul Krugman (New York Times):
"...The Diamond-Orszag report is informative; even I was surprised by a couple of revelations. For example, the mystery money infusions that the commission assumes will somehow be forthcoming are almost enough to preserve Social Security exactly as it is, with no benefit cuts, forever. Also, the commission's plans include severe cuts in disability benefits, a crucial part of Social Security that privatizers have a habit of overlooking.
But in a way, the most interesting thing about the new report is the administration's reaction. Charles Blahous, who was executive director of the commission and is now on the White House staff, quickly responded with a memo best described as hysterical. The number of non sequiturs and misrepresentations Mr. Blahous manages to squeeze into just a few pages may set a record. Among other things, he angrily accuses Mr. Diamond and Mr. Orszag of failing to address issues they cover quite clearly. Of one such accusation, Mr. Orszag remarks drily that "in his haste to issue a response to our paper, the Executive Director appears to have overlooked the final box . . . which addresses precisely that issue and provides the comparisons he requested (though he may not be pleased with the results). We direct his attention to that box."
A sample of Mr. Blahous's tactics is his insistence that private accounts don't weaken Social Security, because diverting money from the trust fund into those accounts doesn't reduce the total sum of money available — if you still count private accounts as part of the total. As they say in the technical literature, "Well, duh." Of course the money doesn't disappear — but it is no longer available to pay benefits to older Americans, whose own Social Security contributions were used to pay benefits to previous generations..."

CG note: On part owing to the WH's defense of its Commission, and in part because Bush was responsible for cherry-picking the members of the Commission and its "findings" I cover more details on below on their interim report, which itself was riddled with lies and errors filled with compassion. 

(being compassionate)

SS2-02 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

Asserts that the Social Security Trust Fund does not hold real assets

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...The Social Security Trust Fund, however, currently holds more than $1 trillion in Treasury securities. These assets are backed by the full faith and credit of the U.S. Government, the benchmark of security in global financial markets..."
1
SS2-03 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

Claims that in the future "the nation will face the same difficult choices as if there had been no Trust Fund at all."

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...This assertion ignores the real economic contribution of the Trust Fund. The accumulation of Trust Fund reserves raises national saving, reduces the public debt and thereby reduces the annual cost of paying interest on that debt, and promotes economic growth. The commission’s argument to the contrary assumes that Social Security surpluses, reflected in the Trust Fund balance, contribute nothing to national saving. This assumption is inconsistent with the treatment of Social Security in the national income accounts, which are the official source of data on national saving. The assertion that Social Security surpluses contribute nothing to national saving is also contradicted by historical experience, and is completely implausible today given the existence of a Congressionally established lock-box for Social Security, which ensures that Social Security surpluses are devoted to reducing public debt and raising national saving..."
1
SS2-04 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

Claims that 2016 is the "crisis date" for Social Security, because under current projections, benefit payments in that year will exceed payroll revenue. 

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...If the Trust Fund held no assets, 2016 would indeed be a particularly important date for Social Security. But the Social Security Trustees currently project that in 2016, the Social Security Trust Fund will contain reserves of more than $5 trillion (which is more than $3 trillion in today’s dollars) and will be earning more than $300 billion a year on those assets. The commission’s arguments regarding the relevance of 2016 are misguided because the Trust Fund provides resources to the Social Security system and — more fundamentally — because the accumulation of reserves within the Trust Fund has raised national saving and thereby eased the burden of financing future Social Security benefits. In addition, if 2016 were indeed a "crisis year" for Social Security, shifting two percentage points of payroll into individual accounts would accelerate the crisis from 2016 to 2007, nine years earlier than under current law..."

USA Today:
"...
A White House commission on Social Security, under intense criticism for pushing the creation of private investment accounts, backed off its claim Tuesday that the system is ''broken.'' The panel replaced it with a finding that the 66-year-old federal retirement program is on a fiscally unsustainable course and needs repair..."

Paul Krugman (New York Times):
"...the annual trustees' report on Social Security...the report's unwelcome conclusion: that Social Security is in very good shape. True, the rest of the government is running big deficits, and borrowing heavily from the retirement fund — but Social Security isn't the source of that problem...the bottom line is that the long-run sustainability of Social Security looks better than ever. The staff of the Social Security Administration, using conservative assumptions, now says that the system could operate without any changes at all — no cuts in benefits, no additional revenue — until 2041, three years longer than it projected last year..."

1
SS2-05 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

States that increasing national saving is the only sure way to improve retirement security for current workers while also lessening the burden on future generations (and implying that privatization is desirable)

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...We agree that national saving is a very important consideration in Social Security reform. Individual accounts financed by diverting funds from Social Security, however, would not raise national saving. If individuals did not change their behavior in response to the creation of such individual accounts, the transfer of funds from Social Security to individual accounts would have no effect on national saving...Once individuals’ responses are taken into account, however, the net effect may well be negative: Individuals likely would reduce their other saving by a larger amount in response to a dollar deposited into an individual account in their name than they would in response to a dollar that was used to reduce public debt. As a result, the net effect of transferring funds from the Social Security Trust Fund to individual accounts may be a reduction in national saving..."
1
SS2-06 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

Claims that contrary to popular perception, Social Security is not particularly progressive

  Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...Unfortunately, the commission’s presentation on this important issue is biased and incomplete. It ignores recent studies showing that Social Security is becoming more progressive over time, it fails to compare Social Security to a likely individual account system, and it presents a misleading picture of Social Security’s effects on minorities and women...Social Security remains quite progressive: Even on a lifetime basis, it provides relatively more resources to lower earners than to higher earners. If one includes disability benefits, which accrue disproportionately to low and moderate earners, the progressive effect of Social Security is intensified. Furthermore, and most importantly, most individual account proposals would be regressive..."
1
SS2-07 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

Suggests that Social Security is a bad deal for African-Americans because of their shorter average life expectancies

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...the study cited in the commission report as showing that African-Americans are harmed by Social Security actually finds that both African-Americans and Hispanics receive higher average rates of return than white Americans (primarily because of their lower earnings), a finding that the commission document fails to report..."
1
SS2-08 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

Claims that individual accounts would allow increased bequests to heirs and would promote wealth...
suggests that Social Security benefits end with the death of the beneficiary

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...The assertion that individual accounts would provide more protection for heirs than Social Security is misleading on two fronts: First, Social Security provides important benefits to heirs through survivors’ benefits. In fact, $75 billion — approximately 20 percent of total Social Security benefits — were paid in 1999 to survivors of deceased workers. These benefits are superior to the benefits that would be available under some systems of individual accounts, because Social Security survivors’ benefits are fully protected against inflation and private annuities are not. Second, any system that permits accumulated account balances to be transferred to heirs reduces the funds available to support retirement benefits...The broader argument that individual accounts would increase wealth also is misleading. As a nation, the only way to increase wealth is to raise national saving..."
"...The co-chairs do not explain how diverting revenue from Social Security into individual accounts would raise national saving
in the presence of the Congressionally approved lock-box
for the Social Security surplus..."
2
SS2-09 Social Security Commission "findings" (Draft Interim Report of) Social Security Commission of Bush admin

claiming that, historically, the partial funding of Social Security did not contribute to greater national saving because the government as a whole ran a budget deficit in the 1980s and early 1990s.

Henry Aaaron, Alan Blinder, Alicia Munnell, Peter Orszag (Center for Budget and Policy Priorities/Century Foundation) - Also see follow-up report:
"...This assertion ignores the fact that reducing a budget deficit adds as much to national saving as increasing a surplus..."
1
SS3-01 Social Security and Medicare Bush administration

"...According to forecasts just released by these programs' trustees--who include Bush's secretaries of labor, the treasury, and health and human services--the long-term prognosis for Medicare and Social Security is darkening even as the medium-term outlook improves..."

The New Republic:
"...How do the trustees reach this counterintuitive conclusion? Easy. They just increase their estimates for long-term per capita health costs while--you guessed it--tamping down their forecast for economic growth. In fact, according to The Washington Post, the trustees' long-term growth assumption is so pessimistic that the entire surplus would have almost completely disappeared had the administration used the same assumption for its ten-year budget projection. But don't worry--the gloom isn't likely to last. After all, missile defense week is probably right around the corner..."
1
SS4-01 Social security private accounts Fleischer for Bush

"..."[T]he reality is that there are three options available," White House Press Secretary Ari Fleischer said in a press briefing on July 24. "One is to raise taxes, which was done before and hasn't worked. The second is to cut benefits, which is something the president doesn't support. And the third is exactly the president's proposal, to allow younger workers [the] right on a voluntary basis to put a portion of their Social Security taxes in other investments."..."

Ben Fritz (Spinsanity):
"...These all fail to note, however, that adding private accounts to Social Security would almost certainly require raising taxes, cutting benefits or taking money from other programs in order to fund the huge cost of switching to such a system. Specifically, individual accounts divert revenues needed to meet Social Security's obligations to current retirees, thus worsening -- rather than solving -- the system's financial shortfall. In fact, the president's own Commission to Strengthen Social Security acknowledged that the version of private accounts it supports would worsen the program's actuarial balance over the next 75 years.
Heritage's John admitted in a recent UPI article that the hard choices he and his colleagues claim private accounts avoid are actually inevitable. "It's true that money going into [personal accounts] will not pay current benefits to our parents," he stated, "but filling that gap will have to be done by the hard choices mentioned above [cutting benefits or raising taxes]. It will just happen sooner."..."
1
SS5-01 Medicare surplus Daniels for Bush

"..."Out here in Indiana," he admonished Sam Donaldson last week, "people are concerned about jobs and income prospects, not bookkeeping entries."
Daniels says we should forget about saving the Medicare surplus--it's one of those "bookkeeping entries" that plainspoken Midwesterners dismiss--in order to help us out of the economic downturn..."

Jonathan Chait (The New Republic):
"...indeed, Keynesian economic theory does suggest that, when the economy slows, the government should put money into the hands of consumers through tax cuts and spending. But Daniels applies this theory only when it suits him: Although the same economic theory argues for spending increases, Daniels wants spending cuts. And Keynesianism recommends only a temporary fiscal stimulus during a recession. Daniels doesn't just want to bust the Medicare lockbox this year. He wants to do so every year. And he has laid the groundwork to do so with a series of clever existential arguments, each more tendentious than the last..."
2
SS5-02 Medicare surplus Daniels for Bush

"...claims that using the Medicare surplus for debt reduction is impossible because the Social Security surplus alone is enough to pay off all the national debt that can possibly be reduced..."

Jonathan Chait (The New Republic):
"...The White House has been peddling this line since February. It's wrong for a number of technical reasons. It misleadingly plays down the amount of debt that can be redeemed and exaggerates the amount of surplus available--because, instead of using the whole Social Security surplus for debt reduction, the Bushies want to divert several hundred billion for private Social Security accounts. It also ignores the fact that the Social Security and Medicare surpluses could still be saved even if all the redeemable debt was gone: In that happy eventuality, they would simply be invested, just like other government pension funds..."
1
SS5-03 Medicare surplus Daniels for Bush

"...maintains that "Medicare is not in surplus."..."

Daniels response to TNR:
"...Is Medicare in surplus? I say no, and Chait allows as how my viewpoint is "technically true"; he's one word in surplus himself. Medicare will spend $50 billion more than it collects this year; whatever you call that, it's not a "surplus." A surplus can be fabricated only by segregating hospital costs and payroll taxes under Part A while ignoring all other spending. The deceptiveness of this pretense was exposed in 1997 when President Clinton and Congress arbitrarily moved home health care's accelerating costs from Part A to Part B. Presto! The "surplus" was restored and increased, albeit even phonier than before..."

Jonathan Chait (The New Republic):
"...This is technically true but intentionally misleading. Medicare is made up of two parts. The part funded by payroll taxes (which pays for hospital insurance) runs a surplus; the part funded by general revenues (which pays for doctor visits) runs a deficit. When politicians refer to the Medicare "surplus" or "trust fund," they always--and necessarily--are talking about the former. For all his efforts, Daniels cannot make it disappear through semantic legerdemain..."

Jonathan Chait's response to Mitch Daniels (The New Republic):
"...When people talk about the Medicare surplus, they mean the hospital trust fund. The hospital trust fund is in surplus, and Daniels is engaging in semantics..."

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SS5-04 Medicare surplus Daniels for Bush

"...derides the Medicare and Social Security surpluses as "nothing but a pile of IOUs."..."

Jonathan Chait (The New Republic):
"...Yes, it's true that the trust funds consist of nothing but pieces of paper promising that the government will pay them back. But, as Daniels presumably learned at Princeton, those pieces of paper are also known as Treasury bonds. If they are as worthless as Daniels suggests, the bond market is in for a big surprise..."
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SS5-05 Medicare surplus Daniels for Bush

"...at times...implies that he opposes any reduction in the national debt. "The implication of some sides to this debate is that instead of sharing some of the surplus with the taxpayers at large ... we should have sent it to bondholders instead," he stated last week. "Who are these people, incidentally? It's interesting to me. Thirty-six percent are foreign banks and foreign holders. Of the Americans who hold these funds, these bonds, the famous top one percent [own] forty-three percent."..."

Daniels response to TNR:
"...Chait is "stupef[ied]" that I bother to note that extra surplus funds are paid not to any trust account but to bondholders. He writes: "Paying people back the money you owe them is not some sort of gift." No, but paying them ahead of time, with the extra premium prepayment it requires, can be. In small amounts, the offset of premiums by lower interest payments can be favorable, but if (with Chait) we slavishly follow the lockbox illogic, we will wind up rewarding bondholders with penalty premiums--real gifts in the future. Besides, I only inserted this minor observation as a passing irony, given the fixation many administration critics have with the wicked "top 1 percent" who own nearly half these bonds..."

Jonathan Chait (The New Republic):
"...This argument is so stupefying that even addressing it is intellectually demeaning. Daniels repeatedly characterizes paying down the debt as essentially giving money to bondholders, and other Republicans have started to echo the line. What he neglects to mention is that this is money the government owes them, and until it's paid back, the government--and that means we taxpayers--has to pay interest on it. Paying people back the money you owe them is not some sort of gift..."

Jonathan Chait's response to Mitch Daniels (The New Republic):
"...the administration grossly understates the amount of debt that can be repaid without penalty. And when Daniels painted debt reduction as a subsidy for the rich, he didn't mention a word about early premiums. He was attacking the whole idea of debt reduction..."

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SS5-06 Medicare surplus Daniels response to TNR:
"...Chait points out that, even after all the redeemable debt is paid off, further surpluses "would simply be invested, just like other government pension funds." But other funds are not invested in the private marketplace today, and permitting Social Security to do so would quickly lead to its owning 10 percent of U.S. equities. There are still a few advocates of what used to be called "state ownership of the means of production," but herein lies a fundamental debate that I doubt Chait meant to trigger. 
There is one exception. The funds of the Federal Thrift Savings Plan can, in fact, be invested in private assets today, and more than 50 percent are. But they are not "trust" funds in the traditional sense; they are private accounts owned by individuals, just like President Bush recommends for Social Security. If that's where Chait wants to head, let's shake on it..."
Jonathan Chait's response to Mitch Daniels (The New Republic):
"...Daniels is flat wrong when he says government funds "are not invested in the private marketplace today." State and local pension funds own more than $1 trillion in corporate equities, many with less stringent firewalls than anything contemplated for Social Security. If Daniels thinks this is socialism, we're already there..."
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1. Now some of you might wonder where this University is located - so, it is appropriate to make it clear right here that this is not a real University - it is only a hypothetical institute of lower higher learning.

2. I sometimes prefer to truncate the words Compassionate Conservative to Compassion Con. There is no intent here to imply anything significant by this (at least anything more than is commonly understood). I reserve all moral clarity rights to the use of this term. One Compassion Con credit is assigned to every instance of compassion (i.e., misleading, deceptive or inaccurate statement or outright lie/mendacity).

3. Note that Compassionate statements made by Mr. Bush's spokespersons, advisers or appointees - speaking clearly on behalf of Mr. Bush - are considered as being supported by Mr. Bush, absent a public statement to the contrary.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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