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Back in 2010, Ohio Rep. John Boehner defied recent history and basic math when he comically denied that the Bush tax cuts enacted in 2001 and 2003 played any role in producing federal budget deficits ever since.  Now in his refusal to countenance any new tax revenue in a last minute compromise to avoid the job-killing sequester, Speaker Boehner is peddling a new deception.  Pretending to ignore inflation, population growth and the expansion of the American economy, Boehner is now claiming federal tax revenue is at a record high.

Speaking to Scott Pelley of CBS News earlier this week, Boehner said no tax increases could be part of any bipartisan plan to avoid the first $85 billion in cuts to discretionary spending beginning March 1.  Why?

"The president got his tax hikes in January. The federal government will have more revenue this year than any year in our history. It's time to tackle spending. Period."
Now, the $2.7 trillion in fiscal year 2013 revenue recently forecast by the Congressional Budget Office is, by a small margin, Uncle Sam's largest haul when measured in current dollars. But as a percentage of the total American economy (see chart above), federal tax revenues remain well below historical averages.

The handy CBO chart paints a pretty clear picture of Boehner's whitewashing.  At less than 17 percent of U.S. GDP, federal revenue for FY 2013 is near historically lows.  But that is an improvement over 2010, when the disastrous recession combined with the continuing drain from the Bush tax cuts slashed federal receipts to the 15 percent level not seen since the early 1950's.  Meanwhile, the costs of two wars, emergency recovery measures including TARP and the stimulus, and counter-cyclical demand for food stamps, unemployment benefits and health care pushed Washington's spending to levels not seen since Ronald Reagan's first term.  (It's worth noting that federal spending is almost flat since Barack Obama first took the oath of office, while the annual deficit has declined.)  Contrary to Republican mythology that "tax cuts pay for themselves," it took five years for the Treasury to recover from the Bush tax cuts of 2001.

That last point, as we'll see below the fold, is made clearer when taking inflation into account.

Measured in constant 2005 dollars, Uncle Sam will only pocket $2.25 trillion this year.   That figure is not only lower than the previous peak in 2007.  It's below the $2.3 trillion in tax revenue collected in 2000 during Bill Clinton's final year in office.  (In the chart above, actual data through 2012 comes from the Office of Management and Budget.  For the following decade, the forecast is based on CBO numbers using its projected inflation of 2.2 to 2.3 percent.)

As we fast forward to the looming March 1 deadline, the overwhelming consensus of economists including the Federal Reserve and the nonpartisan CBO is that this is not "the time to tackle spending."  While John Boehner this week admitted "I do not" have a sense of how many jobs will be lost as a result of the sequester," CBO Director Douglas Elmendorf was very clear in his recent testimony before Congress:

"The sequester alone will reduce GDP growth this year by 0.6 percentage points, lowering GDP at the end of the year by that 0.6 percent. We think that would reduce the level of employment at the end of the year by about 750,000 jobs."
Pretending Uncle Sam has his best-ever tax haul won't change that.

(For more background, see the presentation by Edward Kleinbard of the USC Gould School of Law, "Why Tax Revenues Must Rise.")

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Comment Preferences

  •  disagree (8+ / 0-)

    Boehner is not confused . He is lying through his teeth. He is acutely aware how the tax structure compares to the past, simply he is doing his duty to the friends whose income he wants to protect

  •  Lying, drunk, or both... (8+ / 0-)

    ...incompetent, irrelevant, and immaterial.

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Thu Feb 28, 2013 at 03:21:01 PM PST

  •  The latest CBO report (3+ / 0-)
    Recommended by:
    ExStr8, Losty, avsp

    issued in February 2013 (after the Fiscal cliff deal)  (pdf here) indicates that, while revenues as a percent of GDP are projected to be about 17% (16.9%) this year, it rises to 18% next year, then 19%, and stays at 18 - 19% thereafter.  

    That 18-19% beginning in 2014 is certainly within historical norms, and perhaps a bit on the high end when it gets over 19% (it reached 20% only once, in 2000).  That would indicate we don't need to increase revenue any more after the Fiscal cliff deal, although I think there's a general agreement that we need to reform the tax code to simplify it.  

    The CBO data indicates that, after the fiscal cliff deal, we are where we need to be as a matter of revenues.  It also assumes that if the limits in the Budget Control Act stay in place, spending will be down to around 22% or so of GDP over the next ten years, which is probably within the  recent norm.  This also means that we will add another 6.9 trillion to the debt over the next 10 years.  Keeping the Budget Control Act cuts for the next 10 years (as the law now provides) helps greatly to reduce what has been historically high spending.  

    However, none of that addresses our long-term problem, after the next 10 years, which is largely Medicare and Medicaid.  The CBO report also notes that, after the next 10 years,  we get back to a big problem:  

    Fourth, projections for the period covered in this report do not fully reflect long-term budgetary pressures, although upward pressure on the federal debt is evident in the later years of that period. Under current law, the  aging of the population, the rising costs of health care, and the scheduled expansion in federal subsidies for health insurance will substantially boost federal spending on Social Security and the government’s major health care programs, relative to GDP, for the next 10 years and for decades thereafter. Unless the laws governing those programs are changed—or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of the two—debt will rise sharply relative to GDP after 2023.  Deciding now what policy changes to make to resolve that long-term imbalance would allow for gradual implementation, which would give households, businesses, and state and local governments time to plan and adjust their behavior.
  •  He also misleadingly claims.... (1+ / 0-)
    Recommended by:
    avsp

    That the House has passed two deficit reducing bills and doesn't need to pass a third.Of course, as any sixth grader could tell you, bills that are not passed and signed by the President during any session of Congress do not magically pass through to the next session of Congress. And this guy is in charge? I think we need a national strike. We don't go back to work until the House does.

  •  Math has a well-known liberal bias. eom (0+ / 0-)

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