Did record low taxes lead to a greater deficit?

[wanamingo]

Riser wouldnt GDP be a better metric of gauging tax cuts? Which if we look at it during those years (2001-2009) had the slowest rate of growth since WWII.

I mean the money is going to be coming in regardless... But Im not entirely sure of your point, tax revenue looks pretty stagnant between 2001 and 2005, not exactly a silver bullet in the bush tax cuts debate. Look at what you posted again, the largest bush tax cuts were implemented in 2001, now there was a small recession that ended in late 2001, but to have declining revenue for 3 years doesnt really help your point.

 

[gamerk316]

Ok I'm not reading all that.

Sum up, what are you saying? Spending more will fix the economy?

When applied toward applications that raise GDP, yes. Theres a reason why in the first 12 months after the Stimulus. we went from loosing ~750,000 jobs a month (January 2009) to break even (December 2009) on job numbers. It did its job, by plugging the decline in consumer spending. But there was never any additional spending to cause an actual IMPROVEMENT. EG: The Stimulus, by plugging the missing consumer spending, stopped the bleeding, but wasn't by itself enough to cause any significant amount of growth. The general improvement we are seeing in the job market is due to the time its taken consumer spending to recover.

If you want to argue about having $800 billion in surplus around 2000 compared to today, why don't we do apples to apples: We should also have the spending we did in 2000, inflated of course, as opposed to the current spending levels. Our surplus would be well over $1 trillion a year with tax cuts.

Again, not that you fail to even consider GDP into this equation. The Dollar amount of debt is a useless economic indicator. Debt as a share of GDP is far more important.

Point being, if you keep the debt constant, but GDP declines by 10%, guess what? You're 10% more in debt.

You can't compare 2000 tax surplus against 2010 deficits and argue tax cuts were the cause. You fail to recognize the huge increase in spending.

The increases to Federal Spending over the past 10 years, as a percentage increase per year, are well within historic norms (3.48%). The problem is growth in GDP over that timespan is well BELOW historic norms (2.19%). That means less revenue collected via taxation, and thus a higher debt.

His math is faulty and his statements are skipping significant parts. In 2000 we may have nearly had a balanced budget but he leaves out the recession GW Bush inherited with the Dot Com bubble. That was significant. How did that get fixed? The tax cuts within a year or two quickly fixed that issue. That "revenue" was lost regardless because of the economy. Things stabilized. 9/11 hit, economy was hurt again for a few long months. It recovered.

Bush NEVER fixed anything; average GDP growth under him was a paltry 2.3%, and he only had a single year of GDP growth above 3% (FY 2004). The markets went up because of very business friendly policies, but the average worker was worse off. Hence the housing bubble.

The old argument was that GW Bush was a big spending. His spending PALES in comparison to Obama's. Bush's last year the Federal Deficit was ~$490 billion. 4 years later the Federal Deficit is over $1 trillion.

Because REVENUE has significantly decreased due to about $400 Billion in lost Income Tax revenue, because people are making less money. Spending increases, as a percentage, were HIGHER under Bush (3.1575%) then Obama (0.6%, as of FY 2010 [November 2010 - October 2011]). So your argument fails in the face of facts: Revenue, not spending, is currently the main driver of the deficit.

http://en.wikipedia.org/wiki/History_of_the_United_States_public_debt

Notice the significant decrease in revenue when the government starts spending more?

I'm sure the few million people not paying Income Tax due to loosing their jobs had NOTHING to due with that $400 Billion of lost revenue.

Wait, the Bush tax cuts resulted in an INCREASE in revenue? You don't say!!!

Which had nothing to do with the slow recovery out of .com? Guess what? Revenue goes UP when recessions end. Shocking, I know.

EDIT

My main point being: if you never touch the tax rates, change in tax revenue is going to closely track change in GDP. If you decrease taxes and decrease revenue by 10%, and you only increase GDP 5% as a result, guess what? You're down 5% versus doing nothing at all. Saying "revenue went up" isn't the argument; the argument is "revenue was down versus what it would have been if rates had been left the same". Hence the Bush Tax Cuts are an economically bad idea, as they take money OUT of the economy.

 

[riser]

Riser wouldnt GDP be a better metric of gauging tax cuts? Which if we look at it during those years (2001-2009) had the slowest rate of growth since WWII.

I mean the money is going to be coming in regardless... But Im not entirely sure of your point, tax revenue looks pretty stagnant between 2001 and 2005, not exactly a silver bullet in the bush tax cuts debate. Look at what you posted again, the largest bush tax cuts were implemented in 2001, now there was a small recession that ended in late 2001, but to have declining revenue for 3 years doesnt really help your point.

GPD in this case is pointless as use of 'printing' money changes GDP, therefore it can't be used as a reliable metric during that time. It can be manipulated when changing factors that should be consistent.

The argument was the Bush tax cuts cost $800 billion in revenue. I don't see it. That's why I posted the Federal Government's revenue. At no point did $800 billion less in revenue happen. You will have to recall the years from 2001 to 2005. You had 9/11 causing impact for a year or longer, the tsunami affected worldwide production, airlines were failing and/or merging, and some other economic issues. Considering the tax cuts had a small drop in revenue among all the other economic conditions.. and then you see the revenue start jumping up.. right until stimulus spending happened.

The question I posed and have not seen answers: Where is the $800 billion in loss of revenue because of the Bush tax cuts? At best you can say, for a short time, there was $300 billion for a year or two. No where near $800 billion. They said the Bush tax cuts caused $800 billion in less revenue; The US Gov't is spending $800 billion more.. I don't see it. I need someone to explain it to me. Especially since Revenue has gone up, yet that pesky $800 billion is still there.. you'd think with revenue going down that 'lost' $800 billion would go down, right?

 

[gamerk316]

Tax cuts do NOT take money out of the economy. Private citizens engaging in commerce is what makes the economy what it is.

The CBO disagrees with you. Tax cuts are not very efficient at generating economic growth (CBO estimates each $ in tax cuts generates $0.50 in GDP). Part of the reason is obvious: People saving money is BAD for the economy.

The second part is less obvious: State and local taxes have risen in proportion to the drop in Federal taxes over the past 50 years. The reason for this is shockingly simple: as state aid has dropped off, states have had to raise their taxes to keep operating at their current levels of support. So that money you save in federal tax cuts? Eaten by the state in order to keep schools running.

Farthermore, when you give tax cuts to higher earning workers (myself being an example), the money is either put into a savings account (no economic benefit), or invested (and taxed at a far lower rate, for very little economic benefit).

Targeted programs tend to be far more efficient at generating economic growth, because you can target the funding at people most likely to actually SPEND the money given to them. Federal infrastructure programs are a perfect example of this (nevermind the better infrastructure that is a secondary benefit); you generate job growth in several different fields (construction, electrical/plumbing, and so on), and generate structures that can give a permanent increase in revenue. Heck of a lot more economic bang for the buck then giving the top 1% a 1% tax cut.

Government spending is a drop in the bucket compared to the wealth generated in the private sector.

Not really; the private sector accounts only for about 30% of all economic activity. The rest is Federal/State/Local governments.

 

[gamerk316]

The argument was the Bush tax cuts cost $800 billion in revenue. I don't see it. That's why I posted the Federal Government's revenue. At no point did $800 billion less in revenue happen. You will have to recall the years from 2001 to 2005. You had 9/11 causing impact for a year or longer, the tsunami affected worldwide production, airlines were failing and/or merging, and some other economic issues. Considering the tax cuts had a small drop in revenue among all the other economic conditions.. and then you see the revenue start jumping up.. right until stimulus spending happened.

Look at growth in GDP from 2000-2010:

2000: 3.7%
2001: 1.2%
2002: 1.3%
2003: 1.4%
2004: 3.4%
2005: 2.6%
2006: 2.9%
2007: 2.8%
2008: 0.0%
2009: 2.6%
2010: -2.0%

Compared to tax revenue collected:

Tax revenue for 2000: $2.03 Trillion
Tax revenue for 2001: $1.99 "
Tax revenue for 2002: $1.85 "
Tax revenue for 2003: $1.78 "
Tax revenue for 2004: $1.88 "
Tax revenue for 2005: $2.15 "
Tax revenue for 2006: $2.41 "
Tax revenue for 2007: $2.57 "
Tax revenue for 2008: $2.52 "
Tax revenue for 2009: $2.10 "
Tax revenue for 2010: $2.16 "

Notice how revenues track GDP. offset by about a year? Revenue jumped from 2004-2006, which is the same timeframe the economy was growing close to 3%. Revenue likewise dropped as of 2009, the year after GDP flatlined. Changes to tax revenue track changes to GDP naturally.

My point being: Tax collections go up over time. By reducing tax rates, you cause a ONE TIME increase to GDP, but a permanent loss in revenue due to the lower rates. Over time, that adds up.

http://politicalcorrection.org/blog/201105130001

CBO estimates a cumulative deficit of $6.2 trillion from 2002-2011; with a price tag of $2.02 trillion, the Bush tax cuts, including last year's extension, are responsible for almost one-third of the shortfall.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-07-ChangesSince2001Baseline.pdf

http://www.whatthefolly.com/2012/02/02/cbo-report-shows-extending-bush-tax-cuts-will-raise-deficit/

Pending policies that will add to the federal deficit:
Extension the 2001 and 2003 Bush tax cuts scheduled to expire in December 2012: $2.84 trillion plus another $505 billion in debt service fees, totaling $3.35 trillion added to the deficit between 2013 – 2022
Extension of 80 other tax provisions, many of which expired in December 2011, including research and experimentation tax credit: $839 billion plus another $173 billion in debt service fees, totaling $1 trillion added to the deficit between 2013 – 2022
Extension of the Alternative Minimum Tax exemptions: $804 billion plus another $133 billion in debt service fees, totaling $937 billion added to the deficit between 2013 – 2022
Continuation of existing Medicare reimbursement rates to physicians: $316 billion plus another $56 billion in debt service fees, totaling $372 billion added to the deficit between 2013 – 2022
Cancellation of sequester cuts mandated by the Budget Control Act: $984 billion plus another $187 billion in debt service fees, totaling $1.2 trillion added to the deficit between 2013 – 2022

Although I'm sure your analysis is better then that of the CBO. [/sarcasm]

 

[riser]

gamerk316, you're looking at nothing but stats. Stats lie.
GDP can be manipulated - Look at China for that.

With tax cuts, revenue went up. When the government starts spending more, revenue goes down. Again, we see this when the first stimulus bill went out. Revenue went up after the spending stopped.
Look at Japan. Lost Decade. You have 10 years of the government spending more and more while declining. When they finally ran out of money and couldn't borrow to spend any more, revenue went up. There is no debating this.

Just read the first few lines of this:
http://en.wikipedia.org/wiki/Lost_Decade_(Japan)

Does that not sound EXACLTY like what the US is going through?!

http://money.cnn.com/2011/09/27/news/international/US_Japan_recession.moneymag/index.htm

Even Japan argues that any government spending should happen in the private sector, not continued into the government expansion and programs. We see a power grab by the US government to expand itself and take away from private companies. Instead, if the government is to spend money, they need to do it in the private sector. This worked in WWII by spending in the private sector, not government sector.

 

[riser]

Which had nothing to do with the slow recovery out of .com? Guess what? Revenue goes UP when recessions end. Shocking, I know.

EDIT

My main point being: if you never touch the tax rates, change in tax revenue is going to closely track change in GDP. If you decrease taxes and decrease revenue by 10%, and you only increase GDP 5% as a result, guess what? You're down 5% versus doing nothing at all. Saying "revenue went up" isn't the argument; the argument is "revenue was down versus what it would have been if rates had been left the same". Hence the Bush Tax Cuts are an economically bad idea, as they take money OUT of the economy.[/quotemsg]

Look at growth in GDP from 2000-2010:

2000: 3.7%
2001: 1.2%
2002: 1.3%
2003: 1.4%
2004: 3.4%
2005: 2.6%
2006: 2.9%
2007: 2.8%
2008: 0.0%
2009: 2.6%
2010: -2.0%

Compared to tax revenue collected:

Tax revenue for 2000: $2.03 Trillion
Tax revenue for 2001: $1.99 "
Tax revenue for 2002: $1.85 "
Tax revenue for 2003: $1.78 "
Tax revenue for 2004: $1.88 "
Tax revenue for 2005: $2.15 "
Tax revenue for 2006: $2.41 "
Tax revenue for 2007: $2.57 "
Tax revenue for 2008: $2.52 "
Tax revenue for 2009: $2.10 "
Tax revenue for 2010: $2.16 "

Notice how revenues track GDP. offset by about a year? Revenue jumped from 2004-2006, which is the same timeframe the economy was growing close to 3%. Revenue likewise dropped as of 2009, the year after GDP flatlined. Changes to tax revenue track changes to GDP naturally.

My point being: Tax collections go up over time. By reducing tax rates, you cause a ONE TIME increase to GDP, but a permanent loss in revenue due to the lower rates. Over time, that adds up.

http://politicalcorrection.org/blog/201105130001

CBO estimates a cumulative deficit of $6.2 trillion from 2002-2011; with a price tag of $2.02 trillion, the Bush tax cuts, including last year's extension, are responsible for almost one-third of the shortfall.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-07-ChangesSince2001Baseline.pdf

http://www.whatthefolly.com/2012/02/02/cbo-report-shows-extending-bush-tax-cuts-will-raise-deficit/

Pending policies that will add to the federal deficit:
Extension the 2001 and 2003 Bush tax cuts scheduled to expire in December 2012: $2.84 trillion plus another $505 billion in debt service fees, totaling $3.35 trillion added to the deficit between 2013 – 2022
Extension of 80 other tax provisions, many of which expired in December 2011, including research and experimentation tax credit: $839 billion plus another $173 billion in debt service fees, totaling $1 trillion added to the deficit between 2013 – 2022
Extension of the Alternative Minimum Tax exemptions: $804 billion plus another $133 billion in debt service fees, totaling $937 billion added to the deficit between 2013 – 2022
Continuation of existing Medicare reimbursement rates to physicians: $316 billion plus another $56 billion in debt service fees, totaling $372 billion added to the deficit between 2013 – 2022
Cancellation of sequester cuts mandated by the Budget Control Act: $984 billion plus another $187 billion in debt service fees, totaling $1.2 trillion added to the deficit between 2013 – 2022

Although I'm sure your analysis is better then that of the CBO. [/sarcasm]

Sorry, I don't see where Revenue and GDP track each other offset by a year. I see GDP going down while revenue goes up.. I don't see a distinct pattern. And quoting the CBO is horrible. When are they ever right? They're always mistaking things and adjusting their numbers. Let's play in the world of reality. Look at Japan. We are doing what they did and it wasn't good.

More money in people's hands is better than in the government which is what the tax cuts did. People have more money to spend in the private sector. Take away money from the people and the private sector suffers. GDP doesn't mean squat when the government is manipulating the numbers. China had a year with like 20% GDP growth.. but that's because the numbers were manipulated and currency pegged against the US Dollar.

 

[riser]

If you look at Real GDP, not the normal GDP, you see a nice continued upward increase until Stimulus spending kicks in. Then you see a decline, then you see it going back up after stimulus spending is over.

Real GDP is used on the national level because it is adjusted for inflation. The number you are using isn't adjusted against inflation. The Real GDP will show a much better picture in favor of tax cuts coupled with the same and/or less government spending. Increased spending causes a decline in Real GDP. While your GDP number goes up, Real GDP goes down due to inflation and the numbers being adjusted.. again, since the government is manipulating the numbers by increased borrowing and spending, GDP will look good. Take into account inflation because of that increased spending Real GDP will show the true picture.

If I made $50,000 a year with no debt.. and then took out $25,000 in loans, my income for the year would be $75,000. That's great on paper.. but next year I'm still at $50,000 and then I have to pay back that $25,000.. so either my GDP shrinks, or to maintain it I take out at least $25,000 additional to make GDP the same. Well, realistically I have to pay back that loan, so my Real GDP is less because now I'm shelling out money to pay off debt and borrowing more to maintain that level. Eventually I won't be able to borrow and we'll have to deal with a "balance sheet" recession.. where I just won't have the money available to borrow.. my GDP will plummet because I can't live on credit anymore. I'm forced to cut back. My real GDP will go down as well.. but that doesn't matter at all. That's just a stat.

Look at the numbers, not percentages.

If you look at government spending as percentages, you get lied to. Look at it for revenues and spending. Stats lie. Numbers don't.

BTW, the CBO predicts numbers based on the previous years. Last year income was $100,000,000 with a tax rate of 10%. If we raise taxes to 20% on the $100,000,000, then we make even more. But they don't predict what the market will do. Income generally goes down when taxes go up, so they might make a little more with higher taxes, but it represses the economy. Lower the tax rate, the income might go up and the smaller rate would break even, maybe even make some money.
The CBO crunches numbers, they don't do anything with the economy.

 

[JAYDEEJOHN]

GDP to spending is the highest since WWII
We did have to spend back then, not now.
Too much spending, regardless of how much growth is made,period

 

[wanamingo]

GDP to spending is the highest since WWII
We did have to spend back then, not now.
Too much spending, regardless of how much growth is made,period

Well we are in the middle of a few was that were put on the credit card....Oops I forgot im not supposed to talk about the shortcomings of the past administration.

 

[JAYDEEJOHN]

Well we are in the middle of a few was that were put on the credit card....Oops I forgot im not supposed to talk about the shortcomings of the past administration.

OK
http://www.nytimes.com/interactive/2011/06/22/world/asia/american-forces-in-afghanistan-and-iraq.html
and theres this
http://wiki.answers.com/Q/How_many_Americans_fought_in_World_War_2

now
http://en.wikipedia.org/wiki/1940_United_States_Census
vs
http://www.census.gov/main/www/popclock.html

Now, do the math

PS, nows the time to throw in todays costs vs then, even ignoring that the US had basically nothing in terms of armaments, ships and personnel before WWII
And yes, I think if your home town was slaughterd, I then could blame Bush for defending it

 

[riser]

Latest forecasts.. high unemployment for the next 5 years according to a gov't report. High, but not critical. Interesting. Same thing Japan went through... I think elected officials should now have degrees in world history.

 

[gamerk316]

With tax cuts, revenue went up.

FIVE YEARS LATER. After GDP had raised a total of 9.9% over that time span. So it took 5 years and 10% GDP growth just to break even, which cost a SIGNIFICANT amount of revenue over that timespan. You also need to factor in the permanent lost revenue due to the lower rates.

Hence why just about every non-partisan analysis puts a ~$2 Trillion (and counting) total cost on the cuts: Even factoring in differences in GDP had the taxes not gone into effect, almost every analysis shows that revenue would be higher today if the tax cuts had not gone into effect.

Seriously, your argument is basically: Tax rates went down, and 5 years later, revenue was slightly up, therefore tax cuts = revenue.

 

[gamerk316]

Sorry, I don't see where Revenue and GDP track each other offset by a year. I see GDP going down while revenue goes up.. I don't see a distinct pattern. And quoting the CBO is horrible. When are they ever right? They're always mistaking things and adjusting their numbers. Let's play in the world of reality. Look at Japan. We are doing what they did and it wasn't good.

Look at the numbers from 2007-2010:

GDP:
2007: 2.8%
2008: 0.0
2009: 2.6%
2010: -2.0%

Revenue:
2007: $2.57
2008: $2.52
2009: $2.10
2010: $2.16

Notice how one year after that 0% GDP growth in 2008 (which also corresponded to a rise in Unemployment), tax revenue dropped by $420 BILLION the following year? There's the missing $400 Billion difference between Bush's last budget and the current one. Revenue actually went up in 2010, despite the rise in UE, due in part to the growth in overall GDP offsetting the lower tax base. Once the final numbers for 2011 come in, I'd expect 2010 revenues to be below 2010 as a result.

And its again worth noting: The year over year change in spending under Obama is well within historical norms, and below the average year over year change during the Bush administration, which undermines your own argument in the first place.

More money in people's hands is better than in the government which is what the tax cuts did. People have more money to spend in the private sector. Take away money from the people and the private sector suffers. GDP doesn't mean squat when the government is manipulating the numbers. China had a year with like 20% GDP growth.. but that's because the numbers were manipulated and currency pegged against the US Dollar.

Two points to make here:

1: You make the silly assumption that if a person makes an extra $1000, that money will be spent. For most income groups, only a percentage of that gets redistributed throughout the economy, the rest is typically saved (earning a low 1-2% interest). Hence why tax cuts are inefficent. By contrast, Federal/State programs can put money in the hands of those most likely to spend almost all the amount given (Unemployment is a perfect example), thus you get more economic bang for buck. Do not forget that money collected in taxes ultimately ends up in the hands of the people.

2: The US is free to peg its currency to whatever it wants whenever it wants. If the US pegs its currency to gold, like some morons want to do, then the US would be doing the same exact thing as China. Its relative: China's total wealth grew 20% year over year that one year. That simply means that China has 20% more total wealth, based on whatever measure they are using as a baseline. If the baseline changes, then the GDP will change to reflect that. Not that hard a concept to grasp...

 

[gamerk316]

GDP to spending is the highest since WWII
We did have to spend back then, not now.
Too much spending, regardless of how much growth is made,period

Spending levels are currently about 40% of GDP, compared to the 32-35% that was typical during Clintons term. So its gone up, but not as dramatically as some claim it has. Take out the extra military spending of two unfunded wars, and you are right back at the same spending levels you had when we had a balanced budget (about 35.5% based on some quick math, so maybe a TAD high still). We'd still have a deficit though, and if spending levels would be more or less the same, what part of the equation must be the problem?

Latest forecasts.. high unemployment for the next 5 years according to a gov't report. High, but not critical. Interesting. Same thing Japan went through... I think elected officials should now have degrees in world history.

Japan did just about everything WRONG in its housing crisis. You see the same chicken and egg situation the US was very close to entering: Consumers don't spend, so business can't turn a profit, and this doesn't see the demand to justify new hires. So you need significant amounts of government spending to get the economy moving again. Put that extra spending on top of lost tax revenue, and you run into a massive debt problem which will farther drag economic growth.

Thankfully, unlike Japan, the US still (barely) has a functioning middle class, where people like me were able to whether the storm, take advantage of little to no inflation, and actually spend at higher levels then before the recession began (borrowing was cheap; you need to spend a bit to make a lot), causing a slow (bus consistent) increase in economic growth over time.

It also helps that a very large stimulus was passed early that succeeded in stopping the bleeding; Japan took a lot longer to get an initial stimulus of any significant size passed, so they had a larger problem to climb out of. The private sector job market of the US was loosing ~800k workers a month in January 2009, but quickly stablised, reaching break-even job numbers in December that same year (one of the fastest changes to job numbers over a years timespan in US history, I might add). Public sector job losses, however, still contribute a lot to unemployment, one reason why I've long favored a temporary suspension of the requirement that states have a balanced budget.

Its recessions like this that should prove that wealth distribution is the biggest long term challenge facing the US. Without a large enough middle class, there simply wouldn't be enough consumer spending necessary to get out of a recession much larger then this one without MASSIVE amounts of debt. At the rate wealth is being concentrated in the top 10% or so, I am truely fearful of how the next big recession will play out, as I simply don't see the US having a large enough middle class to get the economy moving again should another recession of this size hit without wealth being moved back toward the middle class again.

 

[JAYDEEJOHN]

Basically, we spent more on WWII in fours years than either Iraq and Afgan wars combined during their durations to date.
So, basically more than double, and this is adjusted to todays dollar.
Putting that against the weight of the economy back then, with almost 2/3 less people, yes, it was very significant.
We have also maintained that military, where our spending went way down, showing creating the worlds best military and maintaining it are 2 different costs as well.
But lets just double the costs of those wars, Iraq and Afgan, then add 3.7 trillion to our debt. This is where we would be today, and Im counting just 8 years of spending, or simply doubling the duration of WWII, which also is not the case.

So, look to my links, do the math, and then ask,does it add up?
It will change many an argument/position

 

[riser]

Look at the numbers from 2007-2010:

GDP:
2007: 2.8%
2008: 0.0
2009: 2.6%
2010: -2.0%

Revenue:
2007: $2.57
2008: $2.52
2009: $2.10
2010: $2.16

Notice how one year after that 0% GDP growth in 2008 (which also corresponded to a rise in Unemployment), tax revenue dropped by $420 BILLION the following year? There's the missing $400 Billion difference between Bush's last budget and the current one. Revenue actually went up in 2010, despite the rise in UE, due in part to the growth in overall GDP offsetting the lower tax base. Once the final numbers for 2011 come in, I'd expect 2010 revenues to be below 2010 as a result.

And its again worth noting: The year over year change in spending under Obama is well within historical norms, and below the average year over year change during the Bush administration, which undermines your own argument in the first place.

More money in people's hands is better than in the government which is what the tax cuts did. People have more money to spend in the private sector. Take away money from the people and the private sector suffers. GDP doesn't mean squat when the government is manipulating the numbers. China had a year with like 20% GDP growth.. but that's because the numbers were manipulated and currency pegged against the US Dollar.

Two points to make here:

1: You make the silly assumption that if a person makes an extra $1000, that money will be spent. For most income groups, only a percentage of that gets redistributed throughout the economy, the rest is typically saved (earning a low 1-2% interest). Hence why tax cuts are inefficent. By contrast, Federal/State programs can put money in the hands of those most likely to spend almost all the amount given (Unemployment is a perfect example), thus you get more economic bang for buck. Do not forget that money collected in taxes ultimately ends up in the hands of the people.

2: The US is free to peg its currency to whatever it wants whenever it wants. If the US pegs its currency to gold, like some morons want to do, then the US would be doing the same exact thing as China. Its relative: China's total wealth grew 20% year over year that one year. That simply means that China has 20% more total wealth, based on whatever measure they are using as a baseline. If the baseline changes, then the GDP will change to reflect that. Not that hard a concept to grasp...

You're correlating the numbers wrong. GDP and taxes are for that year, not mixed. If you look at it properly you see a different picture. If you take them how they should, you would see that GDP doesn't match against revenue and therefore is insignificant when talking about revenue/spending. The issue is spending, not growth of the economy. Your argument is that taxes caused a gap in spending. I'm arguing that revenue went up but that spending gap remained the same or grow larger. It doesn't make sense. I don't care what GDP is, revenue went up, therefore the deficit spending should have gone done. You can't counter that argument so please give up already.