Tuesday, October 17, 2006

As I was saying

I touched yesterday on the importance of a narrative in politics. As everyone knows, for example, the Bush Administration has spent like a drunken Democrat, chiefly on the industrial-military complex, while at the same time cutting taxes for the rich, leading to a massive and unsustainable deficit which will surely turn the moon to blood and kill us all in Hurricane Katrina.

OK I went off a bit at the end but the high-spending, tax-cutting, deficit-creating bit is widely acknowledged as absolute truth. This is having a damaging effect on the Republicans in the up-coming elections where grass-roots conservatives dislike the end of fiscal sanity, and even centrist liberals dislike the idea of tax-cuts 'for the rich'.

However, truth and narrative have become a bit disjointed.

The deficit, at $247.7 billion, is $175.5 billion less than projected in the January budget, and $48.1 billion less than the White House Office of Management and Budget predicted just three months ago. At about 1.9 percent of GDP, the deficit is lower than it was every single year between 1980 and 1996.

The 2003 tax-rate cuts supercharged business investment, which, in real terms, climbed by 5.9 percent in 2004 and an outsized 6.8 percent in 2005. Not surprisingly, by far the fastest growing revenue source since 2003 has been the corporate income tax. The corporate tax-revenue stream increased 27.2 percent in 2006 after two consecutive years of more than 40 percent growth. Since 2003, total corporate income-tax receipts are up a stunning 168.5 percent — an increase of $165 billion, which happens to be the precise amount the federal deficit shrunk over that period.

Non-withheld individual income-tax receipts, largely capital gains and dividend income, also are up sharply since rates were cut. They jumped 20.7 percent in 2006 (on top of last year’s 31.9 percent bulge) to a record $387.3 billion.

So tax recipts are up, as a result largely of the tax cuts, and the deficit is significantly less than the UK's. Any chance of hearing a change of tune among the 'Bush deficit' merchants? No because some truths are too good, even when they are no longer true.


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