U.S. Budget and Economy

On December 10th, the Congressional Budget Office released a one-page table which shows the estimated cost for the so-called "tax deal". More specifically, it shows the estimated change in revenues and direct spending for S.A. 4753, an amendment to H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The following graph shows the resulting revenues, outlays, and deficits when this change is added to the current baseline: The graph also shows the revenues, outlays, and deficits for the baseline and the alternative under which EGTRRA and JGTRRA (the 2001 and 2003 Bush tax cuts) are permanently extended and AMT (Alternative Minimum Tax) is indexed for inflation. The actual numbers and sources for this and the following graph can be found at this link . As can be seen, none of the alternatives have much effect on outlays. Regarding revenues, the tax deal causes a two-year slowdown in their projected recovery and the permanent exten...

On November 21st, the Wall Street Journal ran an editorial titled "Higher Taxes Won't Reduce the Deficit " . The authors of the editorial are Stephen Moore and Richard Vedder. Moore is listed as a senior economics writer for The Wall Street Journal editorial page and Vedder is listed as a professor of economics at Ohio University and an adjunct scholar at the American Enterprise Institute. The editorial begins by mentioning that the draft recommendations of the president's commission on deficit reduction and a plan put forward by Alice Rivlin have proposed taxes as a part of reducing the deficit. It continues: The claim here, echoed by endless purveyors of conventional wisdom in Washington, is that these added revenues—potentially a half-trillion dollars a year—will be used to reduce the $8 trillion to $10 trillion deficits in the coming decade. If history is any guide, however, that won't happen. Instead, Congress will simply spend the money. In the late 1980...