Fun Facts

OK, here's a pop quiz. In what year did the U.S. federal government collect the most tax revenue in its history? (Jeopardy theme song playing) Give up? The answer is 2007, when it collected $2.568 billion. But wait. How can that be? What about those Bush tax cuts? Hmmm, quite a mystery. Maybe the conundrum can be solved by adjusting for inflation. Nope. The answer is still 2007. Well, what about tax revenues as a percentage of GDP? Got me there. In FY 2007 the percentage was 18.5%. The record is 20.9%, in 1944. But that 18.5% is still higher than the average from 1970-2000. So, how is it that the federal government got historically solid revenues after Bush cut taxes?

What has happened to revenues since FY2007? From FY2007 to FY2011 revenues fell $394 billion, and 4.1% as a percentage of GDP. Of course this is a result of the recession, but it's worth noting that bad economic times have not just hit the middle class. The rich also got poorer. From 2007-2009 the number of $1 million earners dropped by 40%. Their income dropped 48%. Federal taxes paid by this group dropped 43%.

The point of all these numbers is that it should be clear that the Bush tax cuts are not responsible for the fiscal mess we are in. While revenues have fallen in the past fews years due to the recession and a sluggish, fragile recovery, federal spending per year has increased by approximately $1 trillion. Presto, crippling deficits and debt, capital that is unavailable to the private sector, and an environment in which businesses are leary about hiring new employees.

Now, Obama wants more Keynsian stimulus to provide what he calls a "jolt" to the economy. The imagery is disturbing. It brings to mind a guy on the operating table who has flat-lined and the doctors use the shock paddles while yelling "Clear!" Perhaps that is the current state of the economy. But it is difficult to see how another, smaller jolt is going to help after the major jolt, aka Stimulus 1, has failed miserably. He ridicules Republicans for promoting the same old policies that haven't worked (tax cuts, reduced spending and fewer regulations) while simultaneously promoting policies that didn't work in the 1930's, haven't worked since then, and most recently haven't worked since he took office. It's bad enough that Obama knows nothing about economics. The bigger tragedy is that he thinks he does.

One more point. While Obama has been chastising Republicans for not bringing his "jobs bill" to a vote, Senate Majority leader Harry Reid prevented just that last night. Republicans in the Senate were happy to bring the bill to a vote. Granted, they knew it wouldn't pass, but so did Reid, because several Democrats (one suspects those up for election next year) won't vote for it. Reid broke long standing Senate rules to save Obama the embarrassment of having Democrats shoot down the bill. Don't expect any public acknowledgement of this from Obama. He will continue to smear Republicans as the only ones standing between the people and good jobs. He will, of course, know that he is being disingenuous (to be kind), but he'll say it anyway.

Figures from an article I read, which used: Source for budget numbers: The White House Office of Management and Budget, Table 1.3. Source for tax numbers: Internal Revenue Service, Table 1.1.