It's the Economy... (You Know the Rest)

The President announced yesterday that the deficit was not as great as first predicted, allowing Dear Leader to trumpet the triumph of his tax cuts and call for their permanence.

In its midyear report on the budget, the administration projected that tax revenue will increase 11 percent in the fiscal year that ends Sept. 30. That is "much better than we had projected, and it's helping us cut the budget deficit," President Bush said in a White House ceremony to release the report, which is usually a low-key midsummer event. So instead of the substantial increase from last year's $318.3 billion deficit that the administration and other forecasters predicted a few months ago, the 2006 deficit will fall by 7 percent, according to the new projection.

But since I'm a godless liberal who Hates America First at every chance presented to me, I'll ask the question: Are things really that rosy? Here's what Tim Grieve over at Salon's War Room noted yesterday:

There's more than a little smoke-and-mirrors action going on here. When the president claims that he's ahead of his plan to cut the deficit in half by 2009, we're supposed to forget the fact that the starting point for that 50 percent cut -- a deficit of $521 billion -- is one that never really existed in the first place. When Bush launched his plan in 2004, the deficit was $412 billion. But instead of using that number, the administration relied on the much higher number -- $521 billion -- that had been projected for the 2004 deficit but never came to pass. Why? Because it's a lot easier to get to half of $521 billion, or around $260 billion, than it is to get to half of $412 billion, which is $206 billion.

As Brad DeLong explains in Salon today, numbers games like that one continue to be a hallmark of the Bush budget plan. How is Bush doing in a more objective sense? Think Progress has the numbers. Bush inherited a budget surplus of $284 billion. If his administration's current estimate holds up, 2006 will bring a budget deficit of $286 billion. That's an improvement over 2003, 2004 and 2005, but it's still the fourth worst budget deficit in U.S. history. No. 5 on the list? The deficit piled up under the president's father in 1992.

Add Robert Reich to the parade rainers:

Look at the other side of the ledger and things are almost as bleak. Yes, revenues are up slightly. But they’re still running $100 billion less than what the White House projected five years ago when it sold its tax cuts. In fact, overall revenues have barely reached the level they were in 2000.

The basic question is whether those tax cuts have helped or hurt the economy. The White House supply-side gang says they’ve helped, and points to the slight upturn in tax revenues to argue its case.

But every economic recovery offers good news. That’s why we call them recoveries. The business cycle is, after all, a cycle. When the cycle is turning down, the news is bad. When it’s turning up, news is good.

The best way to find out whether the Bush tax cuts have really helped is to compare the current recovery with every previous recovery since World War II. What do we find? Real revenue growth in this one is trailing the average of all previous recoveries. So is the rate of new investment. So is the rate of job creation.

You don’t have to have total recall to remember that after Bill Clinton raised taxes and cut spending, we had faster revenue growth than now, a higher rate of new investment, more jobs and a more rapidly-vanishing deficit.

But the biggest difference between then and now is the baby boomers are now much closer to retirement. This means it’s even more important now to cut spending and raise taxes in preparation for the upcoming drain on Social Security and Medicare. But what is this administration doing? It continues to borrow against Social Security, spend like mad, and try for more tax cuts.

The president’s supply-side tax cuts have had only one conspicuously positive effect, for one conspicuous group. They’ve helped people earning over $200,000 a year become fabulously richer. These people do have cause to celebrate, and it’s understandable if they want to parade around in their designer clothes. The rest of us, though, are still caught in a downpour.

Speaking of which, Daily Kos diarist bonddad had a post yesterday with a lot of numbers (hold onto your hats, humanties majors) that shows that the rich are indeed getting richer, and the poor are getting increasingly fewer bites of the pie:

Economists love to talk about "pies" and now would be a good time to use this comparison. I'll use the current national compensation figures to demonstrate the difference in each income level's respective share of national compensation. In addition, tax analysis is sometimes broken down into "quintiles". A quintile is simply a way of dividing all of the income earners into 20% brackets.

According to the Federal Reserve's Flow of Funds report, the national income pie was $11.491 trillion in the first quarter of 2006. Compensation of employees accounted for $7.329 trillion or 63%. According to the Census Bureau, in 1969 the top 5% took 16% of the national compensation pie, or $1.17 trillion of the current compensation pie. Using 1999's percentage that number would be $1.54 trillion or an additional $370 billion. For the top quintile, their 1969 percentage take would be $3.02 trillion of the current compensation pie and their 1999 percentage take would be $3.51 trillion, or an additional $497 billion. Comparing the difference between the 1968 and 1999 income distributions, an additional 6.78% of the national income pie went to the top quintile of income earners, leaving less for those in lower quintiles.

So, the top quintile is making more. That means by definition, the bottom three quintiles are making less. Again according to the Census bureau for the years 1969 - 1999 the fourth highest quintile saw its percentage of national compensation income drop from 23.6% in 1968 to 22.8% in 1999. This is a 3% drop. The third quintile saw its percentage drop from 17.3% to 15.3% or a 11.56% decrease. The second lowest quintile saw its percentage drop from 12.1% to 9.8% or a drop of 19%. The bottom quintile saw its percentage decrease from 5.7% to 4.1% or a drop of 28%.

Well, maybe Dear Leader's tax cuts are working... for his base.