I suppose it’s time for me to do my little part in 2012 and break down a few of these American Presidential election myths, so my first Tumblr target is whether or not tax cuts pay for themselves.
Imagine you had a USD 100,000 business and a prospective business partner approached you with an idea to make money that required you to give up 10% ($10,000) of your company’s revenue as an investment, resulting in your business getting $2,200 percent of its money back after 5 years, and as a reward for your blessed patience, your business will realize an additional 10 percent return after another 5 years to bring your total 10-year return to $3,200, leaving your business in a $6,800 investment hole. One more thing – your business also stands to lose an additional 5 percent of whatever revenue you hoped to make by year 10.
How long will it take for you to throw this fool out of your office?
Peeps – this is exactly what the United States government gets out of a 10 percent tax cut, as analyzed by the Congressional Budget Office [PDF] in 2005 during the Junior Bush years.
I’m sure a few of you smarties will tell me that the government is not supposed to make a profit and that the government should bite any bullet handed to its mouth if doing so helps the rest of the economy grow.
The only problem with that idea is that the CBO analysis shows a maximum 1.1 percent boost to the economy, or $138 billion. And since the report was written in 2005, the corresponding GDP was $11.7 trillion, the 10 percent tax cuts cost more than $1 Trillion after 10 years, and basic math prevails…
It’s also important to note that the CBO Director at the time of this report’s publication was Douglas Holtz-Eakin, a Republican who was former Presidential candidate John McCain’s chief economic adviser.
song currently stuck in my head: “adventures in the land of music” - dynasty