Posted by Curt on 7 July, 2011 at 7:00 am. 3 comments already!


Over the last couple of days, we’ve had a good debate at Hot Air over the nature of our fiscal crisis between Jazz Shaw, and J. E. Dyer, and me.  At least we all recognize that we have a fiscal crisis; some members of Congress and “intellectual authorities” (with interesting if unreported conflicts of interest) still act as though nothing at all is wrong.  My friend Jazz wrote yesterday that we have a revenue problem as well as a spending problem in answer to my post rebutting David Brooks’ column, so let’s take a look at federal revenue to see whether Jazz’ contention holds up.

The Heritage Foundation provides this chart of federal revenue over the last 50 years in inflation-adjusted 2010 dollars, and the data is pretty clear that we have a recession problem, not a revenue problem:

Take a look at the trends here, again remembering that the data is all in 2010 dollars.  In fifty years, we have tripled overall federal revenue, and prior to the current recession/stagnation we had quadrupled it.  The current trough from the 2007 peak resulted from the fall in economic activity, not from tax cuts or any other intervention.  It’s similar to what happened in the prior trough, when the 2000-1 recession and the 9/11 attacks cut economic activity through 2003.

For that matter, look what happened to federal revenue after the much-maligned Bush tax cuts took full effect in 2003.  Economic activity expanded rapidly — and so did federal revenues.  In fact, the economy during that period boomed, and receipts from both personal and corporate taxes peaked as a result.  The Bush tax rates, as they are properly called today, did not create a revenue vacuum; they helped produce an expansion that enhanced rather than lost revenue.

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