Brummett: Real reason the debt is so big is because the rich are not taxed enough (Real Cause of Deficit Pt 13)

John Brummett asserts that liberals are right about the cause of the deficit. He asserts in his article “Harry let us down,” Arkansas News Bureau, April 4, 2011:

He is right that the actual deficit is caused by direct government spending exceeding income, an imbalance mostly caused, he will tell you with some justification, by the fact that we don’t tax rich people as much as we did in happier and more prosperous times.

We have heard the liberals say for years that Bush put us into this horrible position of deficits because of his tax cuts of 2001 and 2003. However, if Bush was responsible for taking the 236 billion surplus he inherited in 2000 and turning everything downward because of the tax cuts, then why did we only have a budget deficit of 161 billion in 2007?

Brian Riedl is the author of the article “The Three Biggest Myths About Tax Cuts and the Budget Deficit,” (Heritage Foundation, June 21, 2010), and I have enjoyed sharing this article with you in the last few days. I also found a lot of good information in the Appendix too. Here it is below.

Brian Riedl is The Heritage Foundation’s lead budget analyst and has built a solid reputation for interpreting, explaining and reforming the often arcane realm of federal budget policy.

Indeed, much of the current backlash against runaway federal spending can be attributed to Riedl’s work. As far back as 2002 and 2003, his writings exposed the beginnings of a federal spending spree that was pushing real federal spending to more than $20,000 per household for the first time since World War II.

Appendix

Methodology

The purpose of this study was to create a budget baseline reflecting an extension of current tax and spending policies. The budget baseline is presented in Appendix Table 1.

Revenues

Revenue calculations begin with the January 2010 CBO current-law baseline and incorporate extensions of:

  1. The 2001 and 2003 tax cuts,
  2. The AMT patch, and
  3. Other expiring tax cuts that are typically extended annually, all using January 2010 and March 2010 CBO data.

The calculations also incorporate the CBO estimate of revenues from the new health care law through 2019, with the 2020 figure estimated.

Discretionary Spending

Discretionary spending figures are from the CBO’s January 2010 alternative scenario, which assumes that regular discretionary appropriations grow with the nominal GDP and that Iraq and Afghanistan spending remains on the “fast drawdown” scenario.

Entitlement Spending

Entitlement spending figures are the CBO’s January current-law baseline, adjusted to reflect:

  1. The annual Medicare physician payment fix,
  2. The outlay effects of 2001 and 2003 tax cut extenders, and
  3. The new health care law.

Medicare spending is net of offsetting receipts.

Net Interest Spending

Net interest spending figures are from January 2010 CBO current-law baseline, adjusted to include the CBO estimate of the interest costs of all of the above adjustments.

Historical Averages

Historical tax and spending averages are the averages for 1960 through 2009.

Current-Policy Budget Baseline - Nominal Dollars

Current-Policy Budget Baseline - Percentage of GDP

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