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By Misty - Posted on 17 February 2011
Bernie Sanders on PBS News Hour
We have the highest rate of childhood poverty in the industrialized world for our children, and we're cutting programs for those people...
He's right. As much as I try, I can't understand why we've been reducing tax rates for the highest earners over the past 30 years-- as their earnings and wealth have skyrocketed.
We're told that it's these people who are the "job creators," yet our biggest recent job growth occured in the 90's, after Clinton and the Democrats raised taxes. Our economy tanked after Bush's tax cuts, which we were told would increase revenue and add jobs to the economy.
We've gone to two major wars over the past 10 years, asking thousands of Americans to sacrifice their lives, but we're paying for them by going into debt. Meanwhile, the top .1% become filthy rich, benefitting from everything our country has to offer.
I generally agree.
Remember, Reagan both reduced tax rates and reduced tax "expenditures". That is, credits and exemptions and complications.
While I agree that Bush's and Clinton's modest tax increases were partially responsible for the boom of the 90s, I still think that Reagan's tackling of high marginal rates, tax expenditures, and the Federal Reserve's handling of interest rates were also very important in reducing unemployment and inflation.
And not to put the blame/credit entirely on government, there was a lot of innovation happening in the general economy which would have been hard to dampen no matter what the fiscal or economic policies were within a certain range of policies acceptable in the US.
That is, I think that a lot of the economic growth would have occurred despite government policies.
State Budget Crisis
Source: Center on Budget and Policy Priorities
To date some 45 states and the District of Columbia are projecting budget shortfalls for fiscal year 2012, which begins July 1, 2011 in most states... totaling $125 billion for fiscal year 2012.
California $25.4 billion
Texas $13.4 billion
Illinois $15.0 billion
New Jersey $10.5 billion
New York $9.0 billion
Pennsylvania $4.5 billion
Minnesota $3.9 billion
North Carolina $3.8 billion
Connecticut $3.7 billion
Florida $3.6 billion
Spending cuts are problematic during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. In all of these circumstances, the companies and organizations that would have received government payments have less money to spend on salaries and supplies, and individuals who would have received salaries or benefits have less money for consumption. This directly removes demand from the economy.
Tax increases also remove demand from the economy by reducing the amount of money people have to spend — though to the extent these increases are on upper-income residents, that effect is minimized because much of the money comes from savings and so does not diminish economic activity. At the state level, a balanced approach to closing deficits — raising taxes along with enacting budget cuts — is needed to close state budget gaps in order to maintain important services while minimizing harmful effects on the economy.
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