Wednesday, September 08, 2004

Simple, clear, devastating: (okay, maybe not devastating, but pretty bad none the less)

Via Mark A. R. Kleiman we learn about a finding by Max Sawicky that shows Cheney is talking nonsense. Here it is: (emp add)
The latest Congressional Budget Office report on the deficit shows a positive correction of about $56 billion (a lower deficit) from the January 2004 forecast. (Note: the new, revised level is still a record high in terms of absolute dollars.) "Dick" Cheney says this is a "direct result" of the tax cuts inspiring more economic growth than heretofore imagined.

The problem is that the change in the economic forecast for 2004 since January is for less real GDP growth, not more. The January forecast was for growth of 4.8 percent (p. xvii) this year. Now CBO says 4.5 percent (p. 24). So by "Dick" logic, this shows the tax cuts are not working.

The main difference in forecasts is that now more inflation is predicted -- an extra percentage point. One effect of inflation is somewhat higher tax revenues, because inflation pushes more people into the Alternative Minimum Tax.


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