Fun with Numbers

Filed under:Uncategorized — posted by Dave on April 13, 2010 @ 1:53 pm

I found this graph over at the USA Today. Typically I like the USA Today because they attempt to ‘do no harm’ with most of their reporting.
http://www.usatoday.com/news/washington/2010-04-12-deficit_N.htm

Take note of the call-outs for “Tax Cuts”.  When ever a tax cut occurs, there’s a drop in revenue – as a percentage of GDP.  This will lead most people to conclude ‘tax cuts cost us money!’.  However, if you were paying attention in Economics and History classes and remember the Laffer Curve.   Revenue during the years after tax cuts actually _increased_.  Of course the increases appear to cause a decrease in revenues, as a percentage of GDP, because the economy as a whole grew by a greater percentage!  So the pie grew bigger – and everyone did better, keeping more of their own money, BUT the governments take of the pie decreased. 

Additionally, when Revenues to the US government increased, AND the deficit % increased, it means Congress spent even more money – taking advantage of the increased revenues (and then some!).

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image: detail of installation by Bronwyn Lace