The Looming Debt Crisis Driven by Spending

Congressmen and Senators from the Left are at it again.  On the Sunday talk shows they renewed their call for tax increases as if the deficit crisis was caused by lack of revenue rather than their own profligate spending.   Publicly available data from the Office of Management and Budget (OMB) debunks their position.

The real problem is Spending.

No serious attempt to assess the cause of government’s catastrophic debt could simply ignore such breathtaking spending increases.

What about income tax revenue?  Did the Bush tax cuts cause the debt crisis?

On the Sunday talk shows Democrats revived their silly slogans about “paying for” tax cuts.  But they never explain how that would work.  When taxation is the source of government’s money how could it “pay for” a tax cut?  The idea makes even less sense when applied to the current situation because as the next chart shows, after the 2003 tax rate reductions that established the current tax rates, revenue increased.  In 2007 government collected 47% more income tax revenue than in 2003.  In 2007 income tax revenue was higher than any previous year ever, after adjusting for inflation.

Income tax revenue, which is mostly from high income taxpayers, who are mostly business owners dropped in 2009 and 2010 due to the recession’s impact on taxable small business profits.

But even in a weak economic recovery, 2011 income tax revenue is up 26% over 2010.

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