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For Immediate Release
July 11, 2006
Setting the Record Straight: The President's Policies Are Increasing Tax Revenues and Growing Our Economy
In Focus: Economy
Setting the Record Straight
The New York Times : "Earlier This Year, The Administration Conveniently Projected A Highly Inflated Deficit Of $423 Billion." (Editorial, "Another Mission 'Accomplished,'" The New York Times, 7/11/06)
White House Press Secretary Tony Snow: "In other words, the thesis of these skeptics is that the Administration is going to put out a forecast that's going to make us look bad for six months so we can get one day's good publicity? That's insane. I mean, that's politically insane. … If you're looking for a time when you want to get a hit, the summer vacation season is probably not prime time for trying to win the big political points." (Tony Snow, Press Gaggle, Washington, DC, 7/11/06)
In 11 Of The Past 15 Years, Revenue Forecasts Have Increased From February To The End-Of-Year Actual Figures, Leading To Reductions In The Deficit.
The Congressional Budget Office (CBO) And Other Forecasters Also Under-Estimated Revenue Growth. CBO initially estimated receipts would grow by 7 percent. However, in their most recent monthly report, they acknowledged that receipt growth has been much stronger: "Revenues continue to grow strongly, up by about 13 percent over receipts at the same time last year." ("Monthly Budget Review," Congressional Budget Office, 7/7/06)
In Previous Years, The Administration Was Criticized For Overly Optimistic Projections. The Washington Post: "Over three years, the administration has repeatedly and significantly overstated the government's fiscal health and the number of jobs the economy would create, but economists and politicians disagree about why. … But in February 2002 – after the recession was declared, the terrorist attacks had occurred and war had begun in Afghanistan – the administration continued to have upbeat predictions. Although it forecast a $106 billion deficit in 2002, it saw the deficit shrinking to $80 billion in 2003, $14 billion in 2004, and becoming a surplus of $61 billion in 2005. Those figures, too, quickly became seen as overly optimistic, as tax receipts continued to come in lower than expected." (Dana Milbank, "White House Forecasts Often Miss The Mark," The Washington Post, 2/24/04)
The New York Times: Additional Tax Revenue Is Still Less Than Projected In 2001. "In fact, [revenue] is $100 billion less than the $2.5 trillion revenue estimate the administration touted when it set out in 2001 to sell its policy of never-ending tax cuts." (Editorial, "Another Mission 'Accomplished,'" The New York Times, 7/11/06)
Stock Market Decline, Recession, And War Contributed To Decreased Revenue. The 9/11 attacks and War on Terror, as well as the collapse of the stock market bubble, 2001 recession, and corporate scandals, caused revenues to decline in 2001, 2002, and 2003. With recent economic growth sparked by the President's tax cuts, tax revenue is growing at double-digit rates (receipts grew by $274 billion or 14.5 percent last year and are projected to grow by $247 billion or 11.4% this year).
Tax Revenue As A Share of Gross Domestic Product Is Projected To Exceed The Historical Average. Federal revenues as a percentage of GDP are now expected to reach 18.3 percent in 2006, above the 40-year historical average of 18.2 percent.
The New York Times: Revenue Increases Are The Result Of Growing Income Inequality. "A growing number of economists, most prominently from the Congressional Budget Office, point out that upsurges in revenue are also the result of growing income inequality in the United States, an observation that is consistent with mounting evidence of a rapidly widening gap between the rich and everyone else. As corporations and high-income Americans claim ever more of the economic pie, revenues rise, even if there’s no increase in overall economic growth." (Editorial, "Another Mission 'Accomplished,'" The New York Times, 7/11/06)
There Has Been An Increase In Overall Economic Growth – Real GDP Grew At An Annual Rate Of 5.6 Percent For The First Quarter Of This Year. This is the fastest growth in two-and-a-half years and even stronger than previous estimates. It follows economic growth of 3.5 percent in 2005 – the fastest rate of any major industrialized nation.
More Than 5.4 Million Jobs Have Been Created Since August 2003 – Including 121,000 Jobs Created In June. The economy has created about 1.85 million jobs over the past 12 months and the unemployment rate is 4.6 percent – lower than the average of the 1960s, 1970s, 1980s, and 1990s.
By Several Measures, The Long-Run Growth In Inequality Has Slowed In Recent Years. For example, the Gini measure of overall inequality in household income was flat from 2001-2004, but increased by 2.7 percent from 1995 to 2000. Similarly, the share of income going to the top 5 percent of households fell 2.7 percent over 2001 to 2004, but increased by 5.2 percent from 1995 to 2000.
New Jobs Are Being Added In High-Compensation Occupations. The average compensation in growing occupations is $30.14 per hour, compared with $21.24 in shrinking ones.
Income Inequality Is A Long-Term Trend Largely Due To The Economy Placing Increasing Value On Education And Skills. For the last 25 years, the reward to investing in skills has grown: workers who get more training or more education are seeing their wages rise. As a result, there have been greater income gains for more-skilled workers.
President Bush's Tax Cuts Have Made The Tax Code More Progressive. The share of taxes paid by the top 5 percent of taxpayers will be 53.3 percent, and would have been 51.6 percent without the cuts. The share of taxes paid by the bottom 50 percent of taxpayers will be 3.4 percent, and would have been 4.0 percent without the cuts.
Los Angeles Times: Focus On The Mid-Session Review Distracts Attention From The Long-Term Deficit. "And the focus on this year's budget will distract attention from the real budget crisis, which will begin in two years as the eldest of the baby boom generation become eligible for Social Security benefits.'" (Joel Havemann, "Deficit's Good News Less Than Meets The Eye," Los Angeles Times, 7/11/06)
The Mid-Session Review Highlights The Unsustainable Growth In Entitlement Spending And Restates The President's Call For Entitlement Reform. THE MID-SESSION REVIEW: "As the President noted in his 2007 Budget released in February, in the long term the biggest challenge to the Nation’s fiscal outlook comes from the unsustainable growth in entitlement spending. As currently structured, entitlement spending in Social Security, Medicare, and Medicaid is growing faster than the economy and the Nation’s ability to pay for this spending. … The reforms in Medicare proposed in the President’s Budget will bring the program’s financing needs more in line with available resources in the near term, but both Medicare and Medicaid need additional reforms to ensure their long-term health. In addition, the President has called for reforming Social Security in a manner that preserves benefits for those already in or near retirement and puts the program’s finances on a sustainable footing for future generations." ("Fiscal Year 2007 Mid-Session Review," White House Office Of Management And Budget, 7/11/06)
The President Has Persistently Called For Bipartisan Legislative Action To Address The Long-Range Financial Shortfalls Of Entitlement Programs And Is Firmly Dedicated To Reining-In Runaway Entitlement Spending:
- The President proposed slowing the growth of Medicaid and Medicare spending in his FY2006 Budget;
- Congress passed the Deficit Reduction Act which the President signed into law in February, saving almost $40 billion over the next five years;
- The President followed up with proposals in his FY2007 Budget to slow the growth of entitlement programs, including Medicare, by $65 billion over five years; and
- The President will continue to work with Congress on entitlement reform, including reforming Social Security to preserve and strengthen it for future generations of Americans.
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