Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Wednesday, July 12, 2006

And Now Jason Furman Reports from the Gamma Quadrant

Hopefully we will be able to retrieve him unharmed:

The official [OMB] scoring shows the [Bush] tax cuts added $200 billion to the deficit this year (not counting the higher debt service on the [extra debt caused by the] tax cuts in previous years). The academic "dynamic scoring" debate is whether the tax cuts raised this year's deficit by $180 billion (if they contributed to growth) or $210 billion (if they reduced growth).

And the Fox News debate is in outer space.

Fortunately the [Bush] administration is on our side. They estimate that the tax cuts add AS MUCH AS 0.7 percent to national income over the long run. That's consistent with paying for AS MUCH AS 10 percent of themselves. And that's with their unrealistic financing assumptions...

0.7% of national income is about $85 billion. At a 25% marginal tax share for the federal government for the economy as a whole, that's an extra $21 billion of revenue.

The "static academic" estimate is that the Bush tax cuts added $200 billion to the deficit this year. The "dynamic Bush" estimate is that they added $180 billion to the deficit this year.

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