Brad DeLong is annoyed at the latest from
Irwin Stelzer:
Hassett and others in the administration point out that despite a hefty reduction in the corporate tax rate from 35 percent to 21 percent, government revenues rose by $3.3 trillion in the fiscal year just ended. In part this is because the economy is growing at around a 4 percent rate in response to the tax cuts and to a revival of animal spirits as entrepreneurs and corporate chieftains wake up in the morning wondering not what the government is going to do to them, but what it might do for them. So Trump may yet be proven right. And if that proof does not emerge by 2020, he an always blame the Fed. The problem, says Trump, is that spending rose even more, by $4.1 trillion.
Hassett is lying but let’s note so are the
OMB Director and the Treasury Secretary as well as
Speaker Paul Ryan:
He was basically lying to us hoping the public would be too stupid to realize that when the price level rose by 2.5% during the same period, we are talking about a 2% real decrease in tax revenues.
Yes nominal government spending rose by 3.2%, which represents only a 0.7% real increase. Spending and revenues both fell relative to GDP. Brad correctly notes:
his claim that under Trump economic growth is "around... 4%". It is not. GDP growth under Trump has been and is widely projected to be roughly 2.7% per year, not "around... 4%". Irwin Stelzer is a liar. Liars are not worth reading.
While true – Trump’s entire economic team has been lying but quoting nominal changes rather than real changes. So maybe Stelzer was talking about the increase in nominal GDP. Yes – that is dishonest but hey – everyone on Team Trump is doing this.
pgl,
ReplyDeleteOffhand it looks like Steltzer has a bigger problem of error. Your quote from him has tax revenuse increasing (nominally) by $3.3 trillion. But I think that is what the total is, not what it increased by. After all, GDP is only a bit over $20 trillion.
Brad's 2.7% figure is the percentage change in real GDP from 2017QII to 2018QII. It just so happens that the GDP deflator rose by 2.7% over this period. Since Team Trump thinks it is appropriate to state things in terms of nominal increases, I'm expecting one of these clowns to tell us that GDP rose by almost 5.5%.
ReplyDelete“Hassett and others in the administration point out that despite a hefty reduction in the corporate tax rate from 35 percent to 21 percent, government revenues rose by $3.3 trillion in the fiscal year just ended.”
ReplyDeleteBarkley – good catch. The ‘by’ should read ‘to’ as the Treasury report reads:
“Government receipts totaled $3,329 billion in FY 2018. This was $14 billion higher than in FY 2017, an increase of 0.4 percent.”
Of course the price level rose by over 2.5% so this nominal increase represents a real decrease near 2%.
It's even worse than that. Nominal corporate tax receipts actually fell from $297B in FY2017 to $205B in FY2018. But wait...it gets even worse. While it's true that (nominal) income tax receipts increased from $1,587B in FY2017 to $1,684B in FY2018, you have to ask how this is possible if FICA tax receipts only increased (nominally) from $1,162B in FY2017 to $1,171B in FY2018. So we get a $97B increase in income tax receipts following an income tax cut, but only a $9B increase in FICA tax receipts. How is this possible? The obvious answer is that most of the increased income came from those who earn incomes well above the FICA threshold. If the typical worker earned more wage income, then you would expect FICA taxes to increase proportionally. But nominal FICA receipts were virtually flat, and real FICA receipts actually fell! Conclusion: the increase in tax receipts came from those who either earned salaries above the FICA threshold or from those who enjoyed unearned income. It's the typical Republican shell game. And I'm sure there are plenty of dimwitted voters out there who won't see through this. Voters are nitwits. Always have been and always will be.
ReplyDelete