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Inflation adjusted tax revenues

By Scott Tibbs, December 23, 2009

Fred Peterson complains that I did not adjust for inflation in my summary of federal tax revenues between 1981 and 1989 or between 2001 and 2008. That may be a reasonable complaint, but Peterson also does not take federal spending into account as to the cause of the budget deficit. Remember, the point of my letter to the editor was that too much spending, not a lack of revenue, caused the federal budget deficit.

So, consider the federal budget numbers from the White House. All numbers below are in constant (FY 2000) dollars from pages 29-30 of the PDF. 2008 numbers are estimated, and revenue is in millions of dollars.


Once again, the problem is not that we did not have enough tax revenue, especially while George W. Bush was President. The problem is that government spending far outpaced revenue. During the Bush Administration, government spending increased dramatically while tax revenues increased at a much smaller rate. The point remains the same: the tax cuts signed into law by President Bush did not cause the federal budget deficit. The fact that government spending increased so drastically is what caused the deficit to get out of control.

Democrats love to complain that tax cuts deprived the government of the revenue it needed to run a balanced budget. As the numbers above show, that is clearly and plainly false. The problem with President Bush is that he was not a fiscal conservative and that the budgets he signed increased the size of government at a significant rate. He was also not a supporter of limited government. President Bush signed into law a brand new federal entitlement program, a significant expansion of the federal government's role in primary and secondary education and signed the abomination known as the McCain-Feingold campaign finance "reform" act that actually regulates the content of political speech.

Compare this to the mid to late 1990's when the Republican Congress took over and began a serious effort to control government spending. They reduced the rate of growth in federal spending, infuriating Democrats who bitterly complained that Republicans were "taking food from the mouths of children." When George W. Bush was elected, Republicans in Congress lost their way and abandoned fiscal responsibility. When the Republicans lost control of Congress in 2006, a large number of Americans identified Republicans as the party of big government.

As fiscally irresponsible as President Bush was, President Obama is leaving him in the dust with massive increases in federal spending that has spawned the "tea party" movement. Republicans have jumped on the bandwagon and are advocating for smaller, more limited government as they did in 1994. They are going to have to prove that they are serious about this, however. While there have been Republicans (such as John Hostettler) who have been consistent on the issue of keeping federal spending under control, if Republicans want to win in 2010 they need to prove that they are serious about limited government and not merely using the "tea party" movement for short-term political gain.