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Cutting spending to reduce the deficit has been the focus of budget talks since Congress convened in January.
Doubts that President Obama and House Republicans can do it by reconciling their deficit-cutting plans led the ratings agency Standard and Poor’s to lower its outlook on the United States from "stable" to "negative." It led S&P to warn that the U.S. could lose its coveted status as the world’s most secure economy if lawmakers don’t agree to bring spending in line with revenue.
The GOP plan, approved by the House, would lower taxes on corporations and the wealthiest Americans and draw the bulk of its savings from cutting federal health care programs.
Obama's plan would raise taxes on the wealthiest Americans and reduce military and domestic spending.
House Speaker John Boehner answered it by declaring tax increases "a non-starter."
"We don’t have deficits because Americans are taxed too little, we have deficits because Washington spends too much," said the Republican from West Chester in Southwest Ohio.
From both the other end of state and the political spectrum, Rep. Dennis Kucinich also said he was unsatisfied by the president's plan. But the Cleveland Democrat said he favored Obama's intention to end the so-called Bush tax cuts for the wealthy.
The tax cuts, he said, "helped to create a substantial part of the deficit."
Boehner's comment about too much spending was a statement of opinion. PolitiFact Ohio can't rate it. But we can look at Kucinich's claim about the tax cuts, which runs contrary to assertions that tax cuts pay for themselves.
The Bush tax cuts refer to two pieces of legislation -- the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 -- that were enacted under President George W. Bush and written to expire at the end of 2010. They were extended for two years in December.
The nonpartisan Congressional Research Service examined them in "The Bush Tax Cuts and the Economy," a report issued last December, and in an earlier study of budget deficits and major legislation.
Back in 2001, CRS said, the Congressional Budget Office projected gradually rising federal budget surpluses for the next decade. The tax cuts helped alter the outlook "dramatically," and the budget in 2002 recorded a deficit for the first time since 1997.
"The Bush tax cuts, with a $1 trillion 10-year price tag, contributed to this shift from budget surpluses to deficits," CRS said. Other contributors included the 2001 recession, the increase in defense spending for the wars in Iraq and Afghanistan and the Medicare prescription drug benefit.
But the tax cuts "generated the largest 10-year increases in budget deficits," CRS said.
Estimates by the nonpartisan Congressional Budget Office and the Joint Committee on Taxation put the total cost for the tax cuts (including the Working Families Tax Relief Act of 2004) at more than the amount allocated to the Defense Department for military operations in Iraq and Afghanistan.
"This means that even with the spending for the wars in Iraq and Afghanistan, the federal budget would have been in surplus in 2007 if the tax cuts had not been enacted, or if their costs had been offset," said a 2008 analysis from the left-leaning Center on Budget and Policy Priorities.
The CBO last year projected a decrease in deficits if the tax cuts expired, and said extending all of them permanently would cost $3.3 trillion over 10 years and increase deficits.
PolitiFact has previously examined assertions that tax cuts increase revenues by stimulating economic growth. We found that the Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation and the White House’s Council of Economic Advisers say that tax cuts lead to revenues that are lower than they otherwise would have been – even if they spur some economic growth.
"There's no clear relationship between taxes and economic growth," said Bob Williams of the nonpartisan Tax Policy Center. "Too many factors complicate the picture to draw clear conclusions about the taxes-growth relationship."
Our colleagues at FactCheck.org came to a similar conclusion.
Additionally, the Congressional Budget Office reported in March, "Relative to the size of the economy, federal revenues are currently at their lowest level in 60 years."
"There is no real dispute among economists that broad-based federal income tax cuts reduce revenue (except when tax rates are much higher than they are now)," said Alan D. Viard of the conservative American Enterprise Institute. "Revenue is lower than it would be without the Bush tax cuts -- liberal and conservative economists are in accord on this question."
Debate will go on about the effectiveness of tax cuts in stimulating growth. We won't enter it. But analysis backs up Kucinich in saying that the Bush cuts "helped to create a substantial part of the deficit."
We rate his statement as True.
The Washington Post, "S&P lowers its outlook on U.S. debt; stocks decline," April 18, 2011
The Washington Post, "House passes GOP budget plan for 2012," April 15, 2011
The Washington Post, "Obama announces framework for cutting deficit by $4 trillion over 12 years," April 13, 2011
Associated Press via The Washington Post, "Comparing Obama’s and House Republicans’ proposals for reducing government deficits," April 13, 2011
Politico, "John Boehner toughens his tax-hike stance," April 12, 2011
CBC Radio via PRI on WCPN-FM, Dennis Kucinich interview on "As It Happens," April 13, 2011
Congressional Research Service, "The Impact of Major Legislation on Budget Deficits: 2001 to 2009," March 23, 2010
Congressional Research Service, "The Bush Tax Cuts and the Economy," Dec. 10, 2010
Congressional Budget Office, "Reducing the Deficit: Spending and Revenue Options," March 2011
Congressional Budget Office, "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates," Dec. 1, 2005
Congressional Budget Office, "The Budget and Economic Outlook: An Update," August 2010
Tax Policy Center, Deficit Reduction Proposals
Center on Budget and Policy Priorities, "Tax Cuts: Myths and Realities," May 9, 2008
Heritage Foundation, "Ten Myths About the Bush Tax Cuts," Jan. 29, 2007
Pew Charitable Trusts, "Decision Time: The Fiscal Effects of Extending the 2001 and 2003 Tax Cuts," Sept. 2, 2010
Congressional Budget Office, "The budget and economic outlook: Fiscal years 2011 to 2021," January 2011
The Washington Post, "Lower Deficit Sparks Debate Over Tax Cuts' Role," Oct. 17, 2006
PolitiFact, "Rep. Joe Walsh said that every time we've cut taxes, revenues have gone up, the economy has grown," April 19, 2011
PolitiFact, "Mike Pence says raising taxes lowers tax revenues," Nov. 9, 2010
Factcheck.org, "Supply-side Spin," June 11, 2007
Tax Policy Center, Historical Amount of Revenue by Source, March 24, 2011
Tax Policy Center, Tax Policy Briefing Book, Jan. 23, 2008
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