Roll Call: Latest News on Capitol Hill, Congress, Politics and Elections
March 4, 2015

Chart of the Day

Menzie Chinn provides this chart of federal spending (in red) and revenues (in blue) as a percentage of potential GDP since 1967, highlighting that tax levels have been “low by historical standards” since before the financial crisis and must return to normal levels to solve the “fiscal cliff.”

“Note that…the Republican leadership came up with a proposal of $800 billion additional revenue, all to be achieved by unspecified reductions in tax expenditures… While lowering rates? Doesn’t that make it harder to hit the $800 billion target? I am pervaded by a sense of déjà vu. It is of import to note that $800 billion over ten years works out to only $80 billion per year, or 0.47 percent of nominal potential GDP.”

“While Republican arguments that entitlement reform is eventually necessary is correct… drastic changes to major entitlement programs should not be made in a rush, during the next few weeks. To meet the deadline, tax revenues, by necessity, will have to constitute the bulk of the solution to the fiscal slope.”

  • Lorehead

    Really, this graph should be the response to most right-wing talking points about taxes. The Republican party has developed a lot of myths that nobody is allowed to question inside the echo chamber.

    This more easily refutes the blatantly false talking-point that tax revenues don’t rise as a share of GDP after tax increases (1990-2000, 1982-1986) or decrease after tax cuts (1981, 1986, 2001-present). You need more facts to disprove the false claim that, when tax revenues do decrease as a share of GDP following a tax cut, that means the tax cut grew the economy.

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