Blog Posts > Tax Cuts and Unemployment Extensions: Both Will Add to the Deficit, Only One Will Help Unemployed West Virginians
July 15, 2010

Tax Cuts and Unemployment Extensions: Both Will Add to the Deficit, Only One Will Help Unemployed West Virginians

There is a lot of buzz lately at the national level regarding tax cuts, unemployment extensions, and the federal deficit. Last month, Congress failed to pass an extension of unemployment subsidies, which means by the end of this month 13,300 unemployed West Virginians will have exhausted their benefits, putting them at risk of succumbing to the dangers of long-term unemployment.

Senator Mitch McConnell of Kentucky, who led to filibuster that defeated the bill, argued that the extension would add to the federal deficit. And, as it stood, the total bill would have added about $35.5 billion to the deficit. So in the end, the filibuster was successful, and unemployment benefits were not extended.
Earlier this week, Sen Jon Kyl of Arizona said that the Bush tax cuts for those making $200,000 and over should be extended, arguing that the cost of doing so, $678 billion over the next 10 years, does not need to be offset while the extension of unemployment benefits did. Later, in another interview,  Senator Mitch McConnell justified Senator Kyl’s remarks, asserting that the tax cuts did not cost revenue, instead they increased revenue.
This, quite frankly, is nonsense. The CBO, the Joint Tax Committeethe Brookings InstitutionPresident Bush’s Chief Economist on the Council of Economic Advisors, and his chair of the CEA all agree the Bush tax cuts added to the deficit, and extending them will continue to add to the deficit.
new report from the California Budget Project addresses the idea that cutting taxes will spur economic growth enough to cause a net increase in tax revenue. Their conclusion, and the conclusion of the economists they reviewed spanning the ideological spectrum: Tax cuts simply do not pay for themselves. For a variety of reasons shown in this report and others, even large tax cuts at the state and national level fail to generate enough economic growth to produce enough revenue to offset their costs. The California study showed a $1 billion cut in personal income taxes would result in  revenue loss of $990 million.
The bottom line is that it is time to put to bed the idea that tax cuts are deficit neutral. If $35.5 billion for the unemployed is asking too much, then $678 billion for those making over $200,000 should be out of the question.

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