Quote Originally Posted by drone View Post
I'm willing to wager that these extra revenues are capital gains taxes brought in by the housing bubble and have little to do with "benefits" from the Bush tax cuts. Just as the ~2000 hump in revenues is attributed to capital gains from the tech bubble.
Capital gains certainly played a part, but a large portion of the revenue gain was from corporate income taxes, which had little to do with housing and plays into the supply side argument. Of course, the impact of tax rates - positive and negative - play a distant second fiddle to the greater trajectory of the economy.

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So the deal is done. Who won? Or... more accurately, who lost the least?


Let's be sure to attach the word "tentative" to the debt ceiling deal that members of Congress will begin debating Monday — and then will accept or reject. Given official Washington's tendency throughout this process to take one step forward and two steps back, none of us should be shocked to see still more clumsy footwork.

But for now, let's pretend that the accord announced Sunday night will hold together and become law. If so, we will be pleased to forget for a while the fear about a potential debt default. This deal settles that threat for now, and also makes a down payment on reducing future deficits. Both good.

Perhaps most important for the long run, the American people emerge from this process much more aware that the enormity of their government's borrowing — another day, another $4 billion — threatens the future prosperity of their children and their nation.

If you've followed the twists and turns of recent weeks, you know the genealogy of this plan: It's descended from the bill that House Speaker John Boehner eked through his chamber Friday.

In many ways, the architecture of this deal reflects Republican designs. Think back to early 2011 and the earliest discussions of a need to acknowledge the nation's stratospheric increase in debt by raising the legal limit on that borrowing. Democrats wanted a "clean" hike in the debt ceiling, nothing attached.

Instead, President Barack Obama and Democratic legislative leaders now have agreed to linking that hike to companion trillions of dollars in future deficit reductions. The Democratic demand for tax increases, once evidently non-negotiable, has been pushed to a later debate. Democrats also ceded their previous insistence that a debt ceiling settlement now take the whole ugly topic out of play until after the 2012 election. Not going to happen. The two-phase process that the president described Sunday night follows different protocols than Boehner's framework but has much the same net effect: The debt debate will remain front and center well into the 2012 election cycle. We had supported the Boehner bill for just this reason. A two-phase process keeps the pressure on pols of both major parties. As they ask voters for support, they cannot hide from the dizzying escalation of this nation's debt.

We wish we could guarantee that the enforcement mechanisms built into this deal really would force a bicameral committee, and then the full Congress, to agree on much more dramatic deficit reductions several months from now. That discussion could turn to possible revenue increases, and almost certainly will focus on entitlement programs. That has to be. Without reform, those programs will implode. Come the actual time to cut them, though, many members of Congress will be looking for escape hatches.

Nor is there assurance that the nation's stellar credit rating, which suppresses the cost of borrowing all these trillions, will survive this deal intact. Ratings agencies may decide that Washington just doesn't have the moxie to drop the national debt to an affordable level. On Friday, Moody's Investors Service expressed disappointment over the "limited magnitude" of the emerging deal's spending cuts: "Reductions of the magnitude now being proposed, if adopted, would likely lead Moody's to adopt a negative outlook on the AAA rating," the agency warned.

One other, probably beneficial impact: The long to-and-fro of this process will deprive both parties of attack lines they had been practicing for the 2012 campaign season. Democrats had planned to exploit the proposal from Republican U.S. Rep. Paul Ryan of Wisconsin to reshape Medicare. Republicans often dismiss this line of attack as "Medi-scare," and accuse Democrats of "playing the Granny card." But how can Democrats accuse Republicans of wanting to trim Medicare when their own president proposed cuts to Medicare during the debt ceiling negotiations? Similarly, Republicans will have a hard time saying Democrats alone wanted to raise taxes now that we all know Boehner at one point agreed in principle to hundreds of billions in revenue hikes.

Reforming entitlements, raising revenues — those tactics and many more will come into play if this nation is to unwind its debt. Remember, that debt would continue to grow even if this deal does pass as negotiated.

The so-called "supercommittee" of Congress that would be tasked with the second phase of deficit reductions at least would have ideas it could plagiarize. The president never acted on the December recommendations of his bipartisan fiscal commission. Similarly, bipartisan proposals from the Senate's Gang of Six and from the recent congressional talks chaired by Vice President Joe Biden await action.

No, official Washington has no shortage of ideas. What it lacks is enough spine to make the difficult choices that would extract the U.S. from its dance with the debt devil.

If the deal announced Sunday night is a first step in that crucial rescue, terrific. But, at best, it's only one step in a very long journey.