On January 7, 200--two weeks before Barack Obama took the oath of office--the Congressional Budget Office forecast the federal budget deficit for fiscal year 2009 at $1.2 trillion. Now, the CBO is projecting the deficit will be only $642 billion for FY 2013, $200 billion less than the nonpartisan budget scorekeeper estimated as recently as February.

For policymakers in Washington, the implications couldn't be clearer. For starters, the counterproductive Beltway fixation on immediate debt reduction, which economists have warned is slowing U.S. economic growth and costing millions of jobs, should be jettisoned ASAP. And to be sure, the Republicans' next round of debt ceiling hostage-taking should be condemned as the economic sabotage it is.

The CBO explained why the U.S. fiscal picture is improving so dramatically:

If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, CBO estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year--at 4.0 percent of gross domestic product (GDP)--will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP...

CBO's estimate of the deficit for this year is about $200 billion below the estimate that it produced in February 2013, mostly as a result of higher-than-expected revenues and an increase in payments to the Treasury by Fannie Mae and Freddie Mac. For the 2014-2023 period, CBO now projects a cumulative deficit that is $618 billion less than it projected in February. That reduction results mostly from lower projections of spending for Social Security, Medicare, Medicaid, and interest on the public debt.

By 2015, the annual deficit is now projected to just 2.1 percent of U.S. gross domestic product, well below the 40-year historical average of 3.1 percent. The gap is expected to grow to 3.5 percent by 2023, "because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt."

The new CBO numbers are just the latest confirmation of House Speaker John Boehner's admission that "we have no immediate debt crisis." Coming on the heels of an analysis by the Hamilton Project estimating that austerity at the federal, state and local level has cost up to 2.2 million American jobs, the CBO report should help put to lie that more budget cutting is needed in Washington. As the New York Times explained just last week:

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Friday's news that U.S. gross domestic product grew by only 2.5 percent came as a disappointment. After all, that performance not only fell short of the consensus expectation of three percent GDP growth, but was aided by a one-time bump for inventory expansion deferred from the last quarter of 2012. And while the strengthening housing market was a bright spot, those gains were offset by the contraction of government spending that on average has slashed half a point off GDP each quarter since early 2010. As it turns out, after years of austerity by state and local governments, Uncle Sam, too, is holding back U.S. economic growth.

As Floyd Norris explained in the New York Times, the U.S. hasn't seen this kind of contraction since the post-Korean War demobilization of the mid-1950's:

The G.D.P. report released Friday states the total government part of G.D.P. - federal, state and local - came to $3.0306 trillion in the first quarter of this year. That is 0.01 percent below the $3.0309 trillion recorded four years earlier.

Those are nominal figures, not adjusted for inflation...On a real basis, the decline was 6.5 percent.

And that kind of drag, Jared Bernstein warned, is offsetting the double-digit expansion the housing sector has enjoyed for three straight quarters:

Housing continues to be a bright spot as residential investment was up almost 13% on an annual basis. Housing has now been a positive contributor to growth for two-years running, adding 0.3% to the 2.5% growth rate for the first quarter.

But the government sector more than offset housing's contribution, shaving 0.8% off of the growth rate, with across the board declines in defense, non-defense, and state and local public spending. Since 2010q1, the public sector has, on average, taken half-a-percent from real GDP growth per quarter.

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The truth will set you free. Unless, that is, you're a Republican and the subject is taxes. As the New York Times reported on Thursday, "The Congressional Research Service has withdrawn an economic report that found no correlation between top tax rates and economic growth, a central tenet of conservative economy theory, after Senate Republicans raised concerns about the paper's findings and wording."

As documented in "15 Things the GOP Doesn't Want You to Know about Taxes and the Debt," virtually every article of conservative faith on tax cuts is demonstrably false. In contrast, what the yanked CRS report had to say on the history of tax cuts, productivity, investment, economic growth and job creation was indisputably true:

Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%.

There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.

However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

As the Times reported, Republicans claim to have been irked by the report's use of such terms as "Bush tax cuts" and "tax cuts for the rich." Their real problem, of course, is with the truth.

Now, Republicans have warned for decades that that increasing tax rates on so-called "job creators" will hurt employment and slow economic growth. As it turns out, the economy grew faster and produced more jobs when upper-income tax rates were higher--even much higher--than today.

That record prompted David Leonhardt of the New York Times to ask two years "Why should we believe that extending the Bush tax cuts will provide a big lift to growth?" His answer was unambiguous:

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So Mitt Romney has decided to end his presidential campaign the same way he started it. That is, by lying. During what his aides touted as a "major address" in Iowa Friday, Governor Romney charged that while President Obama "inherited a troubled economy," he "made the problem worse." That's the same long-debunked myth Romney used in his June 2, 2011 speech formally announcing his candidacy when he declared Obama "When he took office, the economy was in recession, and he made it worse, and he made it last longer."

But while Romney was pummeled by fact checkers last year as soon as the words first left his lips (prompting Mitt to hilariously claim for 24 hours "I didn't say things are worse; what I said was the economy hasn't turned around"), the "Obama made it worse" fraud has remained the centerpiece of his campaign. Unfortunately for Romney, the facts and the overwhelming consensus of economists - including the nonpartisan Congressional Budget Office and John McCain's 2008 brain trust - flatly contradict Mitt's closing argument. Instead, the numbers show and the experts confirm that President Obama saved the American free-enterprise system from the abyss and averted Great Depression 2.0.

Sadly for Romney and his Republican allies, history did not begin on January 20, 2009. And the data show that President Obama didn't inherit a "troubled economy," but one literally on the brink of collapse. Obama entered office in 2009 as the Bush recession was in full swing. GDP had plummeted by a shocking 8.9 percent the previous quarter. 820,000 jobs were lost in January 2009 alone; all told 2.2 million evaporated in the three months before Obama's stimulus was passed that February. (That might explain why more than three years after he left office, Americans still blame George W. Bush for the economic calamity he bequeathed to Barack Obama.) Now, even with the difficult recovery, the U.S. has produced over 30 consecutive months of private sector job gains and a return to economic growth. And despite Romney's charge that President Obama's are "the most anti-investment, anti-business, anti-jobs series of polices in modern American history," the Dow Jones has jumped by 68 percent since January 20, 2009. Corporate profits are at record highs even as firms' tax burden continues to drop.

Nevertheless, Governor Romney charged in June that the President "slowed the recovery and harmed our economy," a result he called "a moral failure of tragic proportions." Sadly for his campaign's mythmaking, just 24 hours earlier, the director of the nonpartisan Congressional Budget Office blew Romney's bogus claim out of the water.

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Republican Representative Paul Ryan made a campaign stop at East Carolina University on Labor Day, and spoke along the theme set in Mitt Romney's nomination speech attacking President Obama on what the GOP considers his biggest vulnerability, by asking the question: “Are you better off?”

The “are you better off” question may have been an indictment of Jimmy Carter, but Republican hopes notwithstanding, 2012 isn’t 1980. The economy isn’t as bad, and most importantly, the public still remembers that day four years ago when Obama took office during the worst economic environment since the Great Depression.

On Inauguration Day 2009, the economy had lost nearly 4 million jobs and was still hemorraging at an unprecedented rate.

Now with approximately 150,000 new jobs per month and GDP growth of 1.7 percent, there’s no question that "yes," we’re better off today than when Barack Obama took office. It’s also true that current conditions are on the bad side of "meh." So, Romney-Ryan are going to have to not just ask "Are you better off?" they're going to have to convince voters that they would do better. And remember, Moody's has reported that regardless of who has the keys to the White House in November, economists expect 12 million new jobs in the next four years.

Lies and damned lies are not going to win the White House for Romney-Ryan. Not that they won't continue to go that route.

As Ryan spoke to supporters in North Carolina Monday, he cited bankruptcy numbers to make the point that failing businesses mean fewer jobs. “In 1980 under Jimmy Carter, 330,000 businesses filed for bankruptcy,” he said. “Last year, under President Obama’s failed leadership, 1.4 million businesses filed for bankruptcy.”

But Ryan's math gets fuzzy here. It seems he lumped business bankruptcies and much more numerous personal bankruptcies together. Of the 331,264 bankruptcies in 1980, only 43,694 were for businesses, according to the American Bankruptcy Institute.

Of the 1,410,653 total bankruptcy filings last year, 47,806 were business bankruptcies, according to the institute. And, again, the numbers are falling. In 2009, there were 60,837 business bankruptcies. In July, the latest month with complete statistics, business bankruptcies were 22 percent lower than a year earlier, and personal bankruptcies were down 11 percent.

Far more appropriate than "Are you better off?" should be "Why should anyone trust Romney-Ryan to do what's best for the majority of Americans?"

Behind almost all of the disturbing issues raised by Mitt Romney's jaw-dropping tax returns stands one largely unchallenged conservative article of faith. Much lower tax rates for capital gains than income earned through labor, conservatives claim, spur investment, catalyze economic growth and fuel job creation. But if that Republican theology isn't true, then the United States has for decades done nothing more than deliver a massive windfall to the wealthiest Americans needing it least. Unfortunately, that's precisely what the data show. As it turns out, lower capital gains taxes increase income inequality - and not investment - in America.

As Paul Krugman recounted two weeks ago, the historically low capital gains rate enjoyed by Mitt Romney hasn't always been 15 percent. In the not-too-distant past, it reached 39.9 percent and with the Reagan tax reform of 1986 was briefly the same as the top tax rate on income. But successive presidents of both parties lowered the capital gains rate on investment income because they believed, the Washington Post explained, "it spurs more investment in the U.S. economy, benefiting all Americans."

But as Jared Bernstein demonstrated with the chart above, there's no evidence to support that claim. Bernstein found that the business cycle, not acts of Congress, drive investment in the U.S.

Hard to see anything in the picture supporting the view that either the level or changes in cap gains taxes play a determinant role in investment decisions.

Remember, the ostensible reason for the favoritism in tax treatment here is to incentivize more investment and faster productivity growth. But that's not in the data and the reason it's not in the data is because investors aren't nearly as elastic to cap gains rates as their lobbyists say they are (more precisely, they'll carefully time their realizations to maximize their gains around rate changes, but that's not real economic activity-that's tax planning).

Reviewing other analyses, Brad Plummer of the Washington Post concurred with that assessment that low capital gains taxes don't necessarily jump-start investment in the economy:

The top tax rate on investment income has bounced up and down over the past 80 years—from as high as 39.9 percent in 1977 to just 15 percent today—yet investment just appears to grow with the cycle, seemingly unaffected...

Meanwhile, Troy Kravitz and Len Burman of the Urban Institute have shown that, over the past 50 years, there's no correlation between the top capital gains tax rate and U.S. economic growth—even if you allow for a lag of up to five years.

Billionaire Warren Buffett, the inspiration for the "Buffett Rule" advocated by President Obama and his Democratic allies, couldn't agree more. As he told The New York Times last year:

"I have worked with investors for 60 years and I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77—shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off."

But if lower capital gains tax rates have had little impact on investment, they have had an outsized impact on income inequality in the United States.

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If nothing else, Mitt Romney seems dedicated to proving that repetition of a lie will make it true. On no point is Romney's tilting against the windmill of truth more comically pathetic than his long-ago debunked claim that President Obama "did not cause this recession, but he made it worse." After a tidal wave of fact-checkers demolished his mythology last summer, Romney on June 30 pretended, "I didn't say that things are worse" before reinstating the falsehood in his stump speech just days later. Now, Mitt has a new twist on his "Obama made it worse" fraud, declaring in light of the improving economic outlook that "It's getting better not because of him, it's in spite of him and what he's done."

Sadly for the myth-maker from Massachusetts, the numbers and the overwhelming consensus of economists - including John McCain's 2008 brain trust - demand Mitt Romney give credit where credit is due.

That, of course, is something the serial deceiver Romney is refusing to do, even as he acknowledges the economy is improving. As Mitt put it in New Hampshire ten days ago:

"I'm sure the president will want to take credit for it, for any improvement. Guess what? He doesn't deserve it."

Two days later during a GOP debate, Romney repackaged his con job this way:

"The president is going to try and take responsibility for things getting better. You know, it's like the rooster taking responsibility for the sunrise. He didn't do it," Romney said. "In fact, what he did was make things harder for America to get going again."

But back on planet Earth where the force of gravity still applies and the sun rises in the east and sets in the west, Romney's slander shuold receive the ridicule it rightly deserves.

This summer, Time blasted Romney's accusation that "the recession is deeper because of our President," concluding "that Romney's claim has no credible basis" because "there's no credible economic data showing that Obama has inflamed our economic problems." As Greg Sargent noted on June 27, both the AP and the Washington Post's own fact-checker demolished Romney's talking point on the recession which the NBER declared over in June 2009. Confronted three days later by NBC producer Sue Kroll about the growing economy, modest job gains and surging stock market, Romney simply denied he ever made the charge:

"I didn't say that things are worse...What I said was that economy hasn't turned around."

Nevertheless, just four days later Romney marked Independence Day by returning to his lie. As the New York Times reported:

Speaking at the annual July Fourth parade here on Monday, Mr. Romney told a crowd of supporters and passersby, "the recession is deeper because of our president," adding, "it's seen an anemic recovery because of our president."

Mr. Romney made a similar assertion earlier when reporters had pressed him on the point near the parade staging grounds, after initially seeming to limit his commentary to the president's handling of the recovery, which he said, "has been slower and more painful,'' But then he went ahead and said it, that the president "made the recession worse."

As it turns out, it's not just the tidal wave of reporters and fact-checkers that washed away the mud Mitt Romney hurled at President Obama on the economy. A bevy of economists, including ones who worked for Romney endorser John McCain, long ago concluded that Barack Obama saved the U.S. economy from calamity.

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On Monday, Jeb Bush's Wall Street Journal op-ed raised conservative hopes that the former Florida Governor would jump in and grab the wheel of the clown car that is the 2012 GOP presidential field. But if Republicans were disappointed when Jeb squelched the nascent "Draft Jeb" movement, the American people should be relieved. After all, the American social mobility that Jeb touted in "Capitalism and the Right to Rise" is at modern lows after the decade of economic devastation presided over by his brother. And despite Jeb's mythmaking about taxes, regulations and so much else, the record shows that more Americans can climb the economic ladder when a Democrat sits in the White House.

What Upward Mobility? Whose Right to Rise?

To be sure, conservatives are praising Jeb Bush's ahistorical and data-free endorsement of the call to arms Congressman Paul Ryan issued at the Heritage Foundation:

Congressman Paul Ryan recently coined a smart phrase to describe the core concept of economic freedom: "The right to rise."

Think about it. We talk about the right to free speech, the right to bear arms, the right to assembly. The right to rise doesn't seem like something we should have to protect.

But we do. We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

Unfortunately for Jeb Bush and Paul Ryan, the supposed "right to rise" is now in tatters after the very years in which their ideology reigned supreme. As Fareed Zakaria pointed out in "The Downward Path of Upward Mobility":

Some believe we're still doing fine. In his address to the Heritage Foundation last month, Rep. Paul Ryan (R-Wis.) declared, "Class is not a fixed designation in this country. We are an upwardly mobile society with a lot of movement between income groups." Ryan contrasted social mobility in the United States with that in Europe, where "top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class."

In fact, over the past decade, growing evidence shows pretty conclusively that social mobility has stalled in this country. Last week, Time magazine's cover asked, "Can You Still Move Up in America?" The answer, citing a series of academic studies was, no; not as much as you could in the past and -- most devastatingly -- not as much as you can in Europe.

As Zakaria noted, according to the OECD, upward mobility from the bottom was "was significantly lower in the United States than in most major European countries, including Germany, Sweden, the Netherlands and Denmark." And as TPM reported, an analysis by the Economic Mobility Project suggested that Jeb and George Bush could be the poster children for the limits of social mobility in the United States:

"Most studies find that, in America, about half of the advantages of having a parent with a high income are passed on to the next generation," their report concludes. "This means that one of the biggest predictors of an American child's future economic success -- the identity and characteristics of his or her parents -- is predetermined and outside that child's control. To be sure, the apple can fall far from the tree and often does in individual cases, but relative to other factors, the tree dominates the picture. These findings are more striking when put in comparative context. There is little available evidence that the United States has more relative mobility than other advanced nations. If anything, the data seem to suggest the opposite."

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When President Obama on Tuesday declared that decades of Republican trickle-down economics "never worked," conservatives were predictably apoplectic.

But for all of their protests of "class warfare", "socialism" and worse, Obama was being kind to the Republican ideologues. After all, as the historical record shows, from economic growth and job creation to stock market performance and just about every other indicator of the health of American capitalism, the modern U.S. economy has almost always done better under Democratic presidents. Despite GOP mythology to the contrary, America generally gained more jobs and grew faster when taxes were higher (even much higher) and income inequality lower. And while the U.S. recovery from the Bush recession remains painfully slow, most economists - including the nonpartisan CBO and some of John McCain's own 2008 advisers - believe President Obama saved it from the abyss.

(Click a link below for the details on each.)

• Job Creation and Economic Growth
• The Stock Market
• Income Inequality
• National Debt
• The Bush Recession and the Obama Recovery

Job Creation and Economic Growth

To be sure, George W. Bush provided the perfect bookend to era of modern Republican economic management ushered by Herbert Hoover. The verdict on President Bush's reign of ruin was pronounced even before Barack Obama took the oath of office. Just days after the Washington Post documented that George W. Bush presided over the worst eight-year economic performance in the modern American presidency, the New York Times on January 24, 2009 featured an analysis ("Economic Setbacks That Define the Bush Years") comparing presidential performance going back to Eisenhower. As the Times showed, George W. Bush, the first MBA president, was a historic failure when it came to expanding GDP, producing jobs and fueling stock market growth.

On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The meager one million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:

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On this the fourth Thanksgiving weekend since the start of the Bush recession, families across America are still struggling with persistently high unemployment, underwater mortgages and stagnant wages. But as the nonpartisan Congressional Budget Office (CBO) reminded us this week, Americans can be thankful for the 2009 stimulus. Despite Republican mythmaking that the American Recovery and Reinvestment Act (ARRA) "created zero jobs," the CBO reported that the stimulus added up to 2.4 million jobs and boosted GDP by as much as 1.9 points in the past quarter. As it turns out, that conclusion confirms the consensus of most economists - including John McCain's 2008 brain trust- that President Obama's recovery program is continuing to deliver benefits for the American people.

From the beginning, the CBO has testified to the success of the largely concluded 2009 stimulus package in driving employment and economic growth. (That's one reason why Republicans like GOP frontrunner Newt Gingrich want to abolish the agency.) Now, as The Hill reported Tuesday, the CBO has found that "President Obama's 2009 stimulus package continues to benefit the struggling economy":

The agency said the measure raised gross domestic product by between 0.3 and 1.9 percent in the third quarter of 2011, which ended Sept. 30. The Commerce Department said Tuesday that GDP in that quarter was only 2 percent total.

CBO said that the stimulus also lowered the unemployment rate by between 0.2 and 1.3 percentage points and increased the number of people employed by between 0.4 million and 2.4 million...

By CBO's numbers, the $800 billion stimulus added up to 0.9 million jobs in 2009, 3.3 million jobs in 2010 and 2.6 million jobs in 2011.

But to really gauge the success of the stimulus, it's worth taking a second look at just how dire the U.S. economic situation was when the Obama administration made its fateful prediction that unemployment would peak at 8 percent. As The Economist and the Washington Post's Ezra Klein detailed, in early 2009 the American economy was not only in much worse shape than anyone imagined; it was literally on the brink of collapse.

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