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“At Odds With Reality”: Three Conservative Myths About Government

The Path to Prosperity blueprint of House Budget Committee Chairman Paul Ryan—the foundation for the budget that the House passed last week—reflects conservative politicians’ war on government. As my Center on Budget and Policy Priorities colleagues conclude about a Congressional Budget Office, or CBO, analysis of the Ryan plan:

The CBO report, prepared at Chairman Ryan’s request, shows that Ryan’s budget path would shrink federal expenditures for everything other than Social Security, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and interest payments to just 3¾ percent of the gross domestic product (GDP) by 2050. Since, as CBO notes, ‘spending for defense alone has not been lower than 3 percent of GDP in any year [since World War II]‘ and Ryan seeks a high level of defense spending…the rest of government would largely have to disappear.

The conservatives’ war is sustained by a series of myths.

Myth No. 1: Spending Is Out of Control, and Only Draconian Cuts Will Rein It In

As my colleagues at the center have shown, however, noninterest spending outside Social Security and Medicare spiked in the Great Recession but is scheduled to fall substantially as a share of GDP as the economy recovers (see chart).

Non-Interest Spending Outside Medicare and Social Security

To be sure, government spending will rise as a share of gross domestic product as the population continues to age, healthcare costs throughout the economy continue to rise, and more Americans become eligible for Social Security and Medicare. But, my Center on Budget and Policy Priorities colleagues have written:

When Americans hear talk of the government exploding in size and reach, they don’t usually think this means that more people will receive Social Security and Medicare because the population is growing older or that Medicare will cost more because of factors like the aging of the baby boomers and advances in medical technology that improve health and prolong life but at significant cost. Outside of those demographic and health cost factors, the portrait of a rapidly growing federal behemoth is simply at odds with reality, since costs are shrinking to levels well below their historical averages.

Myth No. 2: The Country Faces a Looming Debt Crisis Due to the Debt Incurred In the Past Few Years

That myth fueled irresponsible brinksmanship over legislation to raise the nation’s debt limit last year, and it stands in the way of meaningful deficit-reduction.

While the policies that Presidents Bush and Obama and Congress enacted to combat the financial crisis and Great Recession helped drive up deficits after 2007, those policies were temporary and will have little effect on deficits and debt going forward. The weak economy and the legacy other policies enacted under President Bush (especially his tax cuts) play a far larger role. Indeed, the Congressional Budget Office calculates that under current law (which calls for the Bush-era tax cuts to expire at the end of this year), deficits would fall over the coming decade as the economy improves, and debt would fall to 61.3 percent of GDP in 2022.

Yes, the gap between spending and revenues will rise again as a share of GDP in later decades if we don’t take prudent action to rein in future deficits. Policymakers and analysts who are not ideologically committed to radically shrinking government recognize that this will require a balanced mix of revenue and spending measures. But such a balanced policy runs up against myriad tax myths, including the following:

Myth No. 3: Americans’ Tax Burden Is High and Rising

That’s certainly the impression the Tax Foundation wants to convey in its latest “Tax Freedom Day” report released earlier this week: “Americans will work 107 days into the year, from January 1 to April 17, to earn enough money to pay this year’s combined 29.2% federal, state, and local tax bill. “

But notice, the report does not refer to “every” American or the “typical” American. That’s because, as this Center on Budget and Policy Priorities report demonstrates, four out of five U.S. households likely pay a much lower average tax rate than the one highlighted in the Tax Foundation report. Moreover, average federal income rates are at historic lows for typical taxpayers. When total taxes, including federal and state and local taxes, are taken into account, the United States has one of the lowest average tax rates among all industrialized countries.

So, here’s the question:

Are those who advance these myths interested in fixing the deficit and debt problem, as most Americans would hope, or are they conducting a bait-and-switch in pursuit of antitax advocate Grover Norquist’s quest to “reduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub?”

 

By: Chad Stone, Chief Economist at The Center on Budget and Policy Priorities, Published in U. S. News and World Report, April 5, 2012

April 6, 2012 - Posted by | Deficits | , , , , , , ,

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