“Republicans Return To Tax Cut Fantasyland”: Every Argument Republicans Have Made In Last 20 Yrs About Taxes Have Been Wrong
One surprising thing about the campaign Mitt Romney ran in 2012 was that cutting taxes, a theme you might have expected from someone of his profile, wasn’t at the center of it. Perhaps wary of getting painted, even more than he already was, as the representative of the rich, Romney proposed a tax cut plan that was, by Republican standards anyway, rather modest. But those were the bad old days—tax-cut fever is back in the GOP, with a vengeance. From Bloomberg’s Richard Rubin:
The campaign for the Republican nomination for president is poised to become a race to the biggest tax cut.
More than a dozen candidates are vying for attention from donors and the party’s base voters, and they aren’t letting the U.S. budget deficit get in their way.
Senator Marco Rubio of Florida kicked off the competition with his plan to boost economic growth by slashing taxes on investments, wages and business income. Even the plan’s proponents concede it would reduce tax collections by at least $1.7 trillion in the first decade, largely favoring the top 1 percent of Americans over the middle class.
Senator Rand Paul of Kentucky says he will propose the biggest tax cut in U.S. history. Rick Perry and Rick Santorum, both considering repeat presidential campaigns, ran on reducing taxes four years ago and would be expected to do so again.
The shrinking deficit—it’s less than half of what it was four years ago—creates an opening for Republicans to return to the tax-cut politics that propelled Ronald Reagan and George W. Bush into the White House.
“It focuses on the right question at the right time, which is: How will we grow more rapidly?” Douglas Holtz-Eakin, a Republican and former director of the Congressional Budget Office, said of the proposal Rubio released last week with Senator Mike Lee of Utah. Holtz-Eakin acknowledged that the tax cuts require spending reductions to keep the deficit in check.
Holtz-Eakin is not just wrong about that, but wrong in two separate ways. First, how we grow more rapidly is not at all the right question. The question everyone is asking now is how we spread the gains of a growing economy more widely. And second, even if the question were how to grow more, tax cuts would not be the answer.
You have to admire one thing about the Republican perspective on this issue: their unflagging insistence, despite a mountain of evidence to the contrary, that the best and perhaps only way to affect the economy is by adjusting the tax rate paid by wealthy people. Here’s a quick history review of the last two decades: In 1993, Bill Clinton signed a budget that included tax increases. Republicans unanimously said it would bring a “job-killing recession.” It didn’t; in fact, almost 23 million jobs were created during Clinton’s two terms. Then George W. Bush got elected and signed two rounds of enormous tax cuts. Republicans promised these cuts would super-charge the economy. They didn’t; job growth was weak throughout Bush’s term. Then at the end of 2012, the deal ending the “fiscal cliff” allowed the top income tax rate to revert back to what it had been during the Clinton years. Republicans grumbled that this increase would hamper job growth. That didn’t happen either; in the two years since, the economy has created 5 million jobs.
In other words, the Republicans’ essential theory about upper income taxes—increasing them destroys jobs and smothers growth, while cutting them explodes growth and creates huge numbers of jobs—is not just wrong, but demonstrably, obviously, spectacularly wrong. Yet they keep saying it.
The reason isn’t all that difficult to concern. For conservatives, cutting upper-income taxes isn’t a practical imperative, it’s a moral imperative. It’s just the right thing to do. Taxes are an inherent moral evil, and taxes on those who have proved their industriousness and virtue by being rich are the most profound moral evil of all. This is a very different argument from the practical one, which says that if we cut taxes for the wealthy then good things will happen to everyone as a consequence.
Republicans know that the moral argument has appeal to only a very small number of Americans, mainly those would benefit directly from upper-income tax cuts. So the practical argument is the one they must offer, even if it happens to be utterly false.
So here’s the question they ought to be asked: “Every argument Republicans have made in the last 20 years about taxes has turned out to be wrong. Now you’re saying if we cut upper-income taxes, it will produce terrific growth. Why would that be true now when it hasn’t been true before?”
By: Paul Waldman, Senior Writer, The American Prospect, March 13, 2015
“Don’t Let The GOP Buy Your Vote, Stupid”: The GOP Has Zero Credibility When It Comes To Fiscal Responsibility
If you want to understand exactly how the Republicans plan to buy the votes needed to win the 2016 presidential election, look no further than “The Economic Growth and Family Fairness Tax Plan.”
Heard of it? The plan, which is being touted with Willy Loman-esque desperation by Sens. Marco Rubio and Mike Lee, seeks to fix our “antiquated and dysfunctional…federal tax system.” And it’s won slow clap after slow clap from Republican-friendly conservatives at Americans for Tax Reform, National Review, and The American Enterprise Institute, whose James Pethokoukis raves, “Lee and Rubio might have cooked up the first great tax cut plan of the 2000s.”
Yeah, not so much. Despite some good features that would likely spur economic growth—such as reducing corporate tax rates by 10 percentage points, switching to a territorial collection system, and capping business-income rates filed on individual Schedule C forms—what the plan does is return us to the early years of the George W. Bush presidency, when budget continence was never allowed to get in the way of shoveling cash to targeted voters.
Recall, for instance, how Bush and a Republican Congress pushed through an unfunded (and unnecessary) Medicare prescription drug plan back in 2003 as a straight-up gift to seniors, who had voted Democratic in 2000. Mission accomplished: Bush went from getting just 47 percent of the senior vote against Al Gore in 2000 to pulling 52 percent of the 65-plus crowd against John Kerry in 2004.
At least Bush was pissing away theoretical budget surpluses that were falsely projected to last far into the future. After years of record-setting deficits and mounting national debt, today’s politicians certainly don’t have that excuse. Yet last year’s Republican budget resolution called for net spending increases every year for the next 10 years, starting at $3.7 trillion and culminating in projected spending of $5 trillion in 2024 (in current dollars). And given the whopping increases in real per-capita spending under a Republican president and Congress during Bush’s first term in office, the GOP has zero credibility when it comes to fiscal responsibility.
There’s no doubt that a spending hawk such as Lee, who has proposed a balanced-budget amendment in the past, knows that. Yet at the heart of his and Marco Rubio’s plan is a massive giveaway to parents in the form of a new $2,500 child tax credit (this would be added to an already existing $1,000 child credit) with no phase-out due to income. However, because it’s “limited to the sum of total income and payroll tax liabilities, including employer-side payroll tax liability,” it means that low-income parents won’t be able to claim the full amount.
The expanded child credit is a big reason why, as AEI’s Pethokoukis grants, the plan would “lose something like $4 trillion in federal tax revenue over a decade, maybe half that if you apply ‘dynamic scoring’ that factors in the effects of economic growth.” (Dynamic scoring attempts to model changes in people’s behavior to changes in the tax code. While the method is easily abused, its core insight—that we change our consumption patterns when costs and benefits vary—is sound.)
But unlike cutting taxes on business activity or trimming top marginal tax rates, expanding the child tax credit has nothing to do with spurring economic growth. This is something that conservatives grant in most contexts. As Curtis S. Dubay of the Heritage Foundation wrote just last year, “Increasing the credit would be a targeted tax cut that would put more money in the pockets of people who qualify for the expansion. However, it would not improve economic growth like rate reductions would because a [child tax credit] increase would not reduce those disincentives on productive activities.”
The free-market Tax Foundation agrees. In fact, in an analysis of the Rubio-Lee plan, it ran both static and dynamic scores of the plan. On its static score for the next 10 years, the Tax Foundation found the Rubio-Lee plan meant serious reductions in annual federal revenue. For instance, switching to just two tax brackets of 15 percent and 35 percent would mean $31 billion less each year compared to current law. The full expensing of business equipment would lead to another annual loss of $78 billion, while the changes to the business taxes would cut $210 billion. And the expanded child tax credit would mean the feds would forgo another $173 billion.
Yet in its dynamic score of the same provisions, something different happens. The consolidation of tax brackets yields an average annual net gain of $5 billion, full expensing yields of $115 billion, and the changes in business taxes pulls in a net of $210 billion a year. But the expanded child tax credit? It still shows an average annual loss of $173 billion.
So the expanded child tax credit has nothing to do with promoting growth. Indeed, as my frequent co-author Veronique de Rugy points out at National Review, the generally accepted best way to promote economic growth via tax policy is by cutting high marginal rates. But because of the size and scope of Rubio and Lee’s expanded child tax credit they can’t reduce the top individual rate below 35 percent without punching an even bigger hole in revenue. “If bolstering the economic status of families is the point of all this,” she writes, “the way to go is lower tax rates, not a tax credit.”
In their explanation of the plan, Rubio and Lee claim that the expanded child tax credit is simply a way of abolishing what they call “the Parent Tax Penalty.” I’m sure I’m not the only one who has trouble following the logic here: “As parents simultaneously pay payroll taxes while also paying to raise the next generation that will pay payroll taxes, parents pay more into the old-age entitlement systems.” Huh? Parents pay to raise their children, yes. When those kids enter the workforce, they (not their parents) will pay taxes on their wages. Forget those “It’s a child, not a choice” bumper stickers. Kids today apparently are to be most valued for their ability to pay into unsustainable old-age retirement plans that need to be scrapped, not propped up.
Questions abound: If the amount of income subject to Social Security taxes is capped, doesn’t it also make sense then to phase out the credit above certain income levels? What about all the tax dollars that flow to children (and their parents) during their first 18 to 21 years? And if the expanded child tax credit is supposed to credit parents for future tax payments made by their children (yes, getting complicated), then why are low-income parents’ credits “limited to the sum of total income and payroll tax liabilities”? Aren’t we crediting parents for their kids’ future tax payments?
I’d argue instead that the “family fairness” portion actually has very little to do with the future past the 2016 election. Expanding the child tax credit, especially in a way that keeps the full amount for middle- and upper-class parents while limiting the amount low-income parents can get, is a pretty obvious (and obnoxious) way to buy votes among likely Republican voters. Especially when we all know that the GOP has no intention of trimming $173 billion out of federal spending to pay for it.
We’re long past the time for a serious conversation about how much government we want to buy and at what price. If the Obama years are any indication, the Democrats are genuinely uninterested in having that conversation. (The president’s latest budget proposal would increase spending over the next decade by more than 50 percent and end the period with bigger annual deficits than we have today.) But the Republicans, who are supposed to know better and be better on fiscal issues, are part of the problem too.
Every bit as much as the tax-and-spend Dems they love to attack, the Party of Reagan ushered in “the Golden Age of Government by Groupon.”
The only question that remains is how much our kids and grandkids will hate us for how much debt—I mean “family fairness”—we’ve amassed in their name.
By: Nick Gillespie, The Daily Beast, March 13, 2015
“Trying Every Trick In The Book”: Republicans Stop At Nothing To Attack Immigrants
On March 3, the House of Representatives finally voted for a clean DHS funding bill. Much of the media reported that Republicans saw the irresponsibility of their threats to shut down Homeland Security and passed a clean bill. But they didn’t, and no one should lose sight of that.
After trying every trick in the book to scuttle the bill, their leadership allowed the vote to happen, but Republicans never caved. Republicans voted over two to one (167-75) against the bill. It only passed because of full Democratic support.
It’s clear that Republicans will stop at nothing to attack immigrants. The fact that national security was on the line was immaterial: Republicans saw an opportunity to display their animus toward all immigrants, and Latinos in particular, and they took it.
This publicity stunt gave Republicans the chance to pander yet again to the most virulent anti-immigrant members of their party. Take, for instance, William Gheen of Americans for Legal Immigration and his comments during the heat of the DHS fight in mid-February:
[I] wouldn’t put anything past [the administration, because] the people who are supporting the organized and well-funded illegal alien invasion of our homeland have the blood of many thousands of Americans on their hands that have been killed, injured raped and robbed by illegal immigrants.
Sure, Gheen is a fringe extremist. But what he’s saying is strikingly similar to what we’re hearing from the Republican Party.
Kansas Secretary of State Kris Kobach, the architect of Mitt Romney’s “self-deportation” strategy, entertained the suggestion that Obama’s executive actions could eventually result in Latinos conducting an “ethnic cleansing” of their fellow Americans. Sen. Tom Coburn, Rep. Mike Kelly, and Rep. Louie Gohmert have also warned that the president’s immigration policies could lead to violence.
While some in the GOP tried to tell a different narrative — that this was just about reining in presidential excess and not about their being anti-immigrant — the fact is that the entire Republican Party is at fault. Not one House Republican signed the discharge petition to allow even a vote on the Senate’s bipartisan comprehensive immigration reform bill. And Senate Republicans who backed that bill, including Sen. Marco Rubio, now say they no longer support it. At this very minute, House Republicans are bringing up even more anti-immigrant legislation, including deportation-only legislation and a bill that would drastically change U.S. asylum and humanitarian protections to put domestic violence survivors and victims of human trafficking at serious risk.
Ultimately, it was Ann Coulter who summed up the Republican position on the DHS debate: Undocumented immigrants (she calls them “illegal aliens [who] have killed, raped and maimed thousands of Americans”) pose a greater threat to our nation than does ISIS.” While not all Republicans used language as biting as that, it was crystal-clear that Republicans believe that attacking immigrants, not funding DHS, should be the top priority.
Who would have imagined that a national party, never mind the Republican Party, would be so opposed to finding any solution for the almost 12 million undocumented people already here that they would risk our national security during the dangerous time we are in now? Yet that’s the reality of the GOP today, and it’s our responsibility to hold them accountable.
By: Michael B. Keegan, President, People For the American Way, The Blog, The Huffington Post, March 6, 2015
“Dynamic Scoring Isn’t A Magical Tool”: Here’s How Conservatives Rig The Budget Game In Washington
When Republicans decided not to retain Doug Elmendorf as head of the Congressional Budget Office (CBO), Democrats became concerned that conservatives would try to rig the budget process. When the GOP required the CBO to use dynamic scoring for its legislative scores, Democrats became even more concerned. Those fears have proven overblown. The new CBO chair, whom Republicans announced last week, is Keith Hall, an economist at the Mercatus Center who was the commissioner of the Bureau of Labor Statistics under President Barack Obama. He’s a credible economist, not a partisan hack.
If you still want to see the budget gamed, though, look no further than the Tax Foundation’s score of Senators Marco Rubio and Mike Lee’s tax plan. The Foundation says that under a static scoring model, which doesn’t account for macroeconomic effects of the plan, the plan would cost the federal government $414 billion annually. That’s a huge amount of money. The government collects about $3 trillion a year in tax revenue, meaning the Rubio-Lee plan would be a 12.5 percent cut, a bold but unsurprising figure. Before Lee teamed up with Rubio, he released a first draft of his tax plan that reduced government revenue by an average of $240 billion a year. The new plan has even more tax cuts.
But when the Tax Foundation applies a dynamic scoring model to estimate the revenue effects of Rubio-Lee, the findings get downright wild. The Foundation projects that once the economy adjusts to the changes, it will grow enough to generate $508 billion (in 2015 dollars) in additional revenue each year. That would leave the American taxpayer with a cool $94 billion net annual gain.
To understand why this is so ridiculous, look at the Joint Committee on Taxation’s dynamic scoring estimates for the tax plan former Representative Dave Camp released last year. (The JCT produces revenue estimates for CBO.) The JCT used eight different dynamic scoring models and provided eight different estimates. “The increase in projected economic activity is projected to increase revenues relative to the conventional revenue estimate by $50 to $700 billion, depending on which modeling assumptions are used, over the 10-year budget period,” the report concluded. Now, $700 billion is nothing to sneer at, but that’s over a ten-year period. The Tax Foundation’s dynamic scoring model raised nearly that amount of additional revenue every single year.1
This is a slightly different comparison, because JCT’s numbers come from the 10-year period while the economy adjusted to the tax plan versus the Tax Foundation’s numbers, which are from after the economy full adjusted. The difference is still stark.
Once the Foundation releases the full report Monday, Rubio and Lee will surely cite the numbers ad nauseam to gin up favorable coverage and analyses of the proposal. The Tax Foundation is giving Rubio and Lee a major political boost by producing such a friendly score.
I’m sure the Foundation’s economists would disagree that they are doing the two senators a huge favor. They would say that the Rubio-Lee plan is far friendlier to economic growth than Camp’s plan was. Maybe they’re right. But it’s not that much friendlier. These numbers are far beyond any realistic estimate of Rubio-Lee’s macroeconomic effects. And it’s basically impossible to produce realistic estimates to start. “Theoretically dynamic scoring is the right thing to do,” Peter Orszag, who was director of CBO under President Barack Obama from 2007 to 2008, told me in January. “Just practically, it’s problematic. When you’re forced to pick one model, you’re pushing scientific knowledge beyond reality. You’re forcing the organization to pick one ‘true’ model when the economic science hasn’t produced a single model that works.”
Many conservative economists agree. Douglas Holtz-Eakin, a former CBO director, has frequently said that dynamic scoring isn’t a magical tool to make huge tax cuts look fiscally responsible. Greg Mankiw, who was the top economist for President George W. Bush from 2003 to 2005, recently wrote in the New York Times that while dynamic scoring is theoretically correct, “there are also good reasons to be wary of the endeavor.”
If Republicans had required that the CBO and the JCT use the Tax Foundation’s dynamic scoring model, it would have been a major problem. At least now the two parties accept the CBO’s score as legitimate. If they demand a bill to be deficit-neutral, the CBO is the final arbiter. That would all change if the Tax Foundation’s models were used. Of course, the actual likelihood of that happening was never clear. But if Republicans had required such changes, Democrats would never have trusted any score on any legislation—and rightfully so.
The two sides have enough trouble agreeing to pass anything today. It would be that much harder if they couldn’t even agree on the scores of legislation. You can understand why Democrats were so nervous as Republicans debated how to change the agencies.
1This is a slightly different comparison, because JCT’s numbers come from the 10-year period while the economy adjusted to the tax plan versus the Tax Foundation’s numbers, which are from after the economy full adjusted. The difference is still stark.
By: Danny Vinik, The New Republic, March 5, 2015
“Strength, Toughness & Resolve Is All It Takes”: On Display At CPAC; How The Presidential Primary Makes GOP Candidates Simple-Minded
The Conservative Political Action Conference is always guaranteed to produce head-shaking moments, as one future presidential candidate after another tells the crowd of activists what they want to hear, and then some. It’s a concentrated version of the long Republican primary process, with everything that characterizes contemporary American conservatism cooked down to its viscous essence over the course of a few days.
You may have already heard about Scott Walker’s comments yesterday at the conference, in which he made an analogy between his fight to crush unions in Wisconsin and the fight against ISIS and other terrorist groups. I’ll get to that in a moment, but first I want to look at something Marco Rubio said this morning, because they go together in a way that tells us a lot about what we’re going to be hearing from these candidates for the next year and a half.
Speaking from the CPAC stage, Rubio said that “if we wanted to defeat [ISIS] militarily, we could do it.” But we haven’t done that, because President Obama “doesn’t want to upset Iran.” I’m sure many in the crowd nodded their heads. First you have the implication that despite the thousands of air strikes we’ve launched against ISIS, we’re not really trying to defeat them, and that doing so would be simple if only Obama had the backbone. But he won’t, because he’s so solicitous of another of our enemies, Iran. If you know that this president is a Muslim-coddling, terrorist-sympathizing weakling, it makes perfect sense.
But in reality, Iran, a Shiite country, despises the Sunni extremists of ISIS. ISIS threatens the government of Iraq, which is Iran’s ally (or lapdog, depending on how you look at it), which is why Iran has sent troops there to fight the terrorist group. Eliminating ISIS is exactly what Iran wants us to do.
Perhaps Marco Rubio understands that, and if given the chance he’d revise his comments. But doing so wouldn’t play too well with the people whose votes he needs, because it would be an acknowledgement that — guess what — things can get pretty complicated in the Middle East. We can be trying to stop Iran from getting nuclear weapons yet still have shared goals with them when it comes to another issue.
That simplifying impulse is what got Walker in trouble, too. When he said yesterday in answer to a question about ISIS, “If I can take on 100,000 protesters, I can do the same across the world,” the problem wasn’t, as many people said, that he was comparing Wisconsinites exercising their free speech rights in opposing his efforts to crush unions to brutal terrorists (he clarified later that that isn’t what he meant to say). The problem was that he was arguing that serious problems, whether it’s your own constituents who disagree with you or a terrorist organization, have essentially the same solution: strength, toughness, resolve. That’s all it takes, and he’s got it. He may not know a lot about foreign affairs, but he doesn’t need to know a lot about foreign affairs.
This is hardly new in the GOP. In 1964, Ronald Reagan said in a speech supporting Barry Goldwater, “They say the world has become too complex for simple answers. They are wrong. There are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.” Republicans have seldom veered from the conviction that in foreign affairs in particular, there are nothing but simple answers.
The trouble is, we’ve seen where that gets you. George W. Bush knew in his gut that every problem had a simple answer. Just as Rubio sees Iran and ISIS in a fictional alliance, Bush thought that Saddam Hussein and al-Qaeda must have been working together, because they’re all Bad Guys, right? And once we show our strength and resolve, the problems will melt before us. We all know how well that worked out.
Try to imagine a Republican presidential candidate who saw the world as a complicated place where sometimes we have to choose between bad options, being strong only gets you so far, and you have to consider the possibility that your actions could have unintended consequences. Would he be willing to say that to his party’s primary voters? Or would he tell them that actually, the answers are all simple, if only we have the courage to see them clearly and act?
I think we all know the answer to that. Campaigns in both parties are seldom going to be full of nuanced exploration of policy issues. But the GOP primary campaign forces its contenders to be particularly simple-minded, whether that’s who they really are or they’re just pretending.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, February 27, 2015
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