“No More Tax Cuts For The Wealthy”: As Debt Battle Looms, No Option But To Raise Taxes
President Obama and Republican leaders in Congress made history of sorts last year when they agreed to a 10-year plan to reduce annual deficits with spending cuts and no tax increases. Mr. Obama vows not to let it happen again.
Both he and Speaker John A. Boehner put down their respective markers this week, suggesting a potential replay of their damaging showdown over the debt ceiling last summer. On Tuesday, the speaker reiterated what has become known as the Boehner Rule: House Republicans will not increase the debt ceiling again without spending cuts of a greater amount. Mr. Obama, on Wednesday, told him Congress must pass a “clean” debt-limit increase to cover the nation’s obligations; there will be no more deficit deals, he said, without higher tax revenues from the wealthiest Americans.
While the Republicans largely prevailed last year, this time the Obama administration believes it has the greater leverage. The pain of the reductions is being felt as House Republicans advance the annual spending bills; already they have proposed to raise the spending caps for the military, and they are squabbling over domestic programs.
“It’s not reasonable or right for there to be another discussion of a spending-only package” for reducing deficits, said Jacob J. Lew, the White House chief of staff and former budget director. “When you look at how we got into the hole we’re in, it’s very clear that tax cuts for the wealthy were part of contributing to the deficits we’re now trying to close.”
Mr. Obama’s position leaves open the question of whether election-year politics will play to his advantage among voters who do not like deficits or the measures needed to reduce them. Neither party expects the fight to be resolved until after the election, the results of which will determine who actually has the upper hand in a lame-duck Congress. The debt limit must be raised by early 2013, Treasury has said.
The two budget deals last year — the deficit-reduction compromise in August and a smaller agreement before that — called for cutting $1.7 trillion from so-called discretionary spending, which covers the bulk of federal programs whose budgets Congress controls annually, including air-traffic control, the military, education, research and much more.
Those deals left unscathed the entitlement programs like Medicare, Medicaid and Social Security, which, given the growing aging population, are driving projections of unsustainable deficits.
And those deals, because of Republicans’ resistance, did not raise taxes, unlike the deficit measures of the 1980s and 1990s.
“Tax hikes destroy jobs,” Mr. Boehner said in his speech on Tuesday.
But veterans of past budget wars say that discretionary spending for domestic programs, which make up just 15 percent of the federal budget, cannot continue to bear the brunt without significant implications for government services. “They’ve gone way past fat and are cutting into muscle,” said Bruce R. Bartlett, who was a Treasury official in the Reagan administration.
Nor, these people say, would the public support the deeper reductions that would have to be made in programs like Medicare if taxes are not part of the mix.
“That’s basically why I, and a very large number of other people, conclude that you do need some additional revenues,” said Rudolph G. Penner, a Republican who headed the Congressional Budget Office in the 1980s and was co-chairman in 2010 of a blue-ribbon panel that proposed a debt-reduction plan.
“I’ve been kind of surprised at these recent agreements, where almost all of the reduction comes from discretionary programs over 10 years,” he said. “What you’re talking about is a very large number of years of austerity — through various Congresses, elections and possible natural disasters and terrorist attacks and on and on, which is just not plausible to me.”
Barry Anderson, a former deputy director of the White House and Congressional budget offices, said, “Eventually you’re going to have to increase taxes across the board” — not just for the wealthy — “by at least a third.”
Former Senator Pete V. Domenici, who was the chairman or senior Republican leader on the Senate Budget Committee from 1981 to 2007, said in an interview, “Adequate projections of revenues and expenditures have to be put on the table. Everything has to be on the table.”
Senator Domenici, with Alice Rivlin, a former budget director for Congress and the Clinton administration, was chairman of a panel in 2010 of former lawmakers, administration officials, academics and executives, that produced a blueprint for debt reduction. It came just before a roughly similar plan from a majority on Mr. Obama’s fiscal commission, which was led by Alan K. Simpson, a former Senate Republican leader, and Erskine B. Bowles, a businessman and former chief of staff to President Bill Clinton.
All three recent debt proposals — Bowles-Simpson, Domenici-Rivlin and that of Mr. Penner’s group, sponsored by the National Research Council and the National Academy of Public Administration — recommended trillions of dollars in savings, both from higher taxes and reduced entitlement spending. Yet it is those two sources that the White House and Congress have avoided, given Republicans’ opposition to tax increases and Democrats’ to cutting Medicare unless taxes are raised.
Tax increases were part of nearly every significant deficit-reduction measure of the 1980s and 1990s, including the 1982, 1984 and 1987 packages signed by Ronald Reagan, the 1990 accord under George H.W. Bush and Mr. Clinton’s 1993 measure. The exception was a deal in 1997, though by that agreement Congressional Republicans ratified Mr. Clinton’s 1993 tax increases that they had vowed to repeal.
Mr. Obama’s chief of staff, Mr. Lew, participated in most of those deals, as an aide to House Democratic leaders and then as Mr. Clinton’s budget director.
“The history of dealing with big problems like this is, almost in every case, it’s been a balanced package” of taxes and cuts in both discretionary and entitlement spending, Mr. Lew said. “So it’s not like it is some radical Democratic position.”
By: Jackie Calmes, The New York Times, May 18, 2012
“The World We Live In”: Yes, Tax Cuts Increase The Deficit
On Thursday, House Republicans unanimously rejected a resolution from Rep. Gary Peters stating, among other things, that the Bush tax cuts added to the deficit. If you read the text they were voting on, it’s pretty clear that it wasn’t built for bipartisanship: It’s phrased to suggest that Bush was a liar and Republican governance was a fraud. That kind of thing doesn’t pick up votes across the aisle.
But there’s a more important economic debate here. Republicans occasionally flirt with the idea that tax cuts don’t increase deficits. Senate minority leader Mitch McConnell has said this directly. Speaker John Boehner has decreed that tax cuts don’t need to be offset, but spending proposals do. But there’s a very easy way to see that Republicans don’t really mean this: They believe that tax cuts cause deficits when Democrats are behind them.
The ongoing debate over the payroll tax is a good example. When Republicans proposed a payroll tax cut as stimulus in 2009, it wasn’t offset. When they agreed to it in the 2010 tax deal, it wasn’t offset. But since it has become the White House’s favored policy, House Republicans — the same House Republicans who passed the CUTGO rules stating that spending proposals had to be paid for but tax cuts didn’t — are insisting the payroll tax cut be offset.
Then there’s the Bush tax cuts. When Republicans tally up Obama’s deficits over the last few years, they’re adding $620 billion for the two-year extension of the Bush tax cuts. When they project his deficits for the next five years, they’re assuming the extension of the Bush tax cuts. And they’re doing so explicitly. Earlier in the week, I worked with the Center on Budget and Policy Priorities on a column summing up the projected budgetary impact of every single piece of legislation Obama had signed into law. In the end, my numbers showed, Obama has passed policies adding about a trillion dollars to the deficit. But Keith Hennessey, who directed the National Economic Council under George W. Bush, responded that I had ignored the trillions of dollars in deficits “from policies President Obama proposes to enact in the future (like extending most but not all tax cuts rates beyond 2012)”.
And Hennessey is right. Not about my analysis, which was restricted to actual policies, not proposed policies (should I also have subtracted $4 trillion from the deficit because Obama favors a deficit deal of that size?). But about the Bush tax cuts, which will add trillions of dollars to the deficit if Obama extends all or most of them in 2012.
Finally, there is a particularly odd claim you occasionally hear about the Bush tax cuts: Revenue increased in their aftermath. Dan Holler, the communications director for the Heritage Action, tweeted as much at me yesterday. “revenues increased between 2003 and 2007…how does @ezraklein argue Bush policies ‘pushed revenues’ down?”
This relies on mixing up the effects of inflation, economic growth, and taxes. The normal way to measure how much revenues a given tax regime is pulling in is to look at taxes as a percentage of GDP. In 2001, taxes revenues were 19.5 percent of GDP. In 2002, they fell to 17.6 percent of GDP. In 2003, 16.2 percent of GDP. In 2004, 16.1 percent of GDP. Some of that is the 2001 recession. But at no point in Bush’s presidency, and at no point since, have taxes returned to 19 percent of GDP.
Or, to put it slightly differently, if tax cuts actually increased revenues, then it would have been absurd for George W. Bush to propose tax cuts as a way of paying down the surplus. In that world, tax cuts would have made the surplus larger, and given the government even more of the people’s money. We would end up in a fiscal paradox, with the government constantly trying to give back its surplus, but ending up with an even larger surplus as a result. But that’s not the world we live in.
By: Ezra Klein, The Washington Post, February 3, 2012
Class Warfare, Republican Style
Republicans have finally found a group they think deserves a tax hike: People who don’t make enough money to pay income taxes.
At the recent GOP debate, all the 2012 presidential hopefuls were unanimous in claiming they would reject a deficit-reduction deal if it contained a 10-to-one ratio of spending cuts to tax increases. But as Dave Weigel writes, the GOP’s supposed anti-tax zealots have been strangely unified in arguing that Americans who pay no income taxes — but pay a variety of other taxes — should see their taxes go up:
Republican politicians didn’t make this argument — until the Obama era. What changed? For decades, the “lucky ducky” number, the percentage of Americans that pay no taxes, never rose above 30 percent. The Bush tax cuts pushed it over 30 percent, but not too far over. Then, in 2008 and 2009, the economy collapsed. The government responded with, among other things, new tax deductions.
The result: The percentage of people paying no income taxes spiked up to 47 percent and stayed there. When the Tea Party started rallying in 2009, it wasn’t protesting higher taxes, because federal income taxes were lower, with more loopholes. It was protesting the perception that productive Americans were shelling out for an ever-expanding class of moochers. And Republicans have taken the Tea Party’s lead.
Of course, as Weigel reminds us, these people do pay sales taxes, payroll taxes, gas taxes and the like. As an April 2010 report from Citizens for Tax Justice explained: “Most of these other taxes are regressive, meaning they take a larger share of a poor or middle-class family’s income than they take from a rich family. This largely offsets the progressivity of the federal income tax.” Fat City!
This tax-the-poor attitude is widely held among Republicans, who are currently positioning themselves to oppose an extension of the payroll tax credit. After having demanded Obama extend the Bush tax cuts for the wealthiest Americans, Republicans are now fretting that the payroll tax cut will increase the deficit. Extending the Bush tax cuts increased the debt by far more than an extension of the payroll tax cut will, but that was worth it, because cutting taxes on the wealthiest Americans is the GOP’s highest priority. It’s far more important than stimulating the economy by giving a tax break to people who might actually need the money.
Of course, we’re not supposed to call the GOP’s commitment to making sure the wealthiest Americans pay as little as possible in taxes — and to increasing taxes on lower income folks — by its rightful name: “Class-warfare.” That term only applies to socialists who think we ought to return to Clinton-era tax rates.
By: Adam Serwer, The Washington Post, August 23, 2011
Brazen: Eric Cantor’s Chutzpah
Eric Cantor’s op-ed laying out the Republican agenda is filled with the kind
of distortions you’d expect, but this passage deserves special commendation.
After decrying a National Labor Relations Board Ruling, he continues:
Such behavior, coupled with the president’s insistence on raising the top tax rate paid by individuals and small businesses, has resulted in a lag in growth that has added to the debt crisis, contributing to our nation’s credit downgrade.
So Cantor is arguing that S&P downgraded U.S. debt because of President
Obama’s future plans to increase the top tax rate. That’s such a mind-boggling
claim that even Cantor cannot bring himself to put it in quite these terms. So
instead he breaks it into a series of steps.
First, he claims that the future promise of upper-bracket tax hikes “has
resulted” in a lag in growth. (Question: if the mere possibility of future tax
hikes is enough to depress growth, why don’t we go ahead and just raise taxes?
If we’re going to get the slower growth anyway, might as well get the revenue,
right?)
Second, the lag in growth “caused” by hypothetical future tax hikes added to
the debt crisis.
Third, the debt crisis contributed to the downgrading of the debt.
It’s a fairly brilliant bit of rhetoric. After all, S&P specifically cited the Republican threat to fail to lift the debt ceiling and Republican refusal
to consider any tax increases as the cause of the downgrade. cantor has
found a way to present Obama’s support for higher taxes as the cause of the
downgrade. That’s so brazen I almost have to admire it.
By: Jonathan Chait, The New Republic, August 22, 2011
Populist Sen Mitch McConnell: “I Think Everyone Should Pay Their Fair Share, Including The Rich”
Today, Senate Minority Leader Mitch McConnell (R-KY) named three Republicans to the fiscal super committee that was created by the debt ceiling deal. All three have taken the Americans for Tax Reform anti-tax pledge and support a cockamamie constitutional balanced budget amendment. “What I can pretty certainly sayto the American people, the chances of any kind of tax increase passing with this, with the appointees that John Boehner and I are going to put on there, are pretty low,” McConnell has said.
But McConnell has not always been so virulently anti-tax. In fact, in a 1990 campaign ad, McConnell said that “everyone should pay their fair share, including the rich,” prompting the Associated Press to say that he sounded like a “populist Democrat”:
“Many Republican candidates are, in fact, holding fast to the no-new-taxes position that Bush embraced and then abandoned, even as they try to portray themselves as friends of senior citizens and the disadvantaged. Others are sounding more and more like populist Democrats. ‘Unlike some folks around here, I think everyone should pay their fair share, including the rich,’ Sen. Mitch McConnell, R-Ky., says in a campaign ad.” [Associated Press, 10/28/90]
“A twist of untraditional Republicanism is added to McConnell’s message when he says, ‘Unlike some folks around here, I think everyone should pay their fair share, including the rich. We need to protect seniors from Medicare cuts too,’” wrote Roll Call reporter Steve Lilienthal. “After proclaiming his independence from the President and Congressional leaders, McConnell reassures voters that he will back a ‘fair deal for the working families of Kentucky.’” [“Democrats Flood Airwaves Charging GOP Party of Rich,” Roll Call, 11/5/1990]
If McConnell truly believes this, he should be appalled by current conditions. Tax rates on the richest Americans have plunged in recent years, and millionaires today pay tax rates that are 25 percent lower than they were in 1995. Meanwhile, income inequality is the worst its been since the 1920s, with the top 1 percent of Americans taking home 25 percent of the country’s total income. Just the richest 400 Americans hold more wealth than the bottom 50 percent of Americans combined, and the richest 10 percent of Americans control two-thirds of the country’s net worth.
From the sounds of it, once upon a time McConnell would have found this troublesome. It’s a shame that he doesn’t any longer.
By: Pat Garafalo, Contribution by: Sarah Bufkin; Think Progress, August 10, 2011
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