Monday, May 16, 2011

Tax cut kool-aid

Our favorite conservative economist, Bruce Bartlett, explains the fraud that is GOP fiscal policy and suggests it's starting to unravel:
The flavor of GOP fiscal policies.
Republicans have a problem. The American people are concerned about the budget deficit and know enough basic arithmetic to understand that it can result from higher spending or lower revenues. Republicans, however, insist that taxes must not be increased by a single penny; indeed, they argue that the government doesn’t even have a deficit problem, just a spending problem. Therefore, the only deficit reduction measures they will consider in the Republican-controlled House of Representatives are spending cuts. So certain are Republicans that tax cuts have no impact on the deficit that they included another $3 trillion worth in the budget they passed on April 15.

Democrats all know that the Republican position is ridiculous, that the Bush tax cuts have added some $2 trillion to the national debt and constitute the largest component of projected deficits going forward. These facts are documented in recent reports from the Congressional Budget Office, Pew Charitable Trusts, and the Center on Budget and Policy Priorities. They show that simply allowing all the Bush tax cuts to expire on schedule next year would be sufficient, by itself, to stabilize the debt-to-GDP ratio.

Unfortunately, Democrats have been oddly reluctant to explain the truth about the deficit. They seem paralyzed by fear that they will be attacked by Republicans for being tax increasers. Consequently, the Republican mantra that spending must be slashed, even if it means effectively abolishing Medicare, and any tax increase, no matter how small, will destroy the economy is just about the only budget option voters ever hear.
Democrats shouldn’t be so timid. There is a lot of poll data showing that the American people are less enamored with the Bush tax cuts than Republicans are, and willing to support higher taxes as part of a deficit solution.

A May 11 Pew report reminds us that the original Bush tax cuts in 2001 were supported only because the budget surpluses of the Clinton administration were expected to continue for some time. Nor were tax cuts peoples’ preferred option for dealing with the surpluses: 37 percent favored increased spending for Social Security and Medicare, 23 percent wanted other domestic spending raised, and only 19 percent favored a tax cut. But a tax cut was the only option Republicans permitted.

Furthermore, people accepted from the beginning that if budget surpluses failed to materialize then the tax cuts would need to be curtailed; 73 percent of people said that the Bush tax cuts should automatically be scaled-back if surpluses turned out to be smaller than expected. Of course, the surpluses were much smaller; in fact, they evaporated within a year. Rather than admit their error, however, Republicans rammed ahead with more tax cuts.

Although Republicans insist that the Obama administration’s policies are largely, if not exclusively, responsible for the deficit, the American people know better. According to an April New York Times/CBS News poll, 41 percent of people primarily blame the Bush administration for today’s deficit; only 14 percent blame Obama. That same poll found that an overwhelming 72 percent of people support raising taxes on those making more than $250,000 in order to reduce the deficit. The House Republican budget plan would slash taxes for the rich by reducing the top income tax rate from 35 percent to 25 percent, thus requiring larger budget cuts to achieve budget balance.

This is not the only recent poll in which Americans have said that they support higher taxes as part of a deficit reduction program. They consistently show that only a small minority of Americans believe that the budget can be balanced with spending cuts alone...

There is some evidence that House Republicans are starting to get the message that their tax position is crumbling. On May 11, a senior Republican staffer told Atlantic reporter Derek Thompson that his party’s position on taxes is intellectually dishonest. “There are two worlds,” the aide said. “One world is political and the sole objective is to maintain party message. The other world is real and in the real world fixing the deficit is a matter of national survival. When you get down to the real world decisions, it’s not about whether to raise taxes; it’s about the ratio of spending to revenue increases.”

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