Taxes and Deficits
In my Forbes column this morning I tried to explain why taxes are an important part of deficit control. If people think deficits will lead to higher taxes they will be more inclined to support deficit reduction efforts. If they don't think deficits will ever lead to higher taxes then they are going to be much less inclined to support deficit reduction.
Therefore, by opposing taxes for any reason, Republicans have made the task of deficit reduction vastly more difficult. They have effectively taken off the table the biggest reason why people might be willing to support spending cuts--to avoid tax increases.
http://www.forbes.com/2009/09/24/fiscal-spending-taxes-opinions-columnists-bruce-bartlett.html
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Thanks for continuing to make
Thanks for continuing to make this extremely important point, and for making it extremely well.
If I may make a couple of suggestions...
To both broaden the general message and to somewhat mitigate suspicion from the right that you are speaking in some partisan way, I'd suggest including in such columns a reference to the corresponding delusions on the left -- that we can solve the long-term fiscal imbalance problem entirely on the tax side, or with that plus "getting out of Iraq" or more generally Defense cuts of an even arguably responsible magnitude (i.e., without causing significant adverse impact on our economic and physical security), etc.
I say "somewhat mitigate" because I'm speaking of a matter of degree. I'm fully aware that many hyperpartisans of the right (just like their counterparts on the left) will be just as dismissive of and hostile to someone seeking realistic compromise, who seems to them to be coming from what they regard as the spineless center. But in general, I think someone calling out the delusions and/or dishonesty on both sides has more credibility with more people than someone calling out only one side.
It probably also would have helped to express some skepticism (if you have some) about the degree of credit that should be given to the 1993 tax increases for the Clinton-era expansion, rather than simply mentioning that "Democratic economists...believe that his 1993 tax increase sparked an economic boom." Some readers will see that statement, absent any qualifier or skepticism, and consider it (at least possibly) a parroting of a Democratic/liberal talking point, which, to them, will reduce the credibility of the column generally.
Reply
I accept the sincerity of the advice, but I don't intend to follow it. The reason is that I am tired of the idea that there are always two sides to an issue, which too easily morphs into the idea that both are equally valid. I think the responsibility of analysts is to analyze, draw a conclusion and state it clearly without a lot of on-the-other-hand equivocation.
Another consequence of the two-sides-to-every-issue perspective is that questions of fact are too easily treated as if they are matters of opinion. As Daniel Patrick Moynihan once said, everyone has a right to their own opinion, but not their own facts.
Finally, we can't ignore the fact that some people are responsible authorities while others are political hacks. Cable TV blurs the distinction by treating authorities like hacks and hacks like authorities.
The result of all this is to make it impossible, as a society, to come to a conclusion about anything. That's why my policy is to do the best I can to figure out the true facts of an issue, to document them, analyze them, and draw firm conclusions from them. Those looking for me to throw bones to those that I think are wrong should look elsewhere.
As I put it in a column earlier this year, echoing Moynihan, people are entitled to their opinions but they are not entitled to be taken seriously.
Bruce, you are misunderstanding
Bruce,
If you are referring to the main point of my comment (addressing the left's delusion of a tax-side-only solution)...
With all due respect, you are completely misconstruing my point. I wasn't suggesting at all that there is a valid argument against your central premise (which is, as I've argued emphatically myself for years, that a spending-side only solution is politically infeasible and unrealistic and thus absolute resistance to any tax cuts is irresponsible, even if one considers it desirable), nor am I suggesting backing away in the slightest from the logical conclusion that the only responsible course is a combination approach of tax increases and cuts in projected spending.
Quite the contrary.
What I'm suggesting is simply that you acknowledge and reject the bullsh*t on the other side (the left) as well, lest they block/delay the very type of solution you advocate -- a combination approach -- based on the equally invalid premise that it is economically and politically feasible to solve the problem ALL on the tax side. In other words, call out both sides on their respective obstructionist/harmful delusions and bullsh*t and make clear that neither absolute solution is realistic. I can't see why you would consider that "throw[ing] bones to those that [you] think are wrong", or why you would think I was suggesting any such thing.
I don't think you're addressing only my second suggestion regarding skepticism of the attribution of credit for the Clinton-era expansion largely/mostly due to the 1993 tax increase, but as I indicated, if you have no such skepticism, I certainly wouldn't want you to say you did. If you do have such skepticism, it would have been useful to mention it, not only for educational purposes but also to maximize credibility in both breadth (along the political spectrum) and degree.
By the way, I don't know when Moynihan first offered his famous line, but a college buddy of mine back in the mid-1980s had a great line, offered mostly self-deprecatingly: "I don't need facts; I have opinions." Unfortunately, unless journalistic institutions find ways to make their business models work better amid all the content offered free on the Web (including much of it essentially leached off original reporting), we'll end up with far too much opinion based only thinly or distortively on facts.
And on another tangent, I have my own expression for whenever I, through Socratic method, identify a contradiction in someone's premises or argumentation, including when I encounter someone who BOTH believes that a given tax cut (or tax cuts generally) will increase revenues AND believe the tax cut will "starve the beast" (lower spending by reducing revenues), obviously mutually exclusive premises. My line: "I can't insist that you agree with me, but I can insist that you agree with yourself."
taxes
I've
been making arguments like this since 1979. Welcome to the party.
Other side
I don't see any Democrats making the argument that our budgetary problems must be solved enirely through tax increases, but I do see lots of Republicans saying that our problems must be solved solely through spending cuts.
Bruce, Are you speaking only
Bruce,
Are you speaking only of members of Congress, because if you are speaking of Democrats/liberals beyond that, you apparently haven't spent much time on liberal blogs (politics or particularly economics/fiscal policy).
As I said, some say we can solve it all on the spending side (mostly/completely by taxing "the rich" and "corporations"), and others combine a tax-side solution with "getting out of Iraq" or more generally Defense cuts.
There are some who go a bit further and include getting rid of "waste, fraud and abuse", but that's pretty much a given for anyone of any political stripe: after all, who wouldn't want to get rid of "waste".
But there are most certainly plenty of Democrats/liberals who reflexively, emphatically, combatively reject any suggestion that part of the solution should or must (in terms of economic and/or political feasibility) be reductions in projected spending that impose real sacrifice, not just eliminate "waste". And that's a message that I wish you'd include, for the same reason I applaud you for delivering the same type of message to the right (to get that segment of liberals to be more realistic and to be more inclined to a realistic and sensible solution) as well as to maximize the credibility of your message across the political spectrum. There is a significant level of obstructionist delusions on both right and left, and if you call out only those on the right, you'll miss the opportunity to deliver this important message to the irresponsible, delusional obstructionists on the left, and you'll lose some on the right and center whom you may have otherwise influenced, because they'll see/suspect you as a partisan on the left.
The two sides on the budget -- who's worse?
I don't see any Democrats making the argument that our budgetary problems must be solved enirely through tax increases
Well, one doesn't see them arguing for big tax increases, that's true. ;-)
But that doesn't mean they aren't practicing best-of-both-worlds straight denial -- which is even worse. Where do you see them proposing to close the big budget problems at all??
Kaus quotes the new Senator from Massachusetts recanting his previous "thoughtcrime" of considering the possibility of means-testing Social Security benefits, after feeling the party's lash...
"I was wrong. Our party ... is unalterably opposed to any cuts in Social Security benefits. I should not have mentioned the subject of a means test."
OK, the party is "unalterably opposed" to benefit cuts -- so how are they proposing to make up the $16 trillion SS shortfall other than by tax increases?
Pelosi has said time and time again that there's no entitlement funding problem until the SS trust fund runs out circa 2040 -- and then the politicians of the day will make a deal as did Tip O'Neill and Reagan did. It's her poll-tested official mantra. If she's ever suggested cutting Medicare I've sure never seen it reported. So what's her proposal to close that budget gap?
Or take Krugman. When the Repubs had the government he used to say SS and Medicare were going to crush the budget -- he was "terrified" -- because of the Bush tax cuts. Now Obama's keeping the bulk of the Bush tax cuts, and Krugman's saying that even with much, much worse CBO projections for 2019, it's no problem because the debt then won't be any worse than in the early 1950s when everything turned out fine! He suddenly decided to omit Medicare and SS from his projections altogether, to make everything Ozzie & Harriet ok. (Krugman versus Krugman)
So Krugman's plan now explicitly is to do nothing until 2019, for starters.
That's budget-wise virtuous and honest?
Who are those Democrats now embracing benefit cuts in lieu of "exclusively" tax increases? (Diane Lim Rogers just posted on their latest vote on the idea. They were rather few in number -- and there were more Republicans.) The Democrats fundamental buget policy on entitlement debt is "head in the sand", denial. I'd love to hear the names of their political leaders actually embracing benefit cuts to close the budget gap.
Hey, I know you are upset with the Republicans' wretched irresponsibility on the budget deficit -- but that doesn't mean the Democrats aren't even more so, worse.
Look at the tally so far: The $16 trillion unfunded present value liability for SS was proudly created by Democrats when they converted it from funded to paygo over FDR's veto -- and the entire entitlement funding crisis and political culture of "the future will pay, we won't" roots from right there. (Yes, Republicans followed) ... The $26 trillion liability for Medicare A & B was proudly created by Democrats (yes, Republicans followed) ... Even Bush's wretched Part D and its $6 trillion was created in response to Democrats using their push for a drug benefit that was bigger and more costly as a political club against the Repubs.
Have the Democrats made any sign of changing their political brand and culture by saying we should start paying down these gaps in any way -- much less by cutting benefits?
Look at Obama and the Democrats today:
[] They are keeping the bulk of the Bush tax cuts that were relentlessly villified and damned by Krugman & Co -- and Krugman & virtually all of Co aren't saying "peep" about it. Things are now Ozzie & Harriet fine! Who are the budget hypocrites there?
[] Near $100 billion annual from cap-and-trade permit revenue given to big businesses, which CBO said would have been fully compensated with 15% of the amount. Hello? Is there any budget cutting virtue in that? Orszag called it "the biggest act of corporate welfare in history" before it happened, warning against it. That's annual revenue that will be gone forever!
[] $70 billion consumed bailing out GM (and stiffing its legit senior creditors) without GM's UAW workers taking even a nominal wage cut. Concern for the budget?
[] And the biggest priority is the biggest new entitlement since Medicare, made "deficit neutral" in the near term by tricks that make what the Bushies did with Part D look virtuous: counting it as "balanced" over 10 years when it operates only for the last 5 with a deca-billion deficit in #10 and growing from there ... "guaranteeing" cost cutting with a new incarnation of the Medicare SGR mechanism that Congress disables to instead increase expenditures every single year, etc.
Amid all this, where is any Democratic concern over closing the entitlement funding gap?
I'd love to see evidence that the Democrats aren't even worse than the wretched Republicans, debt-wise -- but they are. In both words and substance.
Tax cuts are a lot easier to reverse than new entitlements, bailouts, and massive revenue giveaways that powerful interest groups then claim as their own.
Party Difference
I could be wrong about this, but my sense is that Democrats know that our fiscal course is unsustainable and they willing to do what it takes in terms of tax increases and entitlement cuts to restore fiscal stability. The problem is that they don't have the guts to actually do anything because they are afraid that the Republicans will destroy them. Just as Republicans believe that G.H.W. Bush was defeated because he raised taxes, Democrats believe they lost control of Congress in 1994 because they raised taxes in 1993.
Republicans, on the other hand, are absolutely convinced that somehow or other the fiscal problem will take care of itself if they just hold the line on taxes. I'm not sure how they think this will happen. Some believe that low taxes will allow us to grow out of the debt problem (or tax increases will make it impossible to do so), others still believe that tax cuts starve the beast and will bring forth spending cuts if they just wait long enough. I think both of these positions are delusional but I don't know any Republican who doesn't believe one of the other or both.
I know of no Republican or conservative in a leadership position who believes that taxes should be increased for any reason, including avoiding default on the debt. Just yesterday, in fact, a very well known libertarian told me that he would rather pay for government by just printing money than raise taxes.
Thus we have one party that is composed of cowards and the other is composed of people who are crazy. What are we to do? I fear that we will have to go back to the days of double-digit inflation and interest rates before the American people and their elected representatives will believe that deficit reduction is so important that higher taxes are necessary to bring down inflation and interest rates.
Both sides need to see the middle
For Republicans to stand on "no tax increases ever" is terribly irresponsible, as is any liberal insistence on "no spending cuts ever." The deficit needs to be addressed, and a combination approach is the only way to get it done, both politically and fiscally. But as long as politicians are more interested in reelection than in policy, and as long as districts force politicians to appeal to their base, it's difficult to see how a combo might happen.