It was not long ago that Republicans succeeded in holding unemployment benefits hostage to a renewal of the high-end Bush-era income tax cuts and — as a little bonus — won deep estate tax cuts for America’s wealthiest heirs. Those cuts will add nearly $140 billion to the deficit in the near term, while doing far less to prod the economy than if the money had been spent more wisely.
Let us review. There were no tax cuts on the table, there was simply the decision to maintain the status quo or raise taxes. Any additions to the deficit have nothing to do with the tax rate charged, as once again, it is status quo. Any deficit increase is therefore wholly attributable to spending.
The new Republican rules will gut pay-as-you-go because they require offsets only for entitlement increases, not for tax cuts. In effect, the new rules will codify the Republican fantasy that tax cuts do not deepen the deficit.
This is not fantasy, this is reality. Tax cuts NEVER have to "pay" for themselves, but spending must. This distinction flows from the metaphysical truth that the government has no money of its own, only the money it collects from its citizens. When the citizens (through their representatives) decide to limit that collection, government must responsively limit its operations as a result.
It gets worse. The new rules mandate that entitlement-spending increases be offset by spending cuts only — and actually bar the House from raising taxes to pay for such spending.
This is worse? Why? Why are tax increases "sensible", but benefit/spending cuts are not?
For example, the cost to make the Bush-era tax cuts permanent would be ignored, as would the fiscal effects of repealing the health reform law. At the same time, the new rules bar the renewal of aid for low-income working families — extended temporarily in the recent tax-cut deal — unless it is fully paid for.
Repeat again after me. Tax cuts don't "cost" anything, they simply represent a larger share of productive labor retaining its fruits. Asserting that a tax cut "costs" something assumes that spending must be considered as a constant. This is of course, not true.
The NYT represents a view of the relationship between the governed and the government that was largely repudiated in the last election, and to some extent, by the politics of the last three decades (2008 being anomalous). Its readership is declining consistent with the relevance of its editorial views.
It's as if Arthur Laffer never existed. The Democrats and their mouthpieces still insist it's a zero sum proposition. It's not you God damned morons. Lester Thurow had his head up his ass, it ain't true!
ReplyDeleteIf you want to ignore the real, do it at your own expense, not mine.
Bryan,
ReplyDeleteYour analysis is a little flawed, my friend. The NYT has it right.
The non-partisan, Congressional Budget Office, estimates the size of the debt and deficit by taking into account revenues and spending. These revenues can come from taxes, as you point out, and also from government programs.
YES! Our Federal Government provides services to the American people that actually make money. The Federal Housing Administration's Single Family Mortgage Insurance Program within HUD, the Department of Ed's Student Loan Program, and FEMA's Flood Insurance Program are just a few.
When Congress proposes a bill, the CBO scores it. That "score" looks at how much the bill overall and its individual measures will cost or generate for the Government. CBO takes into account the length of the measure when making this determination. Therefore, when Congress authorized the "Bush Tax Cuts" through this year, the CBO calculated that the revenue associated with them would be available to the Government again starting next year.
Their being extended now means that the Government loses the associated revenue. If those in support of these extensions want them to not have an impact on increasing the deficit, there would have to be an offset, a cost saving measure, identified in the bill to "pay for" them. Republicans have not done this routinely for tax cuts they support.
The consequence is that these measures cost the Goverment and increase the deficit.
Sorry Fred, it seems your analysis is where the flaw lies.
ReplyDeleteFolks on the other side of the aisle LOVE to cite the "non-partisan" nature of the CBO, but that's only part of the story. It is ENTIRELY a creature of Congress, and therefore, it has its hands tied--by Congress. Specifically in how it "scores" things.
We saw lots of this in the healthcare debate, where CBO had to score Obama initiatives according to Congressional direction, when everyone in the world knew that Congress would be unable to pass up additional costly measures such as the "doc fix".
Yes, CBO comes up with deficit figures based on what it is given by the Congress, and that was a projection of additional revenue. But a projection of additional revenue and actual revenue are two vastly different things.
In the interim, the people spoke, and informed the Congress and CBO that they wish to retain their earnings at the present rate. The government has LOST no revenue. It simply had not gained ADDITIONAL revenue. Spending increases based on projected revenue tied to the dubious political notion that the Obama Tax Increase would pass must therefore be rolled back to accommodate the voice of the people.
We disagree strongly that there is a cost here. Is there an impact? you betchya. Spend less. But a cost? No sir.
Oh, and one more thing Fred. Whatever money the Government "makes" is a function of what it is doing with--you guessed it--Other People's Money (the taxpayers).
ReplyDeleteThe CBO has to score things based on the information, assumptions etc. that Congress gives it. It's like a computer, bad info in, bad info out.
ReplyDeletePlus it's not zero sum. Just because gov't takes less doesn't mean the gov't gets less. Depending on the rates of course, less is often more.
The Laffer Curve gentlemen, the Laffer Curve.