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Saturday, February 25, 2012

"The Party of Higher Debts"

James Kwak:

Party of Higher Debts, by James Kwak: The Committee for a Responsible Budget recently released an analysis of the budgetary proposals of the four remaining Republican presidential candidates... CFRB compares the candidates’ plans to a “realistic” baseline that assumes the Bush tax cuts are made permanent and the automatic sequesters required by the Budget Control Act of 2011 are waived... Relative to that extremely pessimistic baseline, Santorum and Gingrich still want huge increases to the national debt; only Paul’s proposals would reduce it. Romney’s proposals would have little impact, but that was before his latest attempt to pander to the base: an across-the-board, 20 percent reduction in income tax rates.
How is this possible, since all of them have promised to cut spending? Huge tax cuts, on top of the Bush tax cuts. Romney, as mentioned above, would reduce all rates by 20 percent, repeal the AMT, and repeal the estate tax. Santorum would cut taxes by $6 trillion over the next decade. Gingrich would cut taxes by $7 trillion. Paul, the responsible one, would only cut taxes by $5 trillion.
This is pure crazy talk. I’m not sure what is more remarkable: that the candidates would compete for the affections of the Tea Party (a supposed anti-debt group) by planning to increase the national debt; that they think that they can pose as deficit hawks while planning to increase the national debt; or that they are getting away with it.
How did this happen? It’s probably no surprise to you, but over the past thirty years the Republican Party has become not the party of balanced budgets, but the party of tax cuts... The only surprising thing is how long they’ve been able to wave the flag of fiscal responsibility.
Not that I’m a fan of the Committee for a Responsible Federal Budget. The CRFB is another of those “centrist” groups or panels (like Bowles-Simpson, like Domenici-Rivlin, like the Gang of Six) that is using deficits as an excuse to cut taxes... In fact, compared to current law, they all support large tax cuts, mainly for the rich.
I can understand why you might want tax reform. I can also understand why you might want lower tax rates for the rich. (You might be rich, for one.) I don’t understand how you can use the national debt as an excuse for tax cuts. If you care about the national debt, you should want to let the Bush tax cuts expire and then close loopholes without lowering rates.

The answer, I think, is that complaints about deficits and tax cuts are both a means to the same end, and it isn't deficit reduction, it's smaller government. Tax cuts create a deficit while rewarding key constituents at the same time (all the while arguing that the tax cuts create middle class jobs through trickle down effects that never seem to actually appear), and then the subsequent complaints and worries over the deficit lead to spending cuts. People say the Bush tax cuts didn't work -- I say it myself -- and that's true if you are talking about the impact of the cuts on economic growth and employment. It's hard to find evidence of strong effects on these variables. But it has created huge pressure to cut spending -- the government is being starved of the revenue it needs to support some programs -- and even if by some miracle the Bush tax cuts end Republicans will have accomplished the goal of shifting the conversation in a way that even has Democrats supporting changes to social insurance programs.

    Posted by on Saturday, February 25, 2012 at 11:17 AM in Budget Deficit, Economics, Politics | Permalink  Comments (73)


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