Feb 16, 2011
The politically volatile subject of taxes was back in the air on Capitol Hill today, as the Senate got a visit from Timothy Geithner, who told the Finance Committee that there is no strategy to bring deficits down to sustainable levels by focusing only on discretionary spending cuts.
“That,” said the Treasury Secretary, answering questions on the budget proposal to reduce the deficit by $1.1 trillion over ten years, “requires us to look at revenues.” (Click here to check out his testimony Tuesday before the House Budget Committee, emphasizing priorities including corporate and individual tax reform.)
There are many who oppose that point of view, while still acknowledging that action must be taken. “Our Only Option Is To Cut Spending,” says Rep. Jason Chaffetz (R-Utah), in a posting on The Hill’s Congress Blog, where you can see an interesting sampling of opinion from members of Congress airing their views on the general direction of the budget battle as well as specific spending cuts they don’t like.
Painting By The Numbers
So how does the president’s budget proposal do on the issue of taxes? Donald Marron of the Urban-Brookings Tax Policy Center puts a pop quiz to good use as he delves into the question: Does The President’s Budget Raise Taxes Or Cut Them?
Keith Hennessey jumps into the world of charts and graphs and points to a trend he says would put federal taxes at an all-time high in terms of their size relative to GDP: The Long Term Budget Problem Begins Now.
Ezra Klein looks at the tactical side of taxes and spending, saying “…a future administration looking back at this period will likely consider the stimulus a huge political mistake. The spending — though arguably quite effective — was completely invisible. The major tax cuts in the bill, in fact, were designed specifically so they wouldn’t be noticed. You may or may not believe a payroll tax holiday would’ve created as many jobs, but it definitely would’ve been more appreciated. In the future, I expect stimulus to take the guise of clear and highly publicized tax cuts much more often than spending projects, even though a lot of the evidence we have suggests spending projects carry more benefits than most types of tax cuts.”
The Washington Post’s fact-checker, veteran correspondent Glenn Kessler, has been in a number-crunching frenzy this week, first comparing the Obama budget to those of previous presidents, and today taking a look at Rep. Paul Ryan’s Claims Of Trillions In New Spending In The 2012 Budget, in which he also considers the question of the standards this budget is being asked to meet:
“But the Republican freeze-for-10-years would bring all U.S. government spending–the combined discretionary and mandatory catagories–to just 15.1 percent of GDP in 2021–a level never achieved since 1962 (when the data in the budget start.) The lowest level is 17.2 percent, in 1965, and the Republican freeze would hit that level in 2018 and then plunge below it in 2019 (16.4 percent), 2020 (15.7 percent), and 2021 (15.1 percent).
The only way Obama could hit those targets is to propose wiping out all discretionary spending (including Defense) or eliminating a major entitlement such as Medicare. So it is an absurd standard.”
Bipartisan Moments & Lessons From History
Is bipartisan partnership on deficit reduction really possible? There was an interesting moment today, noted by the Wall Street Journal, in which Geithner found himself on the receiving end of advice from one of the best-known Republicans in Congress: Sen. Orrin Hatch: Hatch to Geithner: I’m Pulling For You.
Lori Montgomery and Shailagh Murray, writing in the Washington Post, also find some mixed signals, reporting Republicans Blast Obama Budget But Signal Willingness To Work With Democrats:
The confusion was evident Tuesday in congressional budget hearings, where GOP lawmakers grilling White House budget director Jacob J. Lew veered between criticizing Obama as not addressing the looming crisis in entitlement programs and asking what they could do to help.
“People on this panel here, at least on this side of the aisle, invite the dialogue, encourage it, with the White House on this,” said Rep. Todd C. Young (R-Ind.), a Marine veteran who sits on the House Budget Committee. “What might I do, as a freshman member of Congress, to create the political space where the president can step up and take a leadership role in these matters?”
U.C. Berkeley economist J. Bradford DeLong takes the long view, with a glance at both the past and the future, looking at the responsibility factor in elected officials on his “Grasping Reality…” blog, arguing that: America’s Fiscal Problem Is Something We Can Fix Only At The Ballot Box: “What is the solution to our long-run deficit problem? It is simply this: elect honorable and intelligent women and men to Congress. Elect representatives who will not pass unfunded tax cuts–as the Republicans did in 2001. Elect representatives who will not pass unfunded spending increases–as the Republicans did in 2003. Elect presidents who will promise at the start of their turns to veto legislative acts that do not meet long run paygo requirements.”
John Dickerson, at Slate, finds history a source of inspiration for thinking of how not to approach our fiscal problems, asking: “Why Are We Doing This Again? Politicians Should Do A Better Job Explaining Why Deficit Reduction Is So Important:”
“Before President Obama’s news conference Tuesday, he met with his predecessor George H.W. Bush. They could have traded war stories about budget fights. Obama was about to talk about the one he was starting. The 41st president could have talked about the fights that finished him politically. Or he could have offered a warning based on a question he received at a town hall debate during the 1992 campaign. Bush, Bill Clinton, and Ross Perot had been squabbling about how to reduce the deficit and debt. A woman stood up and asked how the debt affected each of them. Bush famously flubbed the question, seeming a few fairways away from regular Americans in his response. But the question was as revealing as Bush’s out-of-touch answer. The woman didn’t understand how the debt affected the lives of Americans and why she should care.”
Getting that point across, writes Dickerson, is critical to the outcome of the budget battle, because if the public buys the diagnosis on why the deficit is a problem, they’ll also be more likely to buy into the prescription for improving our fiscal health. We’re ready to help with that cause: to better understand how this crisis affects everyone, check out Our Fiscal Future’s Five Ways The Growing National Debt Can Hurt Us.
Quick Bites: Health Care & Entitlements
Escalating costs for health care, Social Security and other entitlement programs continue to be the 2,000-pound elephant in the room (for more on that, see Deciding What’s Important: Budget Lessons From ‘Parks And Recreation’) when it comes to budget projections. The decisions we make on how to handle these problems will have a big impact on the numbers. James Capretta, who was an economic adviser to George W. Bush and is now a fellow at the Kaiser Foundation, holds the budget to that standard and finds it wanting: An Irresponsible Roll Of The Dice.
Erskine Bowles sees this issue a little differently. In a Fox News interview, the Democratic co-chair of the deficit commission says serious reform of both entitlements and the tax code “can only be done through a bipartisan process with leaders from both sides of the table.” Bowles isn’t giving up on the work that the commission did: “We will encourage the President and Congress to use the Commission plan as a starting point for serious negotiations and insist that the final product be as serious and ambitious with broad enough support to pass.”
Join The Discussion! Your Voice Is Important
You can comment here at OurFiscalFuture.org, on Facebook, and on Twitter. And to learn more about the numbers that set the stage for some of our choices, check out our slideshow, iPhone and Android apps, and Our Fiscal Future’s Visual Budget Tool.
Fiscal Future Daily is produced by Public Agenda for Choosing Our Fiscal Future, in partnership with the National Academy of Public Administration and with support by the John D. and Catherine T. MacArthur Foundation. The editor in chief is Scott Bittle, with contributors Francie Grace, David White, Jen Vento, Hart Hooton and Tom Watson.