"Mitch McConnell appeared on three major networks Sunday morning. But the Senate Minority Leader had just one message to deliver: We’re done with tax increases."
"As you probably know, the bipartisan agreement on taxes that President Obama signed last week will push tax rates on some high incomes back to what they were during the Clinton era. Republicans aren’t happy about that, or any of the other tax increases in the new law. At least two more fiscal policy debates are about to take place—one over whether to increase the government’s borrowing capacity, known as the “debt ceiling,” and one over whether to replace or postpone a set of automatic spending cuts, known as the "sequester." However those debates are settled, separately or together, McConnell and his colleagues are making clear they believe that more tax increases should not be part of the conversation. “We’ve resolved the tax issue,” McConnell said on NBC’s “Meet the Press,” echoing words he’d used in a Yahoo! News op-ed several days before. “It’s behind us.” Going forward, McConnell said, deficit reduction must take place through spending cuts exclusively. “We don’t have this problem because we tax too little. We have it because we spend way too much.”
Americans have heard this argument before. But they might be more inclined to believe it now, for precisely the reason that McConnell cites: Last week’s legislation raises taxes. Isn’t that enough? Isn’t it time to go back to spending cuts?"
This sounds reasonable only if you abstract from the fact that we've already done a lot of spending cuts:
"Hardly. For one thing, last week’s agreement, known as the “Taxpayer Relief Act,” was not the only deficit reduction legislation that Obama and the Republicans have enacted. Rather, it’s the latest in a series of measures. Most notable among the past efforts was the 2011 “Budget Control Act,” which Obama signed after Republicans first threatened to hold up the debt ceiling increase. Those past measures, which were all spending cuts and no tax increases, reduced the deficit by $1.5 trillion. The Taxpayer Relief Act, which is all tax increases and (almost) no spending cuts, reduces the deficit by less than half that amount. So even taking into account last week’s agreement, deficit reduction has meant more spending cuts than tax increases."
Until now, we've had about a 2 to 1 split of spending cuts to revenue. As Cohn notes, Obama doesn't rule out any spending cuts.
"And it will continue to be so. During that same “Meet the Press” interview, McConnell said Obama “doesn’t embrace the effort to reduce spending.” That's just not true. The original proposal he made to House Speaker John Boehner, shortly after the election, included hundreds of billions of dollars in proposed spending reductions, including cuts to discretionary spending (which is already at historic lows) and to Medicare. The Medicare cuts were all on the provider side—that is, they would have reduced what the program pays hospitals, drug makers, and other suppliers of care, but without directly reducing benefits. But in a subsequent proposal, one Boehner ultimately rejected, Obama said he would even agree to a reduction in Social Security benefits. In this next round of fiscal policy making, Obama has said he wants more revenue; most likely, he will return to some of the ideas that didn't make it into last week's deal. But Obama hasn't said he wants an all-taxes approach. On the contrary, he has also said he wants more spending cuts, too."
If anything maybe Obama is too open to spending cuts. At least his cuts are of the better variety. One way you could definitely lower the cost curve in Medicare spending would be to allow the government to negotiate with drug companies. This is something the Dems and Obama should think about going forward-I believe it was touched on during December. Indeed, there now seems to be some evidence that medical costs are now beginning to decline some.
This more generally is why I for one don't care much about "deficit reduction" right now. ObamaCare has some significant cost control measures. Let's see if these things work before we assess where we really are.
Same holds for the deficit. So much of it is just the recession. Prior to it, the main drivers were the wars in Iraq and Afghanistan and the Bush tax cuts. My main reason for favoring the tax increases is tax progressively not deficit reduction per se. Though it was the right place to go as the Bush tax cuts were the single biggest driver of the structural deficit. As Cohn points out, by historical standards Americans are still not taxed very highly:
"But these days Americans aren't paying a lot of taxes, at least by historical standards. In 2012, federal tax receipts were equal to a little less than 16 percent of gross domestic product. Thanks to last week’s legislation, receipts will reach 19.4 percent in 2022, according to official projections. (Actually, receipts probably won't get quite that high, because that projection assumes expiration of provisions that Congress typically renews.) That will still be lower than they were in 2001, when the Bush tax cuts first went into effect. In fact, as Michael Linden and Michael Ettlinger point out, in a new brief from the Center for American Progress:
the last time we actually balanced the budget—from 1998 to 2001—revenue surpassed 19.5 percent every year, averaged 20 percent of GDP those four years, and topped out at 20.6 percent of GDP in 2001. And that was before the Baby Boom generation began to retire.
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