Budget Battles: Tax and Spending Myths and Realities
Here are two numbers to keep in mind when thinking about the House Republicans’ budget plan: They want to cut spending on government programs over the next decade by $4.3 trillion. And they want to cut tax revenues over the same period by $4.2 trillion.
Government spending needs to be brought under control. But slashing vital services just to pay for more tax cuts is bad public policy and bad economics.
It won’t fix the deficit, no matter what the Republicans claim.
We’ve seen this play before. President Ronald Reagan promised that tax cuts would spur more economic growth and pay for themselves. During his tenure, the deficit hit what was then a peacetime high of 6 percent of gross domestic product, and he eventually decided that he had no other alternative but to raise taxes to try to close the gap.
The Clinton years disproved the notion that higher taxes would inevitably stifle economic growth, or cost politicians their jobs. Taxes were raised in 1993, including higher income tax rates on the wealthiest. The economy was strong, and the stock market surged. Taxes were then cut in 1997 in a deal with the Republican-controlled Congress, but by then the combination of higher tax rates on the wealthy, a strong economy and a rising stock market was boosting revenues significantly.
By the end of President Bill Clinton’s term, the federal budget had been in surplus for four straight years.
President George W. Bush and Congress undid that progress with $1.65 trillion in tax cuts, heavily skewed to high earners. The economic recovery of the Bush years was extraordinarily weak by historical standards. By early 2009, shortly before Mr. Obama took office, the Congressional Budget Office projected a budget deficit for that year of more than $1 trillion.
These are the economic facts, which Americans need to hear. The Republicans certainly won’t tell anyone. And, so far, the Democrats haven’t had the political courage to challenge them head-on.
President Obama’s proposed budget for fiscal-year 2012 does call for a mix of tax increases and tax cuts, but he hasn’t made a serious effort to explain the need for substantially more revenue.
The bigger test will come on Wednesday, when Mr. Obama presents a long-term deficit reduction alternative to the Republican proposal. It must include significant sources of revenue, as well as defense cuts and a long-term plan for bringing spending on health care and other entitlements in line with revenues.
As a matter of fairness, raising income taxes must start with requiring the richest Americans — who have been the biggest beneficiaries of Bush-era tax cuts — to pay more. But even that won’t dig the country out of its hole. The middle class is also going to have to pay higher taxes. That is the only way to pay for needed services, tackle the deficit and slow the borrowing and the rise in interest payments.
That means higher income taxes further down the income scale than Mr. Obama has previously called for, and new sources of tax revenue, like energy taxes or a financial-transactions tax or a value-added tax.
Those details are the easy part. More than anything, Mr. Obama must change the political debate, by rebutting, once and for all, the tax-cuts-above-all ideology that has gotten this country into this deep mess.
Here are a few more numbers to consider: Stimulus spending since Mr. Obama took office — including tax cuts — accounts for about $600 billion of the current $14.2 trillion in accumulated debt. The Bush-era tax cuts coupled with major new spending for two wars and a Medicare drug benefit, have added $3.2 trillion to the debt.
Mr. Obama must make the case for tax increases, based on reality, not ideology. Then, and only then, can a serious debate on the deficit begin.
Budget Battles: The Price of Ill-Conceived Cuts
Mayor Vincent Gray of Washington was so angry that the budget deal prohibited his city from spending its own money on abortion that he blocked traffic outside the Capitol, getting arrested in the process.
His rage was a sharp departure from the general self-congratulation of Democratic leaders and President Obama’s failure to tell the truth about the budget deal for this year: It ushers in a denuded era of loss to vital government services, mostly at the expense of the most vulnerable. If Mr. Obama and the Democrats believe in the promise of his campaign — that government must do what individuals cannot for themselves — they need to summon some new fighting strength.
The bill contains enormous reductions in spending over the next six months — $38.5 billion over current spending, and another $40 billion below the amounts Mr. Obama had requested for the year. The withdrawal of that much money will cause significant damage to the economic recovery — neutralizing, in essence, much of the stimulative effect of last year’s payroll tax cut.
But beyond that, the bill damages many of the government’s most important programs and will hurt those on the economy’s lowest rungs. Many of those cuts, in particular, satisfy ancient Republican ideological urges but have little or no effect on the long-term budget deficit.
We do not advocate voting against the bill, unlike those on the right who are furious that the bill leaves standing federal agencies that they wanted to demolish. Doing so would cause another shutdown tailspin.
It would also fail to recognize that Democrats kept the bill from being unimaginably worse by taking out some of the Tea Party’s ideological demands and minimizing the number of discretionary cuts. Democrats actually increased investment slightly in several areas.
But voting “aye” reluctantly is very different from celebrating the compromise, as Mr. Obama did on Friday night, or as Senate Democratic leaders did on Tuesday. They said the overall cut of $78.5 billion from the president’s request would “save taxpayers money and have a real impact.”
Instead of adopting the Republican language and argument, Democrats should be deploring it, pointing out that the deal was the result of extortionate pressure from the House and represents poor economic judgment during a nascent recovery.
To cite a few of many examples, it cuts $1.6 billion, or 16 percent, from the Environmental Protection Agency’s current spending. The agency has been a particular obsession among House Republicans who complain about its regulation of pollution from power plants and mining, all of which will have to be reduced through these cuts.
All of the $2.9 billion that President Obama proposed for high-speed rail was cut, ending, for now, a dream of bringing transportation into the new century. Can Republicans actually prefer to consign Americans to crowded airports and choked highways?
Money to prevent the spread of H.I.V., hepatitis and other communicable diseases was cut by $1 billion, and community health care centers lost $600 million. The program that provides low-income nutrition assistance will lose $504 million.
Foreign aid was sharply reduced, including $379 million to a fund that helps countries create democracy and supports Middle East peace negotiations.
Lawmakers used the bill to achieve long-sought ideological goals like attacking the paltry sums spent on foreign aid, including eliminating White House czars for climate control and health care reform, removing the gray wolf from the endangered-species list, defunding insurance vouchers and cooperatives from health care reform, and reducing money for family planning.
A plan to allow employer-sponsored health insurance vouchers, strongly opposed by business, was killed. The bill, once again, bans transfers of detainees from Guantánamo Bay, Cuba, to the United States.
Democrats were able to increase money for Head Start, Race to the Top education reform, and financial reform, among other areas — a welcome break from the trend. But unless they begin to make a more forceful case against the trend itself, it will only gather in force.
Ivory Coast Gets a New Chance
In his bid to cling to power, former President Laurent Gbagbo unleashed unconscionable violence on his people and brought Ivory Coast to the brink of civil war. When he was finally captured on Monday, photographs showed him as a pathetic, depleted figure. He should now be tried for his crimes. Mr. Gbagbo brought this on himself, and other strongmen and thugs should take heed.
After Mr. Gbagbo refused to concede November’s presidential election, he had ample opportunity to reach a diplomatic solution. Prime Minister Raila Odinga of Kenya tried to negotiate a deal that would have allowed Mr. Gbagbo to turn over power to Alassane Ouattara, his internationally recognized successor, avoid war crimes prosecution and ensure that his allies had a role in the new government.
Instead, he went to battle against Mr. Ouattara. He was captured after a siege of his residence by French and United Nations troops.
Mr. Ouattara doesn’t have time to savor his victory — or gloat. He must quickly unify the country, restore its banking system, resume exporting the all-important cocoa crop. Thousands of displaced people need assistance.
He should consider offering some cabinet positions to Gbagbo political allies if they promise to work for the common good and amnesty to Gbagbo-associated military units if they lay down their arms. United Nations and French peacekeeping forces will be needed to help maintain security during this transition period.
Allies of both Mr. Gbagbo and Mr. Ouattara are accused of committing atrocities in the fighting. All credible incidents must be investigated and perpetrators brought to justice.
Force should never be the first option against leaders who refuse to honor election results. Mr. Gbagbo left no other choice and now, finally, Ivory Coast has a chance at a better future.
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