Call Their Bluff

Are Republicans Serious about Deficits?

Ronald Reagan (bless his sense of humor) loved to say that the problem with his administration was that the right hand didn't know what the far right hand was doing.

Something like that is happening among conservatives on the supposed urgency of closing the federal budget deficit.

On the near right is the preliminary proposal of the co-chairs of the president's deficit commission, Erskine Bowles and Alan Simpson. It is a deeply conservative document that would make sharp reductions in Social Security, Medicare, and Medicaid while also cutting and flattening income tax rates. As is, it would do a lot of harm, but at least it takes the deficit seriously.

Then there are Republicans in Congress whose top priority is to force through legislation making the Bush-era tax cuts for the best-off Americans permanent, thus expanding the deficit by about $700 billion over the next decade.

So on the one hand, we have to cut, cut, cut because fiscal catastrophe is looming. On the other, we have to make the problem worse by shoveling more money to the rich because...well, because taking care of those with tidy incomes is contemporary conservatism's highest purpose.

How can the two right hands be forced to work in tandem? Outgoing House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid promised a vote in Congress if fourteen of the commission's eighteen members could agree on a plan. If the incoming speaker, John Boehner, and his new Republican majority are as serious about deficit cutting as they say, Boehner should make clear he'll hold such a vote in the next Congress since there will be little time for debate in the lame-duck session.

I have doubts any plan can get fourteen votes, partly because the Republican House members on the commission, Dave Camp, Paul Ryan, and Jeb Hensarling, may not want to put the new Congress on the spot.

But the only way to create pressure for agreement by the commission's December 1 deadline is if its members know that getting to fourteen would force congressional consideration. Boehner should show he has Pelosi's courage in committing to a vote before knowing what the commission will produce.

In the meantime, the Bowles-Simpson proposal will have to change a lot if progressives and moderates are to come on board. One test will be how open they are to elements of an alternative put forward by Rep. Jan Schakowsky (D-Ill.). One of the commission's most progressive members, she leans more on revenue increases and defense cuts to get toward balance.

Good for Schakowsky for showing that liberals embrace fiscal responsibility and that biting hard into programs that benefit the middle class and the poor is not the only way to do so. And all who reject her military cuts need to make clear what they would cut instead, or which taxes they would raise.

As for the Bowles-Simpson plan, its problems include an unrealistic 21 percent limit on revenues as a share of gross domestic product. And as the Center on Budget and Policy Priorities has pointed out, the proposal's excessive cuts in Social Security would rather substantially reduce benefits for Americans earning as little as $43,000 a year, hardly rich people. That's a bad idea.

In a sharp but even-tempered critique, the center--a liberal group deeply committed to deficit reduction--also notes that the plan's health cuts "could harm vulnerable people" by creating "widespread health-care access problems." This is the last thing we need.

And why is a deficit reduction commission in the business of reducing tax rates for the wealthy and corporations? Bowles and Simpson propose to cut the top income tax rate from 35 percent, under current law, to 23 percent? Yes, they get there by eliminating all deductions--and would treat capital gains and dividends like other income, a sensible tax reform.

But even if certain popular tax benefits are restored, the top rate would still come down to 28 percent. Why do that when the deficit is so big?

Some conservatives are smart enough to know what a Trojan horse looks like. Wall Street Journal columnist Daniel Henninger wrote an ecstatic column last week ("8-14-23 or Fight!") praising the commission for the rate cuts. If the main purpose of this exercise is to cater to the supply siders on the Wall Street Journal's editorial board, many of us will fall by the wayside.

But shouldn't conservatives want to debate all this? Will Speaker Boehner be serious about deficits or not?

(c) 2010, Washington Post Writers Group


Related: An Expensive Loyalty, by the Editors

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While it may well be the case, assuming that a tax hike on the rich would be better for the deficit in the long run is not necessarily a safe assumption to make.  The GOP and conservative economists have been arguing that they will not.  In August, Arthur Laffer printed a piece in the WSJ claiming that a tax increase would lower government revenue.  Mike Pence echoed that on This Week just a few weeks ago.  Other Republican politicians and economists are claiming the same thing.

While I tend to think that their arguments are kind of weak in this particular instance, it's pretty useless to discuss tax policy while ignoring any and all secondary effects the taxes would have.

Perhaps it would help Mr. Dionne if we were all to pitch in and buy him a TI-84 calculator, or perhaps fund some continuing education at the local community college on downloading excel files from the federal reserve.  Even in The Second World War, Federal Receipts as a Percent of GDP never reached the 21% recommended by the commission.  The highest percentage during WW-II was 19.4%, the highest in the past 25 years was 2000.  In the post war (the big, recent one in my lifetime) Federal Receipts as GDP have averaged 17.9%

Simplify the tax codes with flatter rates, few exemptions will aid economic growth.

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About the Author

E. J. Dionne Jr. is a syndicated columnist, professor of government at Georgetown University, and a senior fellow at the Brookings Institution. His most recent book is Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent (Bloomsbury Press).