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Some Democrats Joining Adult Conversation Over Debt Limit
"Adult conversation” and “serious debate” have become the top political buzzwords over the past couple of months.
President Obama said in February that his “hope is that what’s different this time is we have an adult conversation where everybody says, “Here’s what’s important and here’s how we’re going to pay for it.” Representative Paul Ryan echoed the call, “The fiscal commission gave us hope that we were going to finally have that adult conversation in Washington about how we preempt our debt and deficit crisis.”
Apparently serious adults are rare in Washington. If that’s the case, they must be bordering on extinction among the liberal pundits, journalists and bloggers who have been covering the deficit battle.
This has become no more clear than in the coverage over the debt ceiling debate. The debt ceiling is a cap set by Congress on the amount of debt the federal government can legally borrow. The ceiling currently stands at an eye-popping $14.294 trillion. The utter ridiculousness of that number and the sad fact that we’re constantly exceeding it has engendered some serious concern by conservatives.
They argue that the debt limit vote provides the necessary kick-in-the-pants that Washington needs to pass some real cuts and reforms so that we’re not right back here in six months talking about the debt limit again. A pretty sensible argument. Even President Obama thinks so. In an interview with the Associated Press, Obama said “I think it’s absolutely right that [the debt limit vote is] not going to happen without some spending cuts.”
Ah, sounds like the beginning of an adult conversation. We agree on the end goal, now let’s set about working out the details. And then the pundits got involved.
Take for example what Progressive Paul Waldman wrote in the American Prospect earlier this week:
The reason we're now seeing an unprecedented amount of attention paid to a vote that ordinarily passes with little notice is that the Republican Party's agenda is being set by a group of ideological radicals who seem quite willing to cripple the American economy if that's what it takes to strike a blow against the government they hate so much.
And now we’re back to the kiddies’ table, bickering over who gets the next turn on the Xbox.
Sadly, Waldman is not alone. With an understanding that succeeding in Washington is often about who can yell the loudest, rather than who can speak the most truthfully, liberals have pulled out their bullhorns. Their strategy is transparent enough: Use Armageddon-ish language to describe what happens if the debt limit isn’t raised, then blame any Republican attempt to reduce spending as a ploy to kill the economy.
Mature discourse? No. Would it have worked anyway? Possibly. Until today, when the second part of their plan got trounced worse than the San Antonio Spurs in this year’s playoffs. From today’s Washington Post:
A growing number of Democrats are threatening to defy the White House over the national debt, joining Republican calls for deficit cuts as a requirement for consenting to lift the country’s borrowing limit.
The push-back has come in recent days from Sens. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, and Joe Manchin (D-W.Va.), a freshman who is running for reelection next year. Sen. Mark Pryor (D-Ark.) told constituents during the Easter recess that he would not vote to lift the debt limit without a “real and meaningful commitment to debt reduction.”
Even stalwart White House allies like Sen. Amy Klobuchar (D-MN) said the debt-ceiling vote should be tied to deficit reduction. And Sen. Mark Udall (D-CO) went as far as to say, “As catastrophic as it would be to fail to raise our debt ceiling, it’s even more irresponsible to not take this opportunity to own up to our unsustainable spending path.”
More and more people are joining the adult conversation, understanding that our deficit problems are just too big to ignore. There’s always room at the table. Let’s hope some others are willing to set aside their partisan bombastry and help us solve our spending problems.2 Comments | Post a Comment | Sign up for NTU Action Alerts
Obama Fails to Lead by Example on Taxes
During a speech on deficit reduction at George Washington University last week, President Obama whipped out one of his favorite new one-liners. Republicans “want to give people like me a $200,000 tax cut,” Obama said, presumably referring to the high-income earners in America.
Fortunately, the White House released President Obama and his wife Michelle’s income tax return this week, so we can see just what he meant by “people like me.” The receipt shows that the President and his wife made more than $1.73 million and paid $453,770 in federal taxes. That means 26.2 percent of his income went to taxes, lower than the top 35 percent rate under the Bush-era tax levels, and far lower than the 39.6 percent level Obama pushed for last summer.
This leads economist Steve Landsburg to ask an interesting question, “If the President believes that people like him ought to be paying more, then why didn’t he pay more? There is absolutely no rule against sending in more money than you owe.”
Now you might say that the Obamas believe it’s important to raise many billions more in taxes, and that sending in an extra hundred thousand or so would make essentially no progress toward that goal. But I don’t think you’d continue to say that if you thought about it. If the Obamas are one of, say, a million families in their financial position, and if the Obamas, and only the Obamas, send in some extra money, that’s only (by Mr Obama’s reckoning) one one-millionth as good as repealing the Bush tax cuts — but at the same time it’s costly to only one one-millionth as many taxpayers. Surely these things should scale.
In fact, since you’d expect the first hundred thousand to go to the most urgent use, the president’s contribution should be worth more than one one-millionth of a million contributions, while still imposing costs on only one one-millionth as many people. If repealing the Bush tax cuts is a good deal, the Obamas’ extra voluntary contribution would be an even better one.
Somehow I think it unlikely that Obama will be whipping out his check book anytime soon. Nevertheless, if his desire for philanthropy and his well-founded concern over the deficit overcome him, I’d like to remind him that federal law allows the Secretary of the Treasury to accept gifts given for the express purpose of reducing public debt. I’d encourage our President to visit the following link, which provides an easy and secure way to pay what he considers his fair share: https://www.pay.gov/paygov/forms/formInstance.html?nc=1271991815942&agencyFormId=23779454
Sadly, if the past is our guide, simply giving the government more money does more to increase rather than decrease our deficit. According to a study conducted in late 2010 by economist Richard Vedder, since World War II, each new dollar in tax revenue was associated with $1.17 in new spending.
So if the President really wanted to help he should focus on reducing government spending, not raising government revenues. After all, as recently as 2007 government spending represented only 19.6 percent of GDP, but in the three years since 2009 it has jumped to 24.4 percent, where it is scheduled to stay for the foreseeable future. There is just no escaping the fact that we have a spending problem, not a revenue problem. That said, if our President is going to continue saying people like him should pay more, the least he could do is lead by example.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Liberal Plan for Deficit? How About a 40% Tax Hike
Unsurprisingly, it was that last line that caused the uproar. In response, Douthat did some math and found that if the CBO’s projections come true (revenues jump from 18 to 23 percent of GDP) an average family of four’s payroll and income tax burden would jump from 15 to 25 percent. The marginal tax rate on labor income would rise from 29 percent to 38 percent. “Such unprecedented levels of taxation,” Douthat argues, “would throw up hurdles to entrepreneurship, family formation and upward mobility.”
Drum didn’t wait long before punching back. In a post from yesterday, he pointed to the fact that “The federal tax take was around 20% of GDP during the Clinton era.” Using this as a reference point he argues that letting the Bush tax cuts expire and then raising tax rates by an additional four or five GDP points wouldn’t “be wildly oppressive.”
There are numerous problems with Drum’s latest attempt to pull himself out of the intellectual hole he has dug. Most prominent among them is his odd choice of reference point. Although it is true that tax revenue did rise to 20 percent of GDP under Clinton, it is not, as Drum would have us believe, a case where policymakers can snap their fingers and have revenues soar. Tax revenues are much more closely tied to the performance of the economy than with tax rates. As Megan McArdle pithily notes, “saying ‘all we have to do is go back to the tax rates under Clinton’ is effectively saying ‘all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich.’” McArdle points out that if we exclude the height of the stock market (or, if you prefer, the dot-com) bubble, the average tax revenue take under Clinton was around 18.5 percent.
We also have to dispute Drum’s notion that a tax hike of 5-6% of GDP isn’t “wildly oppressive,” an argument much akin to the initial flash-point of this debate, his assertion that tax levels of 25 percent “just isn’t that much.” While such throw-away editorializing may work on a blog, in reality, such tax hikes would dramatically increase tax burdens for the average American.
Since World War II, the traditional demarcation line given the emergence of the modern welfare state, government revenues have hovered just around 18 percent of GDP. Much to liberal’s chagrin, even with the continuation of the Bush-era tax cuts, the United States will collect about 18 percent of GDP as the economy recovers.
So the problem is not revenues have suddenly plummeted, it’s that government spending will dramatically spike. While NTU firmly believes that we mustn’t the burden of Washington’s largesse on the backs of taxpayers and should instead find ways to curb the growth in government spending, liberals like Drum believe we should raise taxes to 25 percent of GDP. They phrase their planned tax hike smartly, saying revenues need to go up by 7 percent of GDP. But this obfuscates the reality for the average taxpayer. Using an 18 percent baseline, a 7 percent GDP increase, would mean that everyone’s taxes would have to go up by around 40 percent. And that huge revenue grab doesn’t buy us anything new, it’s solely to maintain entitlements as they are presently structured!
This online debate may go on forever. Drum even admits that “a lot of our disagreement is simply irreconcilable.” But let’s hope our representatives in Washington are not so ideologically stubborn. Let’s hope they don’t believe a 40 percent across the board tax hike “just isn’t that much.” Because it is that much. It would mean a fundamentally different life for the average American.1 Comments | Post a Comment | Sign up for NTU Action Alerts
New Deficit Working Group from a Taxpayer Perspective
Republican Congressional leaders have announced their appointees to the President's new deficit reduction working group. The group, chaired by Vice President Joe Biden, is supposed to consist of 16 members. It doesn't look like the group will end up being that large, however. For those Members of Congress who have been appointed, how do they look from a taxpayer perspective? The table below looks at the group, as currently announced, and their latest scores from NTU's Rating of Congress.
Meetings are supposed to start on May 5th.
Happy Tax Day 2011
Happy Tax Day!
In case you hadn't heard, the Tax Code is becoming more complex. According to NTU's annual report on tax complexity, "the complexity of the Tax Code costs individual taxpayers $115.4 billion, thanks to the time burden and expenses of software, preparer fees, and other materials. The total time burden, including corporate filings, is 7.64 billion hours at a cost of $227.1 billion." One reason for this rise in complexity is Congress's insertion on an additional 52,000 words into the code since last year.
While tax complexity is up, the outlook on U.S. government debt appears to be down. According to Reuters, "Standard & Poor's slapped a negative outlook on the top-notch credit rating of the United States on Monday."
Feel like doing something about it? Support NTU's efforts to end the Tax Code and advance a pro-taxpayer agenda that cuts spending, ensures fiscal responsibility, and is pro-economic growth. Why not become a supporter today? Turn Tax Day into something positive!0 Comments | Post a Comment | Sign up for NTU Action Alerts
Tax Day Got You Down? Beef Up Your Spirits With Ayn Rand
Tomorrow, Americans will mark the day we dread: Tax Day. Traditionally on April 15th, the IRS extended the day where citizens are to submit their personal income tax forms and checks to April 18th. That doesn’t seem to make things any easier or any less unfair. Americans will spend millions of hours complying with the 44,000 pages and almost entirely incomprehensible system.
And the tax problem isn’t getting any better. The Tax Foundation recently released its annual Tax Freedom Day report -- an analysis of how many days Americans must work to pay for the cost of federal, state, and local governments – which fell three days later in 2011 than in 2010. Some taxpayers will be standing and shouting on the lawns of their state houses or traveling to Washington DC to call for improvements. Others will be doing something else: Watching a movie.
Opening nationally on April 15th, Atlas Shrugged Part 1 will debut in 299 theaters in 44 states. Based on the best-selling novel written by Ayn Rand, the plot reads like the classic set in slightly modern times (a few cell phones and computers don’t take away from the core principles). Check out the trailer below:
When it comes time to consider your options after sending more money to the government, think about joining fellow fans of Rand’s philosophy and ambition. All you have to do to stand up to big spenders and the Wesley Mouch’s of the world is sit down and enjoy a film 54 years in the making.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Tax Freedom Day Nothing to Celebrate This Year
Happy Tax Freedom Day! Ok, maybe I shouldn’t have said “happy.” Today is a made-up holiday (expect a Hallmark card soon) marking the day when the average American has earned enough in wages to pay off their tax bill to the federal, state, and local government.
A would-be joyous occasion, if it didn’t take more than three months of work to accomplish. In fact, Tax Freedom Day is three days later than it was in 2012, in large part due to new taxes in the Patient Protection and Affordable Care Act and the return of the death tax.
It’s depressing enough to think the average American has to work 101 days to earn enough to pay off their tax burden, but even that doesn’t represent the true cost of government. The Tax Foundation, the group responsible for doing the calculations behind Tax Freedom Day, only includes taxes collected in their math, completely ignoring the total level of government spending. At some point those deficits must be paid back, either in reduced government services relative to what we pay or higher taxes.
When we look at government spending, rather than the tax burden, the date gets pushed back even further. We’re talking way back. If the government were to collect enough taxes to pay for its reckless spending binge, Tax Freedom Day would not arrive until May 23, meaning the average American would have to work an incredible 41 more days to pay off their total tax burden.
Unless something is done to get government’s spending problem under control, Tax Freedom Day will continue to fall later, and later, in the year. Medicare, Medicaid, Social Security, and other government spending will continue to shoot upwards, posing an ever-greater threat to taxpayers as deficits become unsustainable.
Fortunately, House Republicans, led by Budget Committee Chairman Paul Ryan, have a plan to solve these problems (Read what NTU had to say about their plan, a “Path to Prosperity” HERE). While not perfect, the Republican’s budget proposal would put us on a path toward a more fiscally sustainable future without placing additional burdens on taxpayers. Who knows, if we pass a “Path to Prosperity”, Tax Freedom Day may actually come early enough in the year to be worth celebration. As of now, I’ll save the money I’d spend on a Hallmark card for my tax bill.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Durbin to Introduce Internet Sales Tax Bill
This just in: According to CNet News.com, Illinois Senator Dick Dubrin plans to introduce a bill that would require busineses to collect and remit sales tax on remote sales. Wyoming Senator Mike Enzi is expected to co-sponsor the legislation.
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Bills Hiring 100,000 Teaching Assistants and Cutting $39 Billion In Latest Tab
NTUF is hot on the heels of recently introduced legislation with cost estimates and descriptions in the most recent Taxpayer’s Tab. While releasing our final BillTally report for the 111th Congress in mid-March, we remained vigilant in getting you the bills sponsored and supported in the 112th Congress.
This week’s Most Expensive Bill would authorize the Department of Education to spend up to $1 billion for each of the next five years to employ 100,000 new teaching assistants. The paraprofessionals would help teachers with administrative support as well as help students with one-on-one instruction. The bill’s goal is to achieve a lower ratio of school workers to students. School districts who already have met the requirement (mentioned in the Tab) may use funds to help currently employed aides in obtaining teaching licenses or furthering their professional development.
Bills in Issue 10 of The Taxpayer’s Tab include:
Big Ten Budgets
There is some big news coming out of the Big Ten, but it has nothing to do with sports and everything to do with budgets. The news is that the governors of the states of Michigan, Ohio, and Pennsylvania have released their first budgets, all of which do not use tax increases to balance their books.