Sunday, August 7, 2011

Cut-only deficit reduction

In my earlier post about the debt deal, I didn't discuss an issue that's being weighing on me: how important is it to have both spending cuts and tax increases? 

This isn't something that has to be decided all at once. Obviously, we're going to be dealing with deficits and debt for many years. Since we absolutely will be having many iterations on this, we can start with some of approach A, add some more of approach A, add some of approach B, add more of approach B, tweak both A and B, maybe find an approach C that can help. Since a large majority in Congress and the president agree that we must cut spending, let's start there. Requiring tax increases, which many in Congress resist, is a complication we don't need to add into the mix. At least in this iteration.

Another reason to hold off with tax increases is the perception that Congressional Democrats "tax and spend." Part of that perception is outdated: tax revenues have ticked up only a bit in the last 30 years. However, we have been spending much more by running deficits, and it hasn't only been Democrats, since Republicans have had majorities in Congress quite often. Now, however, the calls to fix the deficit primarily or solely through tax increases... er, revenue targets, are coming from progressives who conveniently ignore the projected costs of the programs we already have. I wonder if they are so frightened of the consequences of cuts that they refuse to even look at the math. I've seen this fear before, prior to welfare reform, and the dire predictions didn't pan out. These cuts will probably be more painful, but also more necessary.

A final reason to make the first round of deficit-reduction through cuts is to see how much cutting hurts. We don't have much experience with cutting or its pain, since it's tended to be more spending, more programs, new needs identified that the government feels it should address. If the cuts are too deep and there are painful cries from a sizable majority, that may mean we really do want to pony up more in taxes to get the services we want. But we haven't tested that proposition in this new world where we aren't borrowing a large percentage of a program's cost. We won't know how the cuts hurt until we start actually wielding the scalpel.

1 comment:

Anonymous said...

ModeratePoli wanna cracker?

Sorry -- I couldn't resist.

As you hint around, most of the issue is packaging, although the carnival barkers never let nuance gain any traction. They know without the constant loud distractions people will come to their sense and recognize the no-free-lunch truth and seek reasonable accommodations.

But reasonable accommodation loses to absolutism and scapegoating every time. That's one reason I don't have much faith in people in general. (It's with more sadness than contempt, however.) "Tax" is a bad word so let's try "revenue enhancements". Oops. When necessary, the barkers will bark "TAX!! TAX!! TAX!!" anyway.

I'm not moderate on this. It's time for the pitchfork-bearers to show up at the gated communities and demand back what they stole from the rest of us. It was all a trick, anyway. Why pay taxes to the government when you can LOAN the money to the government and actually get a return? This was the accidental discovery from the Reagan years, but the wealthy GOP clique really liked it so they went for it in spades with GWB.

So definitely get money back from the wealthy, set it up so that they are always paying taxes rather than loaning the government the money, and reduce their return retroactively by, say, means-testing Social Security and Medicare benefits. Let 'em chew on that for a while. I suspect they're put up a ruckus, but in the end they will still be rich, and probably richer because then the rest of us can afford to buy the products the companies they own are selling.

You see, in the end the wealthy's plan was foolish and self-defeating. (See: Wall Street the past two weeks.) They gain the most when the economy grows, and it grows when people are employed and have money to spend.

Nobody ever said wealthy people are smart.