Pres. Bush (Loon Creative/Dreamstime.com)
If you're serious about deficit reduction, you have to be serious about getting rid of the Bush tax cuts—it's pure fantasy to believe you can balance the budget through spending cuts alone. Unfortunately, however, there is very little willpower in our nation's capitol to admit this obvious fact.
The latest example: a bipartisan letter from 32 Democrats and 32 Republicans in the Senate begging President Obama to stop them from passing a budget that increases the national debt. As Greg Sargent points out, the letter barely even mentions taxes, and even then, it uses a euphemism.
Note that the letter defines the parameters of the discussions senators want Obama to lead as follows:
We urge you to engage in a broader discussion about a comprehensive defict reduction package. Specifically, we hope that the discussion includes discretionary spending cuts, entitlement changes, and tax reform.
I checked in with a couple of senate aides about this, and they were amused by the reference to “tax reform.” As they put it to me, this is a weaselly and euphemistic way of suggesting that maybe, just maybe, tax hikes on the rich (which many Dems want) should possibly be part of the discussions — without saying so outright in a way that Republican senators who signed the letter would find unacceptable.
By contrast, the first two of those, “discretionary spending cuts” and “entitlement changes,” are clear and direct references to the solutions advocated most emphatically by many Republicans and conservatives.
The failure to clearly articulate that there's no path to fiscal sustainability without tax hikes is even more glaring than the absurdity of Congress pleading with the president to force them to reduce the deficit that they created.
It seems as though everybody in Washington has forgotten that the Bush tax cuts are by far the biggest reason that the deficit has exploded. During the Clinton years, federal taxes were a bit less than 20% of GDP. During the Bush years, they dropped to a bit under 18% of GDP. Meanwhile, with the exception of Bush's final year in office (which featured TARP plus a decline in GDP), spending was virtually unchanged as a percentage of GDP. In other words, the increase in debt under Bush is almost entirely attributable to his tax policy, with most of the balance coming from TARP and the Great Recession.
It's only logical, therefore, that any serious policy to restore fiscal health would return to Clinton-era tax rates by allowing the Bush tax cuts to expire. For the longer-term, we'd still have to deal with the impact of rising health care costs on Medicare and Medicaid, but at least in the medium-term, we'd have eliminated most of the structural deficit.
For extra credit, we could also immediately adopt Jan Schakowsky's millionaire's tax proposal. Her plan would raise $89 billion for 2011 if adopted immediately, reducing the deficit by 50% more than the GOP plan while avoiding crucial cuts to programs like childhood vaccinations.
If we returned to Clinton-era tax rates and adopted the Schakowsky plan we'd be well on our way to securing fiscal solvency for generations to come. But for that to happen, Republicans will have to stop putting political ideology first and will have to grapple with the basic math of the challenge we face. Unfortunately, that's not something that'll happen anytime soon.