Taxes, spending and the deficit

Source: Office of Management and Budget. Click to view.

The majority of Democrats say that the federal budget deficit should be addressed by raising taxes and cutting spending.  The majority of Republicans say that the federal budget deficit should be addressed by cutting spending and taxes under no circumstances should be raised.  Based on the chart, I would say the Democrats have the better of this argument.

Notice that the only time in the past 30 years that revenues exceeded expenditures was during the Clinton administration.  This is partly a technicality of accounting; the surplus in the Social Security Trust Fund was used to offset the general government’s deficit, even though Social Security is kept separate from the general budget.  It also reflects the moderate tax increases enacted during President Clinton’s first year, and the work done by Vice President Al Gore to improve governmental efficiency and reduce civilian important.  Even so, President Clinton did not project a budget surplus.  What brought his administration into the black was the economic boom during his second term.

During the George W. Bush administration, spending increased, covering the cost of wars in Iraq and Afghanistan and a new Medicare drug benefit, and taxes were cut.  The recession caused spending to increase and tax revenue to fall during the last Bush years, and the gap has grown even greater during the Obama administration.

The Republican leadership – Senate Minority Leader Mitch McConnell and House Speaker John Boehner – say that the deficit is the overriding problem, and non-military spending can in no way be increased.  But when possible tax increases come up, they say that you shouldn’t raise taxes during a recession—in other words, that the recession, not the deficit, is the overriding problem.

My own view is that as a result of the deindustrialization and financialization of the U.S. economy over several decades, we have to think not just about the deficit and not just about restarting the economy, but about rebuilding the nation’s economic strength.

Double click to enlarge

House Speaker John Boehner and Senate Minority Leader Mitch McConnell say that the debt ceiling is 100 percent President Obama’s problem—in other words, that the budget must be brought into balance through reductions in spending alone, that they will accept nothing less, and that it is President Obama’s responsibility, not the responsibility of Congress, to determine how this should be done.

It ought to be obvious that if Boehner, McConnell and the Tea Party Republicans thought their program was politically and economically workable, they would make their own proposals rather than demanding President Obama carry out their program.

Click on We have a taxing problem, not just a spending problem for comment by Ezra Klein in the Washington Post.

Click on The White House’s hidden concession on taxes for more from Ezra Klein.

Click on It’s Now Official: The GOP is a Party of Sixth Graders! for Kevin Drum’s comment in Mother Jones.

Hat tip to Jared Bernstein for the chart.

P.S.  President Obama’s proposals are what would have been considered the extreme right-wing position a few years ago—to privilege balancing the budget over fighting unemployment, and then to balance the budget largely on the backs of the old, the sick and the unemployed.  Yet the intransigence of the Republican right has changed what is considered moderate and what is considered extreme.  The debate in Washington now is not over whether Medicare should be means-tested or Social Security should be cut, but whether these concessions are enough.

I fall into that mental trap a little bit myself.  When I point out that conservative Republicans should recognize how reasonable President Obama has been from their perspective, I should also point out that Democrats should realize the degree to which he has abandoned what the Democratic Party says it stands for.

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One Response to “Taxes, spending and the deficit”

  1. In which I call for tax increases § Unqualified Offerings Says:

    […] 2)  What I’m calling for in point 1 is hardly without historical precedent, as Phil Ebersole points out with an interesting chart. […]

    Like

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