Alan Greenspan To GOP: Let Bush Tax Cuts Lapse
The former Fed Chairman, Alan Greenspan, is now rebuking the popular GOP Supply-Side talking point (as trumpeted recently by Mitch McConnell) that tax cuts increase revenues, and therefore help reduce deficits:
“They should follow the law and let [Bush’s tax cuts] lapse,” Greenspan said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff,” citing a need for the tax revenue to reduce the federal budget deficit. […]
Greenspan, in a telephone conversation after his Bloomberg TV interview was taped, said his position is that all the expiring Bush tax cuts should end, for middle-class and high- income families alike.
Ending the cuts “probably will” slow growth, Greenspan, 84, said in the TV interview. The risk posed by inaction on the deficit is greater, he said.
“Unless we start to come to grips with this long-term outlook, we are going to have major problems,” said Greenspan, who led the U.S. central bank from 1987 to 2006. “I think we misunderstand the momentum of this deficit going forward.”
Here, he more or less lays responsibility for the huge deficit problems we now face at the doorsteps of the Bush Administration:
Greenspan said reducing the deficit is “going to be far more difficult than anybody imagines” after “a decade of major increases in federal spending and major tax cuts.”
Ironic, this coming from the guy who foolhardily endorsed Bush’s 2001 tax cuts, thereby helping to lay the ground work for the massive deficit expansion.
Regardless, this will hopefully take some of the wind out of the GOP/Tea Party sails — these self-proclaimed ‘fiscal warriors’. After all, they have championed two grotesquely incompatible positions: debt reduction AND tax cuts.
Tax cuts have long been the cornerstone of the Republican platform due to their obvious political popularity. But the GOP has recently made debt reduction their ‘call to action’. After they bequeathed a tumultuous economic disaster to an incoming President Obama, the GOP knew he would be forced — as was called for by every credible economist in the world — to increase federal spending to keep the country from spiraling into a full blown depression. It gave the GOP a quick recipe for attack: “Obama is just another big spending ‘socialist’ Democrat, intent on creating runaway deficits”. They hoped to shift at least some of the blame for the staggering deficits they created onto him. Disingenuous?–obviously, but they knew their low-information (propaganda devouring) base would swallow it, hook, line and sinker, and they did.
But a week ago their credibility as self-proclaimed ‘deficit hawks’ was called into question by none other than Chris Wallace (their own mascot) on The Fox News Channel (their home field). And the ensuing fallout continues to reverberate across the main stream media and blogosphere.
The Washington Post recently posed the following question to the GOP:
The issue is whether the tax cuts for the wealthiest Americans should be extended, adding another $678 billion to the deficit over the next decade. The tax cuts, it’s worth remembering, passed originally in 2001 with the argument that the surplus was so large that rates could be cut with budgetary room to spare. Now that the fiscal picture has deteriorated so badly, the questions remains: How are you going to pay the $678 billion? And if you don’t, how are you going to justify the added damage to an already grim fiscal outlook?
If the GOP hopes to have any chance at recasting themselves as ‘deficit hawks’ to anyone left of their wing-nut base, they will have to address this glaring contradiction. They cannot continue to defend tax cuts for the rich, and still claim they intend to be fiscally prudent next time around.
According to the CBO (as reported by Financial Times):
The Joint Committee on Taxation confirms that extending George W. Bush’s tax cuts “would increase the federal budget deficit by cumulative $2.567 trillion between 2011 and 2020.” It adds:
But that would also deepen a growing structural deficit caused by the cost of providing healthcare and social security to an ageing population.
The Congressional Budget Office projects that the national debt will balloon to 87 per cent of gross domestic product by 2020 and 185 per cent by 2035 if the tax cuts are extended and discretionary spending grows in line with the economy.
The Republicans want to extend all the cuts, while most Democrats support proposals by Barack Obama, president, to extend them only for households with incomes below $250,000, lowering the cost to $2.154 Trillion.
Democrats have accused the Republicans of hypocrisy when they block spending on economic stimulus in the name of cutting the deficit.
It’s obviously time to roll back ALL of Bush’s tax cuts. President Obama, show some leadership on this!
NY Times’ Paul Krugman: Supply Side Economics Creates Deficits
Nobel Prize winning economist, Paul Krugman, attempts to educate a largely ignorant Republican/Tea Party constituency on the documented failures of Supply Side economics. He focuses on the Carter and Reagan years (since Republican politicians tend to cite Reaganomics as their model for economic success), and he demonstrates that revenues actually dropped decisively with Reagan’s tax cuts:
… the revenue track under Reagan looks a lot like the track under Bush: a drop in revenues, then a resumption of growth, but no return to the previous trend:
Matt Yglesias contends that “the conservative movement in America doesn’t [actually] care about the budget deficit,” and the proof is in the policies for which they advocate:
1) There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.
2) The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.
3) When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.
4) Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.
5) The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.
In sum, there are zero historical examples of conservatives mobilizing to make the deficit smaller.
Senate Republican Leader Mitch McConnell recently made the following assertion about George W. Bush’s tax cuts for the wealthy:
“There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”
Here Ezra Klein of the Washington Post resoundingly slams McConnell’s fictitious allegations:
There’s an ontological question here about what, exactly, McConnell considers to be “evidence.” But how about the Congressional Budget Office’s estimations? “The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for almost half — 48 percent — of this $539 billion in increased costs.” How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018. How about George W. Bush’s CEA chair, Greg Mankiw, who used the term “charlatans and cranks” for people who believed that “broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue.” He continued: “I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.”
Of course, the Right rarely if ever lets factual evidence get in the way of their deep-seated, largely debunked, ideologies.
Still, it is good to see the Left finally doing a better job of educating the public about the real track record between the differing economic policies — something necessary if we are serious about promoting positive change in this country.