GOP Peddles Uncertainty Myth About Taxes
In their scorched-earth effort to deliver another $700 billion tax cut windfall for the wealthy, Republicans have fittingly appropriated their favorite global warming talking point: "uncertainty." Mitch McConnell, Sarah Palin, Newt Gingrich and John Boehner are just of the GOP leaders claiming "Congress ought to act today to stop all the tax hikes" because "it would reduce the uncertainty that's affecting employers all across our country." Of course, they are predictably silent about the 1980's, when Ronald Reagan upended the tax code four times in five years, including "the biggest tax increase ever enacted during peacetime." And despite conservative warnings then as now about "job-killing tax hikes," American businesses responded by adding 23 million jobs after President Clinton raised upper-income tax rates in 1993.
Since the age of Reagan, the Republican electoral strategy has been "you can fool some of the people some of the time and that's our target market. At least, that is, when it comes to taxes. Because while the Gipper did deliver steep tax cuts in 1981 (slashing the top rate from 70% to 28%), what Reagan giveth he also taketh away. As Paul Krugman noted, in the face of the staggering deficits Reagan's supply-side tax cuts produced, "no peacetime president has raised taxes so much on so many people":
The first Reagan tax increase came in 1982. By then it was clear that the budget projections used to justify the 1981 tax cut were wildly optimistic. In response, Mr. Reagan agreed to a sharp rollback of corporate tax cuts, and a smaller rollback of individual income tax cuts. Over all, the 1982 tax increase undid about a third of the 1981 cut; as a share of G.D.P., the increase was substantially larger than Mr. Clinton's 1993 tax increase.
Tax historian Joseph Thorndike concurred, noting that the two bills passed in 1982 and 1984 together "constituted the biggest tax increase ever enacted during peacetime."
But the Reagan tax hikes hardly ended there. In 1983, Reagan signed into law the recommendations of his commission on Social Security. But as Krugman noted, there was one unfortunate and long-lasting side effect of firming up Social Security and Medicare:
For many middle- and low-income families, this tax increase more than undid any gains from Mr. Reagan's income tax cuts. In 1980, according to Congressional Budget Office estimates, middle-income families with children paid 8.2 percent of their income in income taxes, and 9.5 percent in payroll taxes. By 1988 the income tax share was down to 6.6 percent -- but the payroll tax share was up to 11.8 percent, and the combined burden was up, not down.
And, as CNN Money recently recalled, Reagan overhauled the tax code again in 1986. Because that bipartisan bill "eliminated or reduced many tax breaks and shelters, high-income tax filers who previously paid little ended up with bigger tax bills."
Nevertheless, the national debt tripled during Ronald Reagan's tenure in the White House. But it was only when Bill Clinton sought to stem the flood of red ink by boosting the top income tax rate to 39.6% that Republicans cried foul.
When Clinton's 1993 economic program scraped by without capturing the support of even one GOP lawmaker, the New York Times remarked:
Historians believe that no other important legislation, at least since World War II, has been enacted without at least one vote in either house from each major party.
Inheriting massive budget deficits and high unemployment from Bush the Elder, Clinton's $496 billion program was nonetheless opposed by every single member of the GOP, as well as defectors from his own party. As the Times recounted, it took a tie-breaking vote from Vice President Al Gore to earn victory:
An identical version of the $496 billion deficit-cutting measure was approved Thursday night by the House, 218 to 216. The Senate was divided 50 to 50 before Mr. Gore voted. Since tie votes in the House mean defeat, the bill would have failed if even one representative or one senator who voted with the President had switched sides.
Throughout 1993, President Clinton faced venomous - if completely baseless - charges from his Republican opponents. Newt Gingrich announced that February, "I believe that that will in fact kill the current recovery and put us back in a recession," while also warning the day before the budget vote, "This is the Democrat machine's recession, and each one of them will be held personally accountable." Bob Dole, Clinton's future reelection opponent, complained, "People out there in the real world just don't understand how record-setting tax increases and a taxpayer-financed spending spree by Congress will solve the deficit or put Americans back to work." While John Kasich (R-OH) told Clinton and the Democrats, "your economic program is a job killer," Dick Armey looked into his crystal ball to claim:
"Clearly this is a job killer in the short run. The revenues forecast for this budget will not materialize; the costs of this budget will be greater than what is forecast. The deficit will be worse, and it is not a good omen for the American economy."
Most dramatic of all was Texas Senator Phil Gramm. The same man who led the 1990's crusade to gut regulation of Wall Street and the IRS and later called America a "nation of whiners," boldly - and wrongly - predicted:
"I believe hundreds of thousands of people are going to lose their jobs...I believe Bill Clinton will be one of those people."
The Republican naysayers were, of course, wrong on every count. Bill Clinton kept his job and presided over a rapidly growing economy, expanding incomes, new stock market highs and a balanced budget. Clinton, who authored one of the best eight-year economic performances of the modern presidents, bequeathed a CBO-estimated $5.6 trillion surplus to his successor, the man with the worst economic record. Alas, with his tax cut windfall for the wealthy, George W. Bush squandered it and derailed the American economy.
If this all sounds familiar, it should. Despite their spectacularly wrong forecasts 17 years ago, he GOP brain trust has simply resurrected its 1993 predictions of gloom and doom.
Launching his campaign for House Speaker this summer, Minority Leader John Boehner decried President Obama's "job-killing tax hikes" and called the expiration of the Bush tax cuts for the rich "a recipe for disaster - both for our economy and for the deficit." His Senate counterpart Mitch McConnell told Fox News, "It would be a disaster." On Meet the Press, Dick Armey rejected the notion of returning the tax rates for the top 2% of earners back to their Clinton-era levels, mocking Obama's "new cockamamy ideas" and insisting the President "not raise taxes and take away the return on an investment" And as Newt Gingrich predicted in July:
"This economy will sink deeper into recession. There will be higher unemployment. The recovery will be longer."
Why? Because, as Sarah Palin recently explained:
"The last thing we should do is hamper our economic innovators and entrepreneurs with excessive taxes, overly burdensome regulation, and more uncertainty. This is not a difficult argument to make. It's common sense."
And Republican common sense, as Newt Gingrich insisted this weekend, is solely the province of those rich whose taxes must not be returned from today's 35% to the 39.6% rate of the booming 1990's:
What Republicans ought to do is say to people who create jobs, how many years does the tax code need to be extended for you to make an investment decision? I mean, the goal's not to have an annual extension of the current tax code, and then have every business in the country trapped saying, "I don't know. I want to make a 20 year investment in a factory" ...There is a number, but I would have the business leadership of the country describe the number.
But as Michael Hiltzik wrote in the Los Angeles Times last week, "'uncertainty' isn't the real reason they're not hiring." Poor sales, and not the uncertainty over taxes cited by the likes of the U.S. Chamber of Commerce, are at the heart of the problem for small businesses. And as former head of the Obama Council of Economic Advisers Christina Romer put it today:
Uncertainty is likely holding back the recovery. But its sources are far more fundamental than the tax and environmental issues that typically top the list of complaints. And the solution is certainly not for the government to do less. Rather, it needs to do much more.
At the end of day, though, some things are certain about the Bush tax cuts. In the years after their passage, U.S. economic growth slowed, job creation faltered, budget deficits skyrocketed, Americans' incomes sank, the wealthy reaped an unprecedented windfall and income inequality reached levels not seen since 1929. And to anyone disputing that historical record , as Michael Hiltzik might suggest ,"I'm certain they'll be lying."