Iowa Debate Confirms GOP Won't Pay Down the Debt
Four years ago, perhaps the most telling episode of the Republican presidential nominating process came during a debate at the Reagan Library when three candidates raised their hands to declare that they did not believe in evolution. But when all of the GOP White House hopefuls assembled in Iowa raised their hands in unison to reject any debt reduction compromise featuring a lopsided 10 to 1 ratio of spending cuts to tax increases, they offered the defining moment of the 2012 campaign so far. In a nutshell, while the United States can comfortably afford to pay down its national debt over time, Republicans simply won't.
Of course, Thursday's spectacle comes as no surprise. As Ezra Klein explained last month, when the Republican leadership balked at President Obama's proposal to reduce the debt by $4 trillion over the next decade in a package consisting of only 17% in new revenue, they weren't just walking away from a historically great deal. They were even turning their backs on the sainted Ronald Reagan.
After Reagan's massive supply-side tax cuts of 1981 unleashed an ocean of red ink, the Gipper raised taxes in seven of his 8 years in office, 11 times altogether. (Nevertheless, Ronald Reagan tripled the national debt.) Given that record, Klein concluded, "Today, tea party conservatives would be begging Sen. Jim DeMint to primary the Gipper."
As Klein explained, by any standard, Obama's offer to the Republicans was a very good one:
[George H.W.] Bush also included taxes in his deal, and Clinton relied heavily on taxes in his first deficit-reduction bill, which passed without Republican votes. In 1997, when he was working with Republicans, he actually cut taxes slightly while passing spending cuts. But of course the economy was in much better shape then, and Clinton had already increased revenues substantially.
The one-third rule doesn't break down until you get to the deal Obama reportedly offered Republicans in the first round of debt-ceiling talks: $2 trillion in spending cuts for $400 billion in taxes, or an 83:17 split. And that, if anything, understates how good of a deal Republicans are getting. Tax revenues and rates are much, much lower than they were under Reagan, Bush or Clinton. And next year, Obama is pledging to extend most of the Bush tax cuts, which amounts to a $3 trillion-plus tax cut against current law.
Which raises the obvious question when it comes to new tax revenue for the federal government: if not now, when?
With the economy in recovery, 2013 seems like a very good time to start. After all, at just over 14% of U.S. gross domestic product, the total federal tax burden is at its lowest level since 1950. And while income inequality is at record highs, tax rates for households earning over $1 million annually have plummeted. (Between 2001 and 2007- a period during which poverty was rising and average household income had fallen - the 400 richest taxpayers saw their incomes double to an average of $345 million even as their effective tax rate was virtually halved.) As the Center on Budget and Policy Priorities revealed , according to the Congressional Budget Office "middle-income households are paying overall federal taxes -- which include income as well as payroll and excise taxes -- at or near their lowest levels in decades." As it turns out, total U.S. taxes are not only much lower than virtually every other major industrialized economy, but the gap has been growing for years.
Often overlooked in the Republicans' "no means no" position on new taxes is that the bills for the wars in Afghanistan and Iraq remain to be paid. George W. Bush was the first modern president to cut taxes during war-time. And those bills, which now top $1 trillion and with interest payments and health care for veterans could reach $3 trillion by 2020.
And still, those expenses pale in comparison to the Treasury-draining effects of the Bush tax cuts. These two graphs from the Washington Post and CBPP make that point crystal clear. Analyses by CBPP showed that the Bush tax cuts accounted for half of the deficits during his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus - combined.
In 2009, Utah Senator Orrin Hatch explained Republicans' concept of fiscal discipline when George W. Bush sat in the Oval Office:
"It was standard practice not to pay for things."
Sadly, as Thursday's pathetic debate grandstanding in Iowa shows, Republicans have no interest in making up for lost time. Even Fox News' generous hypothetical plan for a 10-1 ratio of spending cuts to revenue increases is an offer the GOP could refuse.