And once again Republicans are falling into it.
Recently liberals defined fiscal chutzpah by arguing high federal debt precluded tax cuts. This amazing new debt concern conveniently overlooks Barack Obama’s culpability in the calamity they now belatedly bemoan. It also implicitly sets a fiscal trap where liberals keep increasing spending and debt and conservatives can never cut taxes.
The Obama administration’s former Council of Economic Advisers chairman, Jason Furman, argued in the Wall Street Journal on October 1 that “the 1981 and 2001 model of tax cuts makes no sense in today’s fiscal environment.” His central argument is that un-offset cuts would “balloon the debt.” Furman likens cutting taxes to sending “his children off to perform chores in exchange for a candy bar, but instead they discussed doing the chores for six months, did none of them, asked for $1.50, and tried to use it to buy five $1.50 candy bars.”
A better analogy for liberals’ new warning is the comic definition of chutzpah: A child murders his parents and throws himself on the mercy of the court because he is an orphan. Once the shock subsides, it is worth deconstructing liberals’ latest excuse to not cut taxes.
On the tax front, liberals observe that federal taxes measure just 17.3% of GDP today, well below their 1981 and 2001 levels. However, this misses two important facts. This year’s tax to GDP level is not low; it exactly matches the Congressional Budget Office’s 30-year average. They also overlook CBO projecting this level increasing each of the next four years — hitting 18.4% by 2026.
Nor would the Senate’s proposed $1.5 trillion net tax cut leave the federal tax burden below historical standards. Subtracting $150 billion from each year of CBO’s ten-year projection, federal revenues would still be 17.4% in 2021 and 17.9% in 2027 — higher than now and the 30-year average.
The left’s latest argument also skips Obama’s debt creation they claim blocks tax cuts. Federal debt stood at 77% of GDP last year — double its 39% when Obama took office in 2009.
Finding the culprit for Obama’s debt explosion only requires looking at his spending. The left completely ignore spending, except when reminiscing about raising revenue and cut spending à la the Simpson-Bowles plan. Obama pursued only that plan’s first half.
In 2008, spending amounted to 20.2% of GDP — slightly below its 30-year 20.3% average. Under Obama, it never fell below that — dipping only to 20.6% in 2015 and finishing at 20.9% last year.
Liberals’ latest argument ignores their leadership in creating the debt problem they raise. While exculpating themselves, it ensnares conservatives — claiming liberal-created problems first be addressed. Presumably this would instead require raising more revenue — liberals notably avoided spending cuts during Obama’s tenure and still strongly oppose them.
Liberals’ new debt dodge is a clever trap for conservatives. Having dug spending and debt holes in the budget, they want conservatives’ tax cuts to fall into them. In power, liberals increase taxes, spending, and debt. Once out, they re-benchmark tax levels to the spending and debt levels they hiked. Such a course results in spending and taxes only rising.
Another key variable the left avoid is the economy. Under their stewardship, while taxes, spending, and debt rose, the economy lagged. For Obama’s eight years, real GDP growth averaged just 1.5% — less than half its 3.1% 1946-2008 average. Even dropping 2009’s contraction, 2010-2016 averaged just 2.1%.
For the last eight years, America has seen the results of liberals’ fiscal approach of higher taxes, higher spending, and higher debt. Early in his presidency, Obama allowed the Bush tax cuts to continue, fearing higher taxes’ adverse economic impact, only reversing course when he deemed it economically possible.
Now after eight years of subpar economic performance, when Republicans seek to aid the economy by reducing taxes that are moving well ahead of historic averages — this is precluded by liberals’ deficits? Liberals’ concern for debt and spending is new, but their shameless cynicism is as transparent as it is consistent.