“Nobody cares about deficits anymore,” insists retiring senator Bob Corker. Twenty trillion reasons suggest that nobody cared much about deficits way back when, either.
The Trump Administration seeks to reduce the top tax income tax rates from 39 percent to 35 percent, and more ambitiously pushes a dramatic reduction in rates on businesses. Gary Cohn and other administration mouthpieces argue that the ensuing economic growth means the cuts pay for themselves. The Congressional Budget Office concedes that the cuts equal economic growth equals revenue boosts but that those increases do not approach offsetting the revenue lost from the rate reductions.
“Unless it reduces deficits — let me say that one more time — unless it reduces deficits and does not add to deficits with reasonable and responsible growth models and unless we can make it permanent, I don’t have any interest in it,” Corker says of the tax cuts. “I think the greatest threat to our nation is our fiscal issues. It’s not North Korea. It’s not ISIS. It’s ourselves.”
Corker appears correct on all of his points but wrong on the timing. He announced his retirement from the Senate shortly before reinventing himself as a deficit hawk. And his public spats with the president make one wonder if this stance comes from taking it personally rather than standing on principle. But because he makes a strong point strongly, listeners should not reflexively dismiss it as sour grapes or lame-duck grandstanding.
Liberals, a designation that does not include Tennessee’s junior senator, become deficit hawks when the conversation turns to tax cuts. Many conservatives mistake a tactic to derail tax cuts as a sincere plea to more closely align revenues with expenditures. Sacrificing one very good, and very winning, idea because another problem awaits a solution strikes as bad politics.
Why not propose a series of budget cuts along with the tax cuts? At the very least, it separates the serious from the sophists. At best, it results in cutting government and taxes. Alas, the budget cuts never seem to follow the tax cuts. Unfortunately for the GOP, they punted on cutting government in anticipation of the tax cuts.
Republicans imagined that they traded a difficult problem for an easier one by shifting from health care to tax cuts, and in a sense they did. Goldman Sachs gives the plan a 65 percent chance of passing, and Warren Buffett similarly judged odds of it becoming law “higher than most people think.” But reining in health care costs, for the government and individuals, would have made the tax cut argument much stronger, particularly among the party’s outliers who sank the Obamacare replacement bill.
Health care eats up more of the federal budget than any other issue. Aside from education, health care generally costs state governments the most, too. Taking government completely out of the equation, health care eats up a massive portion of individual budgets as well.
The GOP enjoyed an excellent opportunity to negate Corker’s point. Health care represents a budget abyss. Reform, if done right, meant lower deficits. It also meant, in effect, a tax cut. Medical expenses, not taxes, weigh most heavily on Americans. Our annual health care costs appear roughly at parity with federal revenues. And whereas revenues as a percentage of GDP remain roughly in the same place they have been since 1970, health care costs as a percentage of GDP have more than doubled since that time.
Want to unleash the American economy? Health care, boasting a bureaucracy every bit as byzantine as the federal government’s, is where the action is.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.