Why a round of cuts without higher taxes is necessary

The debt-ceiling negotiations continue apace in Washington, which is to say Monday saw another round of Democrats demanding tax increases and Republicans refusing to go along with them.

Aside from the fact that the House GOP position is merely to cut the same amount of spending over 10 years that President Obama wants to borrow during the next 18 months, and apart from the fact that the negotiators claim to have found $1.5 trillion in cuts that ought to be considered little more than low-hanging fruit, there is a very simple problem with raising taxes as part of this deal. I’ve touched on it before, but Mickey Kaus hit on it again Monday:

Deals must be honored over time, and parties rightfully distrust each other. … So sequencing becomes important. …

Opponents of bloated government don’t trust politicians to make cuts if extra revenues are in the offing. Neither, sensibly, do many voters. But if you make dramatic cuts, demonstrate you’ve sweated out the fat — and there’s still a deficit, you’ve got a shot at getting a tax increase through. Cuts First! (emphasis original)

In the ellipses I included, Kaus (who opposed U.S. Sen. Barbara Boxer in last year’s Democratic primary in California) draws an analogy to immigration reform: Because strict border enforcement didn’t follow the 1986 amnesty, amnesty opponents don’t trust the feds to get it right unless enforcement comes first this time. Similarly, with few exceptions, tax increases have been used more as an excuse to increase spending even further rather than to balance the budget with commensurate spending cuts.

The problem he outlines is clear: Congress can’t be trusted to do the right thing with additional revenue if it can’t bring itself to cut $200 billion a year in order to borrow an additional $1.3 trillion a year (and actually, it may be higher than that — suddenly, the Los Angeles Times is calling the debt-ceiling request $2.4 trillion rather than “just” $2 trillion).

So, yes, sequencing is important.

– By Kyle Wingfield

127 comments Add your comment

Joel Edge

June 28th, 2011
5:47 am

“Congress can’t be trusted to do the right thing with additional revenue”
Amen! I wouldn’t trust the Democrat Party with a sack of s#&t in a locked room.

ByteMe

June 28th, 2011
6:12 am

And yet if you let the Bush (and now Obama) tax cuts expire, the deficit disappears in 2 years. Or so concludes the non-partisan CBO and the Bush (and now Obama) White House budget office. Seems like some partisans want to frame the conversation to their own viewpoint instead of to reality.

I’m all for spending cuts, but the limited amount of tax increases necessary to make this work are not going to be as painful to the average citizen as finding nearly $1 trillion a year in spending cuts without significantly downsizing the military.

Oh, and after cutting $1 trillion from the Federal budget — a surefire way to increase unemployment — Republicans will complain that Obama can’t bring unemployment down. What stupidity people will fall for.

BlahBlahBlah

June 28th, 2011
6:23 am

We’re collecting less than 15% of GDP. We damn sure need to raise that a couple of points. No tax hikes at all is silly. Even the bipartisan commission had a 3/1 ratio of cuts to taxes. Taking a hard line on this, when the perception is the people at the top are being protected, will backfire badly on the Republicans.

Churchill's MOM.....Ron Paul for President

June 28th, 2011
6:39 am

we need new Senators. Saxby, the tool of lobbyist, was 1 of the few non corn farm state Senators to vore for the continuation of Ethanol subsidies. To put it simply Saxby sold our vote to the Lobbyisr.

DeborahinAthens

June 28th, 2011
6:41 am

The Republican Agenda is to prevent President Obama from being re-elected. If they have to push us back into a recession, so be it. That’s why they’re playing a dangerous game with the debt ceiling. I’m 60, I’m in the 33% bracket, and I think both sides need to pony up! Move the normal retirement age to 70 for those born after 1970. Most of those people will live to their 90s or 100s. Drop the SS tax cap entirely. It is now $106,000, I think. When I cross the “threshold” –usually in September or October, I don’t even notice that they have stopped taking the SS taxes out, and I’m sure the people that make way more than I do, would notice it even less. Just take SS taxes out of all income. Then, Republicans need to let the “Bush Tax Cuts” expire. They were ill conceived by a very ignorant man who, in my opinion will go down in history as the worst President we’ve ever had. Bush had two Treasury Secretaries that told him they would cause enormous deficits, and he fired them and hired Hank Paulson, otherwise known as the Goldman Sachs shill , who was the father of TARP that Republicans keep trying to blame on Obama.

WAW

June 28th, 2011
6:42 am

“sequencing is important”
Bush “the 1st” correctly identified Voodoo Economics and the extent that Republicans worship at the Wall St – Madison Ave Temple of Greed. He tried, but “Read my lips” mantra didn’t work then and will not work now. Wall St and Madison Ave are businesses and as such must be regulated, controlled and taxed (it overhead, a cost of doing business).
Bush “the 2nd” and a Republican controlled congress undid his daddy’s correction and the USA is paying for it now.
Re-instate Glass-Steagall and raise income tax for those individuals making over $200,000.
If you want to sequence, let those who “don’t work to earn” but “got when the old man kicked the bucket” by for now. Most of them blow it anyway.

Light on Policy

June 28th, 2011
6:52 am

Kyle,

The entire basis driving your argument is not centered around sound economics but trust. When has “trust” ever been a prequisite for a budget process or even politics as a whole.

I guess when you can’t present an argument of numbers based on numbers, then appeal to emotions.

GB

June 28th, 2011
6:55 am

Have you noticed the grotesquely dishonest AARP ad? It criticizes conservative legislators who want to cut Medicare while keeping a number of outlandish grants that support studies of the mating habits of bees or whatnot. Does AARP think we are so dumb that we think the silly grants cited in the ad amount to real money? And that the elimination of these trivial items would save enough to permit the continued funding of “Medicare as we know it”? One more reason that I don’t sign up for AARP.

Name

June 28th, 2011
6:57 am

I trust the US government to make good fiscal decisions like I trust Wilt Chamberlain with my girlfriend.

Ayn Rant

June 28th, 2011
6:59 am

The debt ceiling negotiations are political farce intended to posture and quarrel until the next elections. Republicans want to talk about percentage cuts, instead of citing specific unpopular budget cuts. The debt ceiling serves no purpose: it should be eliminated. Spending cuts are made in the budget, not in debt ceiling negotiations.

Congress needs to stop the farce and get on with the real work of preparing a federal budget and reforming the federal tax code. The “low-hanging fruit” for deficit cuts is in the subsidies and deductions of the tax code.

Do deficit hawks have any idea how to make up for the job losses and consumer spending decline that will result from deficit cuts? There is an implied assumption that private business investment will make up the difference. How can that be possible? Why would investors pour money into an economy that has more joblessness and less consumer demand than now?

“Look before you leap.”

destin dawg

June 28th, 2011
7:05 am

NO to corn ethanol subsidies !!! Vote Saxby OUT !!! tax Cuts.. Spending Cuts !! really need tax Reform… flat income tax … Vat ( sales ) tax….. we get less than 1/2 of fed tax money .. back in productive investment… no to AARP too !!

Man Behind the Curtain

June 28th, 2011
7:08 am

If the Republicans had been so disciplined when they held the reins of power. The lion’s share of the debt is on their tab. Republicans have been trying since day one of Obama’s Presidency to keep the economy suppressed, in order to have Obama take the blame for their collapsing the economy in the first place. Democrats will go along with them at their own peril. Should the Republicans regain the White House the deficit and debt will be not so important. They will not want to accept the consequences of job killing austerity measures.

Man Behind the Curtain

June 28th, 2011
7:17 am

Consumer demand is what create jobs. Thus consumers are the real job creators. Kill this golden goose by shrinking available capital and watch the recession continue to dip. Tapped out consumers mean no job recovery.

Mongo

June 28th, 2011
7:22 am

Unfortunately the Republicans are trying to claim that ending subsidies for Big Oil, farmer welfare, and ethanol are “tax increases” so that their not too intelligent base will think the Cons were just preventing the Dems from raising “their taxes” when they are really protecting the corporate welfare of their big business contributors.

Obozonomics

June 28th, 2011
7:24 am

DeborahinAthens;
Your ignorance is showing again, brighter than the sun. If Bush “very ignorant man who, in my opinion will go down in history as the worst President we’ve ever had” what do you call Obozo WHO NOT ONLY CONTINUED THE BUSH POLICIES HE EXPANDED ON THE WIRETAPPING? If you had half a brain you would know that using your logic Bush would be the second worse president and Obozo would be the worst for continuing the Bush policies.

Lil' Barry Bailout

June 28th, 2011
7:25 am

A token round of cuts amounting to just 2 trillion over a decade isn’t going to be enough to allow the big-government Dems to justify tax increases. The cuts need to be deep enough for them to be painful, or at least mildly uncomfortable, and they must include reform of the parasite maintenance programs (since that’s where the money is in the first place).

Man Behind the Curtain

June 28th, 2011
7:27 am

And tax cuts should be on the table to prove to Democrats that Republicans are serious about debt control and not playing a cruel game of extortion. Goading the Democrats to cut cut cut until the recovery tanks and hands them the White House.

Lil' Barry Bailout

June 28th, 2011
7:28 am

MBTC: If the Republicans had been so disciplined when they held the reins of power.
———

So the answer is…keep being undisciplined? I think we’ve had enough of that from Democrat congress between 2006-2010.

Grow up.

Road Scholar

June 28th, 2011
7:29 am

WE have spent monies in the past for infrastructure improvemets that improved our lives and created jobs. Why hasn’t these programs been expanded? So far the tax cuts have done nothing but make the rich richer!

Lil' Barry Bailout

June 28th, 2011
7:32 am

Or, we could just not pass the increase in the debt ceiling and run a balanced budget. We have plenty of tax revenue coming in to service the debt–no need to default. Some parasite maintenance programs might be affected just a tad…TFB.

Go Figure

June 28th, 2011
7:32 am

This political brinksmanship on the part of the Republicans is misguided and will surely backfire. That being said, I totally agree with LBB: the effect of allowing the Bush tax cuts to expire should be painful for the millionaires or at least mildly uncomfortable.

Road Scholar

June 28th, 2011
7:32 am

Since they don’t like OBamacare, why don’t we take away the republican law makers health benefits. While we are at it we could close their gym also, esp since no one can find out what is in it and the costs to run it!

Man Behind the Curtain

June 28th, 2011
7:33 am

What is more parasitic than speculators that syphon money off of the economic activity of a nation? They “produce ” nothing.

Go Figure

June 28th, 2011
7:34 am

…though I wouldn’t necessarily call our military a parasite program.

destin dawg

June 28th, 2011
7:35 am

NLRB headed by Obama appointed Union lawyer.. against new Boeing plant in S. C… because its a right to work state.. and voted the Union OUT ??/ these are high paying jobs ?? !!

Chuck Allison

June 28th, 2011
7:36 am

Democrats, please quit referring to our present level of income tax as something that can “expire”. The tax rate is what it is, and any upward change will be an increase. We either raise taxes or we don’t raise taxes. We don’t “let” anything expire.

stands for decibels

June 28th, 2011
7:37 am

I’m all for spending cuts

I’m not. I thought they were stupid wayyy back when unemployment was around 9 percent, and I think they’re stupid now that unemployment is… um… still 9 percent.

stands for decibels

June 28th, 2011
7:38 am

why don’t we take away the republican law makers health benefits.

because it’d be a stupid feel good solution that accomplishes absolutely nothing but making these already corrupt men and women even more corrupt and dependent upon their corporate sponsors.

destin dawg

June 28th, 2011
7:38 am

If you like Labor Unions and Lawyers.. that’s what you got last time = No New Jobs !!

stands for decibels

June 28th, 2011
7:39 am

Or, we could just not pass the increase in the debt ceiling and run a balanced budget.

and give everyone ponies! no, better yet, unicorns!

stands for decibels

June 28th, 2011
7:40 am

This political brinksmanship on the part of the Republicans is misguided and will surely backfire.

naw, the corporate media and most of the corporate Democrats totally have their backs on this.

fix is in, folks.

Man Behind the Curtain

June 28th, 2011
7:40 am

People pay for Medicare and Social Security. And are called parasites for recieving what they paid for? The majority of Americans will choose to keep these programs solvent if the politicians will let them.

Go Figure

June 28th, 2011
7:43 am

Unless Congress acts soon, almost all of the “Bush tax cuts” and credits that were enacted in 2001 and 2003 will expire at the end of this year.

Read more: http://www.foxnews.com/politics/2010/10/11/expiration-bush-tax-cuts-affect/#ixzz1QZPYXpF1

Huh?

June 28th, 2011
7:50 am

“…What stupidity people will fall for.”

That’s how you explain “President” Obama.

George P. Burdell

June 28th, 2011
7:54 am

Kyle you are completely correct in this. I would add that I think we need spending cuts just to get us back to the unsustainable pace we were on before the economy collapsed. In 2008 and 2009 spending jumped by over 28% which I do think was necessary to keep us from having a complete meltdown. Now, somehow that level of spending has become our new baseline from which to make cuts from. We need to cut 300 billion a year to get us back to even remotely sustainable levels. We are now spending almost 25% of GDP and if you think taxing the rich is going to be the solution to all our ills you are sadly misinformed. I think if we could get $300 billion of real cuts, then we can start a discussion on increases. But I agree completely that we have to have those cuts first and see that they actually take hold before we even toy with raising taxes.

Realist

June 28th, 2011
7:56 am

OH THE HUMANITY!!! The very thought of taxpayers KEEPING their OWN money!!! As if THEY are smarter than Government bureacrats?!?!?!?!

JDW

June 28th, 2011
7:58 am

The Republicans took a budget surplus in 2000 and turned it into the mess we have today…by all means lets listen to them. :roll:

Go Figure

June 28th, 2011
8:00 am

Where were these vociferous budget-conscious Republicans when they held the majority? It seems they only rear their ugly heads when they have been voted out of office. Can you say…pandering>

Moderate Line

June 28th, 2011
8:00 am

In 2010 20% of federal outlays were for defense, 21% Social Security and 13% percent for medicare.

The next biggest item on the federal budget is interest at 6%. After interest comes unemployment insurance at 5%.

Already we are up to 65% of the budget.
Most of the cuts the Republicans propose are minor. I am not saying they should not be cut but the main cost of the government is transfer payments and defense.

Realist

June 28th, 2011
8:02 am

“…Can you say…pandering>..”

And we know that wonderful Democratic Party would neeeeeever do that!

seabeau

June 28th, 2011
8:04 am

End ALL ENTITLEMENTS NOW!! End ALL FOREIGN AID NOW!! Call your lawmakers and demand a balanced buget admendment for the federal government.

Fletch

June 28th, 2011
8:06 am

Chuck Allison – “Democrats, please quit referring to our present level of income tax as something that can “expire”.

I’m not a Democrat, but “expire” is the correct word. When the tax cuts were originally implemented by the Bush administration, it was with the understanding that they would “expire” after 10 years. The deal Obama made to extend the cuts for 2 more years doesn’t change the fact that they were intended to “expire”.

On another note, I find it amusing that an article that contains the phrase “Congress can’t be trusted” still brings out the sheep from both sides bleeting about who the better party is.

Fletch

June 28th, 2011
8:09 am

Realist – “And we know that wonderful Democratic Party would neeeeeever do that!”

Both sides do it, that’s why I refer to anyone who supports either party as sheeple. Congrats, or should I just say BAAAAAAAAAAA

First Sergeant

June 28th, 2011
8:09 am

Got this idea from a friend yesterday; what do you think?

The 26th amendment
(granting the right to vote for 18 year-olds) took only 3 months & 8 days to be ratified!
Why? Simple! The people demanded it. That was in 1971…before computers, before e-mail, before cell phones, etc..

Of the 27 amendments to the Constitution, seven (7) took 1 year or less to become the law of the land…all because of public pressure.

I’m asking each of you to forward this idea to a minimum of twenty
people on their address list; in turn ask each of those to do likewise.

In three days, most people in The United States of America will have the message. This is
one idea that really should be passed around.

Congressional Reform Act of 2011

1. No Tenure / No Pension. A Congressman collects a salary while in office and receives no pay when they are out of office.

2. Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.

If each person contacts a minimum of twenty people then it will only take three days for most people (in the U.S. ) to receive the message. Maybe it is time.

THIS IS HOW YOU FIX CONGRESS!!!!!

fair and imbalanced

June 28th, 2011
8:17 am

Kyle again with a suprising opinion!

stands for decibels

June 28th, 2011
8:18 am

Got this idea from a friend yesterday; what do you think?

Sarge, I think you should read my post @ 7.38, and then use your imagination as to what my thoughts about your friend’s proposal might be.

Realist

June 28th, 2011
8:22 am

Fletch

June 28th, 2011
8:09 am

Who said I supported either party? And you say BBbbbaaaaaaa

retired early

June 28th, 2011
8:22 am

I regret more and more as these “budget talks” struggle along, that Obama caved in and voted to keep the Bush tax cuts. His thinking, I am sure, was that he could expect that “act of compromise” to be rewarded with bipartisan cooperation in future dealing with the GOP…how wrong can he be. The GOP just tightened the noose around his neck a little more when he signed that bill. The GOP now can blame Obama for inflating the national debt…Damn, I wish he had realized there is no compromise acceptable by the GOP but one…to make Obama a one term president.

sim

June 28th, 2011
8:24 am

The right wing has accomplished what it has taken decades to coordinate: Continuous ongoing warfare against a nebulous enemy that will never be defeated by conventional means. We will be at war for generations to come thanks to the efforts of the right–at present these conflicts are costing the American taxpayers 2.5 billion dollars per week–put that in tandem with a tax structure that utterly elides those who profit from these conflicts and now you have a fiscal situation the right needs to leverage its social agenda. That’s what we’re seeing now. We somehow always to manage to find money to finance death, but not a penny for Americans who need their nation’s help. Now they can strike down unions, deprive children, the elderly and the ill; they can attack public education and government employees of all kinds and deprive working people from the help they so desperately need–the benefits they need to save their lives have gone to finance wars and pay for mercenary armies. The right doesn’t want a draft–they know that will sound the end of their extravagant and very profitable blood bath. We have allowed a president to rape the U S Constitution and the Bill of Rights. We allowed him to start a war in Iraq when it was common knowledge that our aggression was based on lies. Our supposed ‘threatened national interests” are an excuse for any and all aggression. We allowed that same president to hand all the contracts (unvetted) to the V-P’s own corporation! Bush’s cronies have gouged us at the pumps, stolen our retirement accounts, and crashed the markets by way of their thefts. Then we have been forced to refinance the very men who have committed these frauds. In short, we have had a right-wing coup and most Americans don’t even realize what has happened or how far-reaching the losses actually are. Should we privatize Social Security? Remember that little ploy? Imagine the consequences now.

Huh?

June 28th, 2011
8:26 am

“…to make Obama a one term president”

Best statement today.