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The False Narrative of the Grand Bargain on Tax Hikes

Over the past few months, there has been a daily trickle of establishment Republicans coming out before the media in hostage style confession statements to declare that they would accept tax increases as part of a “grand bargain” to cut the deficit.  The latest member was Lindsey Graham, who stated his newfound opposition to the taxpayer pledge of Americans for Tax Reform, which he considered to be too ideologically intransigent.  Tom Coburn continues to work with the “Gang of 6” in an effort to “raise revenue.”

The media has extrapolated on Graham’s narrative, suggesting that Republicans are too unyielding to compromise and that they would even chase Reagan out of the party if he’d be president today.  Buttressed by Jeb Bush’s comments concerning Reagan’s place in today’s Republican Party, the media is chastising us for being so stridently opposed to tax increases – even in the event of a “grand bargain” of $10 of spending cuts per $1 of tax increases.

The problem with this narrative of the grand bargain is that no such agreement exists.  Nor will it ever materialize.

I’ll be the first person to agree to such a deal.  There, I said it.  If Democrats would really agree to a deal that would wind down the welfare and entitlement programs and eliminate full departments of the executive branch, I would reluctantly go along with some form of revenue increases.  Raising taxes is unfair and counterintuitive, but if that is what it would take to get Democrats to come onboard with our efforts to shrink government, then it would be a deal worth making.

Then again, if unicorns could fly, we wouldn’t need airplanes either.

The reality is that Democrats have never agreed to anything more than notional baseline cuts over 10 years.  They have not agreed to close down a single agency or office, much less a full government department.  They have not put on the table a plan to eliminate even a few of the 2,184 assistance programs.  And they never will.  It would be an anathema to their entire political desideratum: growing government and creating dependency and special interests for the purpose of cementing a permanent power structure.

The farm bill that just passed the Senate is a great example of how gargantuan budget figures are used to create the false impression that we are cutting spending.  Both Republicans and Democrats on the Agriculture Committee are patting themselves on the back for their great work in cutting $23 billion from the 10-year baseline, down to $969 billion from $992 billion.  The problem is that the one program they eliminated – direct payments to farmers – will be replaced by a more costly shallow loss protection program that is not accurately reflected in the cost of the bill.  Moreover, this bill locks in several hundred billion extra in food stamp spending, thereby consummating the Obama Food Stamp presidency even after he leaves office.  Remember, this bill makes food stamp spending mandatory.

Over the next few years, we will hear grumblings of budget deals that sound like an Old McDonald song: “a few trillion here and a hundred billion there; here a trillion there a billion, everywhere a spending cut.”  However, once we cut through the illusory narrative generated by the media, we’ll realize that not a single program or agency is eliminated, at least not without the creation of a new one in its place.

The real question is why so many Republicans are revealing their cards on the issue of taxation in preparation for a deal on spending that Democrats would never support?  You don’t hear Democrats saying, “gee, maybe we would agree to abolish the Department of Education as part of a broader deal to raise taxes.”

Democrats might be the evil party, but Republicans are intent on being credulously stupid.

COMMENTS

  • uncmike

    Daniel, good piece.

    I suspect many conservatives would consider a sensisble tax increase of some sort if the Democrats would embrace deep and meaningful cuts–that will never happen. But the usual crowd of RINOs like Lindsey Graham, Boehner, McConnell et al., would be all too happy to raise taxes w/out any honest and firm commitment to cut–they pull this trick over and over again. These RINOs want to keep their jobs for life and they need more money to spend to buy their re-elections. They care not a whit about conservative principles such as limited government and individual freedom. These self-styled “moderate” Republicans like Jeb Bush don’t like it that the tea party is making it hard for he and his “moderate” friends to run things the way they used to run them. I hope y ou will keep the heat on the crowd on our side with more pieces like this.

    • ardendulou

      The talking points next year should be how to balance the budget during the 2012 budget process. Massive tax reform (not tax hikes, redo the system) and massive spending cuts are the key. The GOP ‘should’ target Clinton’s 1999 budget total and factor 2% spending raises to offset inflation.
      Then figure out what the tax revenue needs to be and build a tax system to pay for it WITHOUT using SS money. It is really that simple if the GOP wants it to be. The Fair Tax or a flat tax calculation is super simple once you know the goal. Politicians make it too hard.

      • ardendulou

        The oversea military operations in Iraq and Afganistan would be removed from teh budget number and be funded via war bonds. If no war bonds are sold, the soliders leave.

        • mrfixit10

          This is an idea that worked when America was at War.
          Our Military and Families are at war, The rest of the 99% are at Wal-Mart trying to get a rebate on the latest I-Pad that Daddy paid for.

      • davesinsanantonio

        regulation cuts and regulatory reform! Business is being strangled, and private property rights are being eroded. We need to regain control of the bureaucracy, and not just at the federal level either.
        Rein in the people who supposedly work for us!!!

  • http://teapartisan.wordpress.com Loren Heal

    Dear Democrats:

    • If you’re willing to do the $10 in cuts, let’s do them. Why are cuts tied to tax increases?
    • OK, let’s tie them. Why don’t we compromise and just do $9 in cuts?
    • Would you be willing to do $1 in tax cuts for $10 in spending cuts? I don’t care whose taxes you cut, as long as it’s someone who is currently paying taxes.
    • http://impudent.edublogs.org/ kyle8

      nt

      • adair

        Three dollars in cuts for every one dollar tax increase. Reagan signed the tax increase, and un-voila! No cuts ever happened!

    • ghostship

      They would just increase spending by $20.00 then agree to “cut” $10.00 in spending on a 10 year plan with $0.01 being “cut” now and $9.99 supposedly being “cut” in the final year if of course your a fool enough to swallow it.

      I just want a real spending cut of 1 dollar. Just spend $1.00 less than the previous year. I’ll settle for just one measly dollar in real cuts because that would be biggest spending cut in Washington since 1965.

      I’m sick and tired of “cuts” that result in spending going up. Maybe the government needs to legalize drugs. Maybe I need to be high in order to understand how I can “cut” spending and increase it at the same time.

      • JSobieski

        Bad PR and mediocre policy.

        Better to go with “Freeze Freeze and Freeze” so long as it is a real freeze. It would be better policy and better PR.

        Talking about trillions in cuts just lets the D’s call the cuts draconian. Far better to say “what cuts?”

        • davesinsanantonio

          Absolutely no new regulations without specific prior approval by Congress, and a minimum of two old regulations retired for every new one approved. We need to shrink the bloated federal registry, and the bloated bureaucracy as well–no new hires, and lose slots through attrition.

          • commonsenseobserver

            I fear that would be impossible. That’s what regulations are all about, after all. I do favour the REINS Act, and I think the Romney campaign can go further by embracing a “one in, two out” rule for the next 5 years as you have said, beyong a regulatory freeze.

  • Steve Summers

    For every dollar that federal spending is BELOW the level of the prior year (actual cuts- not below the projected growth), I’d be willing to pay my share of a matching dollar of increased taxes. That way, the ‘rats can’t “yank the football” like they’ve done every previous time a “balanced – taxes plus cuts” approach has been agreed to, resulting in tax increases but no spending decreases.

    There would have to be some rules- for example, rather than the “Prior year”, it would have to be the lowest prior year after the deal is cut (to prevent the ‘rats from raising spending by a half trillion one year then cutting that half trillion the next, and demanding a $500B tax increase). The tax increase should also be a surcharge on existing taxes, so it applies to everyone- in proportion to their rates – i.e., +10% doesn’t mean the 5% bracket goes to 15 and the 35 goes to 45 – it would mean 5% goes to 5.5 and 35% goes to 38.5. But it still has to apply to EVERYONE.

    Unfortunately, I’m pretty confident that agreeing to something like this won’t have any effect on my tax bill. Unless the Reps get 60 votes in the Senate and the presidency, and at least some of them grow a spine, we’re not going to see any real reductions in spending.

    • http://impudent.edublogs.org/ kyle8

      But the Pelosicrats would never go for it.

  • Finrod

    Reagan agreed to $100B in tax hikes in exchange for $300B in speding cuts. We got the tax hikes but the spending cuts never came, thanks to Democrats.

    No more deals with Democrats on taxes, period. They’ve proven themselves completely untrustworthy.

  • benko

    to the democrats, to the public and to the media folks when asked. Preferably in some tactful way.

    • hart65

      Agree on moving over a fixed period of time to a balanced budget at a percent of GDP that is compatible with a right sized government and a thriving private sector. 26% of GDP is not working! History teaches that somewhere around 18-20% is the sweet spot. Then match any cuts that are actually made with that much additional revenue. As this process unfolds and the economy grows, revenues may well increase without major tax rate increases. And 20% of a booming economy may well support the government deficit free… AND allow for some debt reduction.

  • aesthete

    Canada during the 90s, for example, raised taxes while cutting expenditures. Most of the Germanic countries (like Switzerland) do the same.

    Funny thing? These countries are later able to lower tax rates.

    Grand Bargains work because they spread the pain out evenly so it doesn’t have disparate impact, and because it makes clear that the problem is severe. If I tell my wife “we have a spending problem” and take all my favorite things off table for discussion in what to cut in the family budget, it’s going to be tough to get an agreement.

    We need better negotiators, not less Grand Bargains. This is just an excuse to do nothing as debt snowballs.

  • poorwilber

    Its more useful to take an accordian to a duck hunt than establishment Republicans to a negotiation. They always surrender first in the press.

  • poorwilber

    Reagan wouldn’t be confortable in the Republican Party today? What absolute hogwash. We just nominated a candidate for POTUS well to the left of Ronald Reagan.

  • Tbone

    While Democrats are a disease, they are a cancer.

  • norris

    is going half way in the wrong direction . Spending cuts can bring us back to a reasonable budget. Move EPA and department of education back to state control . Have department conferences on line or at the city nearest the largest group of employees , stay in reasonable hotels and go home when the work is complete. Many private companies have cut back 25% or more ,government offices should be able to cut 10% with no real loss of services.

  • MrDaveRite

    No deal we have ever made for spending cuts has been kept, since they fooled Reagan til now. Before we enter into another tax increase for spending cuts deal, we need them to come through on their previous promises. Otherwise, there can be no deal this time, since we KNOW they lie.

    Every GOP politician needs to say that every time the issue is brought up. Keep the Democrat side of the previous deals, before we make another deal.

    Keep the Democrat side of the previous deals before we make another deal. The fact there is no deal is on them EVERY time.

  • moonmad

    In grand bargains. Especially McConnell, he has used the Grand Bargain strategy to stymie real progress. Instead he loves a big complicated looking movie machine with lots of blinking lights and moving parts that accomplishes nothing. So no to Senators and congress gangs. I want to see you take step in the right direction. For starters push holding the line on any tax increases that occur from inaction on congress’s part.

  • JSobieski

    Why not publicly agree to a 10 to 1 “in concept” so long as spending cuts are limited to the current year (no future cuts for immediate spending increases).

    The correct response to a hypothetical 10:1 proposal is to welcome the specifics on the 10. Until such a proposal is put into statutory language, taunt the D’s with being untterly unserious about the economy.

    Tax increases in the context of REDUCTIONS in marginal tax rates would be a fine compromise in the context of entitlement reform and addressing budget issues generally. However. we all know it would never get to that point.

    When will the Rs learn how to play politics?
    When will those on our side learn how to utilize advantages that the D’s hand to us? (such as the fact that GE pays no federal income taxes).

    The game of tax increases now with cuts that never materialize is a game that happens with the D’s control the House (see Reagan, see Bush 41). The R’s control the House, so we can play around with hypotheticals since we can put the brake on any increases anyway.

    • Dave_A

      Is that the entire concept of corporate income tax is wrong in the first place…

      GE is where the rest of corporate America SHOULD be, not vice-versa…

      • JSobieski

        Name me one politician actively advocating for a 0% corporate income tax in 2012?

        We are operating in a world where real cuts in spending are virtually impossible, and a corporate tax rate of 0% is an absolute pipe dream.

        So if we are talking college dorm room discussion, amen brother!

        If we are talking about a strategy for maximizing directionally correct movement in our difficult political/economic climate, pointing out that GE pays no taxes is a great way to reach a compromise involve reducing marginal rates–for both companies and individuals.

        It is not playing a populist card to point out that the largest insiders benefit the most from all the gimmicky tax credits/deductions.

  • rayjunior

    Last week Miochele Bachmann an absurd post by Michele Bachmann made its way here and I addressed it directly on my show. I was going to post the response to that thread, but it’s just as appropriate here.

    The Republicans are not worth following into the battle this year, especially ones like Lindsey Graham and Michele Bachmann.

    Here’s the response, relevant portion around 19:50

    http://youtu.be/4XH8irTYskw

    • gekster

      What was in it you didn’t like?

    • tnfriendofcoal101368

      To reanimate yourself as another name, once you have been ghosted. Especially if you want to put out the same boring tripe that got “rayjuniorshow” ghosted by Bill S. in the first place.

      • gekster

        I looked and seen only one post from him, and didn’t think anything about it.
        Good catch.
        (if he was banned once before, it shouldn’t take the mods long)

    • Bill S

      and you’re not welcome now.

      Leave. (Oh, and we’ll help you with that).

    • http://www.hakubi.us/ Neil Stevens

      retread

  • travis690

    This is the same plan that the Democrats unveil every year to try to say that the Republicans will not budge.

    What the Democrats never talk about is anything specific related to how they would IMMEDIATELY reduce actual (not projected) spending. After all: If the money goes to one of their constituencies, then it absolutely cannot be cut. But if it’s an immaterial amount that goes to a non-Democrat constituency, then the amount will be magnified far beyond the reality as a “cut” in spending.

    Just like income tax deductions are not “tax expenditures,” a reduction in the growth of spending is not a “spending cut.”

    Question: When will Washington learn this lesson of simple math?

    Answer: As long as they have flame-throwers like Chuck Schumer speaking out like third-grade bullies, they never will.

  • ateam

    What has gotten us into trouble is compromise. If you have a list of principles that guide your actions, your thoughts and your votes, them by God stick to them. So many Republicans are afraid if they don’t compromise, they will get voted out and then won’t be effective because they won’t be in the fight. It’s compromising your principles that created this mess. The Democrat’s idea of cuts is something that people 10 years down the road will have to deal with and stomach the pain. If you aren’t willing to take the medicine now, you never will.

  • celador2

    I see no reason to raise taxes for any reason. US is in debt yet grows spending by borrowing. The tax hikes would not go to pay down debt but to grow spending.

    So the grand deal says borrow and raise taxes to feedDNC cronies’ ever demanding special interests?

    No thanks, lets pass on this familar line.
    How about tax cuts that will jump businesses, create weath and thus more revenues for greedy DC coffers?

    Stand your ground and do not raise taxes for any reason.

  • justperhaps45

    If the available money becomes less, spending will shrink.

    Live in the short term. Ten years out figures are planning numbers, not reality.

    Have the money before the project starts or be able to prove that the project’s payback, in cash, will cover the principal and interest payments for short term borrowing.

    A guarantee is meaningless unless backed by the guarantor’s assets.The founders signed on the line. Maybe the legilators should have a little skin in the game?

    As long as we delegate debt creation we will become poorer.

  • http://americanstance.org pweldon

    As some above have pointed out, Daniel does not give sufficient input on the problem that tax increases are almost impossible to reverse legislatively but spending cuts are easy to reverse.

    I am all for modest revenue increases for the Federal Government, to be triggered upon successful completion of spending cuts equal to five times any revenue increase and to be immediately reversed in the event of any spending increases.

    Regards, Pete Weldon
    americanstance.org

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