Can someone -- anyone -- tell me why the Republicans in Congress keep saying 'no new taxes'?
It can't be because they think our economy is improving. It's clear to everybody -- Democrats and Republicans alike -- that our economy is wheezing and mired in a nearly four-year-long jobless recovery with still more than 29 million real unemployed workers.
It can't be because of economic theory. Economists are notorious for their disagreements, yet almost every single credible economist, including Republican favorites like Reagan economic advisors Martin Feldstein and David Stockman, believes we need a combination of revenue increases and budget cuts to get our fiscal house in order. Most also believe we need more -- albeit this time much more effective -- stimulus, to be paid for out of those new revenues.
It can't be because they are trying to represent the will of the people. Sixty-three percent of voters clearly support raising taxes on households earning more than $250,000 a year (New York Times, 8-06-11).
And it's disingenuous to suggest that it is better for the vast majority of Americans if we balance the budget without any new revenues from taxing the extremely wealthy and closing egregious tax loopholes, but rather only further cuts of Defense spending and more insensitive slashing of our nation's core social programs. Any honest analysis of respective tax burdens would show that we have so grotesquely distorted our once-progressive tax system that it now hugely over-benefits extremely wealthy individuals and multinational corporations.
So, how can any member of Congress miss what the polls are saying? The answer has to be -- again -- self-interest of the member and/or his being beholden to the campaign finance largesse of the nation's wealthiest taxpayers and multinational corporations, for no one else in the country benefits from this insensitivity.
Resolution of the "new revenues plus cuts" versus "only more cuts" debate is certainly not going to be found in whether or not one course of action is going to 'double dip' the Great Recession of 2007 and the other is not. Even the 'economic literalists' who still look only to GDP growth as the only measure of economic vitality, rather than to the more meaningful measure of real unemployment, have to concede that, as The Economist recently commented (8-06-11), "Output has not regained its pre-Recession peak and the feeble recovery is petering out." In fact, over the past six months the U.S. has eked out annualized growth of only 0.6 percent, when 3.0 to 3.5 percent annual GDP growth is for our economy no more than stasis.
By only cutting government expenditures, no less a profound expert than Mohamed El-Erian, the CEO of the market-moving bond firm Pimco, says that: "Unemployment will [now] be higher than it would have been otherwise, and growth will be lower. Withdrawing even more spending at this stage will make [the economy] ever weaker." (New York Times, 7-31-11)
It should be possible for members of Congress -- and for the president -- to appreciate the gross insensitivity of a cuts-only approach to the current economic crisis simply by focusing on what we will lose as a nation and as citizens if we only cut further and don't raise new revenues.
The specific responsibility placed on the 12 appointed members of the special Congressional committee is to find, between now and November, at least $1.2 trillion in additional net savings out of the federal budget over the next decade. Yet some of the Republicans on this super committee have already declared their firm opposition to any new revenue from tax changes or reforms, so by the rules established for it, unless the Republicans moderate their positions this means further cuts only.
However, to put the prospect of 'further cuts only' into perspective, as the New York Times editorialized on August 6, the special committee could entirely eliminate (not just cut) the whole of the FBI, Pell Grants for college students, the Centers for Disease Control and Prevention, the National Institute of Health, and the Head Start program for at-risk young children and it would still not eliminate the $110 billion of government spending annually that is needed to aggregate $1.2 trillion of net savings over the next 10 years.
Resolution must, quite obviously, therefore be found in some meaningful amount of new tax revenues. The following summary of various federal tax rates and taxes under President Reagan after passage of his personal hallmark Tax Reform Act of 1986 and here now in 2011 clearly shows why. (These figures were ably put together by my colleague Roger Smith, who shares my concerns -- the highlighting of the estimated individual middle class taxes and tax rates are entirely mine.)
Leo Hindery Jr. is chair of the Smart Globalization Initiative at the New America Foundation and an investor in media companies. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. and Liberty Media.
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