In your recent column in the Washington Post “Opinions” page, you made an argument that we need to cut spending and raise revenue now in order to cut the deficit. You also said that the budget is 25 percent of GDP and revenue is 15 percent of GDP which are respectively too high and too low.
I agree that we need to cut spending and raise revenue. Not only do we need to cut the deficit, but we need to eliminate it, and then pay off the debt. The interest on the debt exceeds 200 billion dollars a year. However, I do not agree that we need to raise taxes before we cut spending for three reasons.
First, I won’t believe that the Democrats are serious about cutting spending until I see it. The deficit more than tripled under a Democratic Administration, Democratic Senate, and Democratic House. Your party tricked the Republican House on the last budget deal with creative accounting, and the current budget was cut by a mere third of a billion dollars; that would account for about two hours of deficit spending. Also, the deficit will not really be cut until Social Security, Medicare, and Medicaid are reformed. I’d personally like to see them sunset, but your party has scared old people too much with lies and distortions for that process to get started. Regardless, unless entitlements are reformed, their costs will continue to explode as baby boomers retire at the rate of ten thousand a day. Make real cuts in spending and real reforms in entitlements this year, and then talking about raising taxes might make sense.
Here’s a thought. Eliminate the unconstitutional government programs (such as Obamacare which will make medical care more scarce and expensive for people who don’t have access to gold-plated health insurance programs such as Congress has). Read Article One, Section Eight of the Constitution. That’s your job description. If a program does not fall under your enumerated responsibilities, eliminate or sunset it. That will cut spending by trillions this year. I’m just sayin’.
Second, raising taxes does not always raise revenue. As I understand, it the past, when the capital gains tax rate was cut, more revenue from capital gains taxes came in. While we can’t spend our way out of the deficit, we can’t tax our way out of it. Lowering taxes can raise revenue. Eliminating excessive regulation on businesses can raise revenue. How? Lowering taxes and reducing regulation on businesses encourages them, especially small business which account for 80 percent of private sector jobs, to take risks by expanding and hiring more workers. Hiring increases employment which increases the number of taxpayers which increases revenue. One set of regulations you could take a look at are those that the EPA is putting on coal-powered plants, including plants which produce electricity. Those regulations will increase the price of electricity for everybody, including businesses. The cost of doing business will go up as well as the cost of heating, cooling, and otherwise powering our homes. This is something Obama wants to happen. If it does, businesses will have an even thinner margin and raise prices for consumers, and consumers will have less money to spend. Sounds like a job killer to me.
Third, if you want to raise revenue, you ought to do it honestly and fairly. Simply put, the tax code needs to be radically simplified so that everybody knows what percentage of income they can expect to pay. You want to eliminate loopholes. I want to more than you. Not only do I want to eliminate the tax breaks for corporate jets, I want to eliminate them for mortgage interest, for hiring the unemployed, for installing green technology, for charitable contributions, for having children, for not being married, or any other behavior. Institute a flat tax, or at least a much flatter tax, and stop trying to manipulate our behavior with tax breaks for this or that. Also, everybody should pay taxes. Why should one half of the citizens enjoy the benefits of government without paying for them? Tax everybody fairly, and that will raise revenue.
In short, if you want the debt ceiling raised, which most Americans do not, then make real cuts and real reforms in this year’s budget. After that, we might think you are serious about reducing spending.