Debt Deal Collapse Good for GOP, America
congress, Nation 3:43 AM
News broke yesterday that the so-called Deficit Supercommittee failed to reach an agreement to cut $1.2 trillion over the next decade. But is their failure really so bad?
Readers will recall the supercommittee was created as a stipulation for raising the debt ceiling last summer. With the goal of finding deficit cuts, the bipartisan group would either find consensus or suffer a politically unacceptable alternative: deep entitlement and defense cuts, triggered automatically.
Automatic spending cuts aren't the only upside to the supercommittee collapse. The process has made Democrats look really, really bad. With tax projections surpassing historic highs and spending at mind boggling levels, they appear petty and hyper-partisan refusing to cut spending growth and instead preferring to hoover more money out of taxpayer wallets. Perhaps the most precious prize of all was the clear and emphatic reversal by President Obama on his pledge to raise absolutely no taxes on middle class families. He will surely have to answer for that next year.
Committee Co-chair Jeb Hensarling (R-Tx) penned in the WSJ, "Republicans were willing to agree to additional tax revenue, but only in the context of fundamental pro-growth tax reform that would broaden the base, lower rates, and maintain current levels of progressivity. This is the approach to tax reform used by recent bipartisan deficit reduction efforts such as the Bowles-Simpson fiscal commission and the Rivlin-Domenici plan. The Democrats said no. They were unwilling to agree to anything less than $1 trillion in tax hikes—and unwilling to offer any structural reforms to put our health-care entitlements on a permanently sustainable basis."
Without a deal, the deficit will narrow automatically by cutting spending without raising taxes. This is a better deal for Republicans than even the most conservative plan floated by the committee. For America's future, the collapse may be the best deal imaginable.
The Problem - Revenue vs. Spending:
This chart from the Heritage Foundation clearly shows the relationship between federal spending and tax receipts since 1960, projected to 2021. While revenues have remained near an average of 18% of GDP, spending has risen well above its historical average of 20.3% GDP. So does the government tax too little or spend too much?
Democrats have argued for "increased revenues" (read: tax hikes) on grounds that receipts have been below average during the recession. But projections show that they will naturally return to historical levels as the economy recovers. Alarmingly, the American tax burden is already rising to it's highest level in history. Allowing the Bush tax cuts to expire, Americans will pay 20.6% of GDP in taxes by the end of the decade. Making the Bush-era rates permanent, revenues will still break records by 2035. This is an ominous trend for the folks that pay the bills in this country.
Spending on the other hand is already well above historical averages and growing without end in sight. It is worth noting that discussed "cuts" to federal programs are cuts in projected growth, not actual cuts. The Boston Globe had this to say:
Democrats have argued for "increased revenues" (read: tax hikes) on grounds that receipts have been below average during the recession. But projections show that they will naturally return to historical levels as the economy recovers. Alarmingly, the American tax burden is already rising to it's highest level in history. Allowing the Bush tax cuts to expire, Americans will pay 20.6% of GDP in taxes by the end of the decade. Making the Bush-era rates permanent, revenues will still break records by 2035. This is an ominous trend for the folks that pay the bills in this country.
Spending on the other hand is already well above historical averages and growing without end in sight. It is worth noting that discussed "cuts" to federal programs are cuts in projected growth, not actual cuts. The Boston Globe had this to say:
"Sequestration — the triggering of automatic spending cuts if the supercommittee’s required deficit trims don’t materialize — will barely slow the spending train. Between 2013 and 2021, the federal budget is expected to grow by another $1.7 trillion. And if the sequester trigger is pulled? By another $1.6 trillion. If that’s “brutal,’’ I’m Katy Perry."
"Other governments (and earlier administrations) have done it. Under Prime Minister Jean Chretien in the 1990s, Canada slashed spending across the board, reduced its federal payroll by 45,000 jobs, and privatized the national railway and air traffic control system. The result, as Fred Barnes recently chronicled in National Affairs, was an economic rebound. A deficit of nearly $37 billion turned into a $3 billion surplus, and a national economy that had been growing at an anemic 1 percent kicked into overdrive, expanding by an annual average of 3.4 percent between 1994 and 2006."
The Political Aftermath:
Senator Pat Toomey (R-Pa) sees an upside to the supercommittee failure. "The silver lining is that we are going to get the spending cuts anyway." However he added, "the mandatory cuts in defense programs could jeopardize our national security." Human Events points out that concern is shared by Defense Secretary Leon Panetta, a Democrat.
Automatic spending cuts aren't the only upside to the supercommittee collapse. The process has made Democrats look really, really bad. With tax projections surpassing historic highs and spending at mind boggling levels, they appear petty and hyper-partisan refusing to cut spending growth and instead preferring to hoover more money out of taxpayer wallets. Perhaps the most precious prize of all was the clear and emphatic reversal by President Obama on his pledge to raise absolutely no taxes on middle class families. He will surely have to answer for that next year.
Committee Co-chair Jeb Hensarling (R-Tx) penned in the WSJ, "Republicans were willing to agree to additional tax revenue, but only in the context of fundamental pro-growth tax reform that would broaden the base, lower rates, and maintain current levels of progressivity. This is the approach to tax reform used by recent bipartisan deficit reduction efforts such as the Bowles-Simpson fiscal commission and the Rivlin-Domenici plan. The Democrats said no. They were unwilling to agree to anything less than $1 trillion in tax hikes—and unwilling to offer any structural reforms to put our health-care entitlements on a permanently sustainable basis."
Without a deal, the deficit will narrow automatically by cutting spending without raising taxes. This is a better deal for Republicans than even the most conservative plan floated by the committee. For America's future, the collapse may be the best deal imaginable.
Posted by Nick Stone
on 3:43 AM.
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