Jonathan Chait

Only Twenty Four Percent!

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Reason's Nick Gillespie has a sprightly video touting how easy it would be to balance the budget without raising taxes:

The video is touting a Reason article he co-authored with Veronique de Rugy. It's a revealing expression of the vacuity of mainstream libertarian fiscal thinking.

In the video, Gillespie chirps, "it's so incredibly simple that virtually any elected official should be able to pull it off." The hook is that, under their plan, "you only need to trim 3.6% of each year's budget."

Gillespie displays a piece of pork, which symbolizes the federal budget, divided into ten slices, representing each of the next ten years. He trims a tiny bit of fat off each slice ("all we need to do is cut this little piece of fat right here.") Voila!

But, of course, the visual is completely misleading. He is representing a plan to cut 3.6% of the budget every year. His actual plan is to cut 3.6% the first year, then another 3.6% the next year, then another 3.6% the following year, and so on.

Another way of putting this is that, to maintain the current level of services in the federal budget, we would need to spend $5.5 trillion. Gillespie and de Rugy would propose instead to spend $4.2 trillion in 2020. That's their prerogative. I'm sure they could find at least $1.3 trillion in spending that they don't like. But the point is that you would have to eliminate a lot of functions of the federal government, and/or reduce a lot of social benefits.

The specific claim that you only need to cut 3.6% of the budget, and the broader claim that you just need to trim a little bit of fat here and there, are utterly false. The idea that the budget can be balanced without any increase in tax revenues and without imposing substantial pain is one of the most debilitating pathologies of right-wing thought.

Meanwhile, in National Review, de Rugy goes all Laffer Curve and argues that the Bush tax cuts caused the rich to pay higher taxes:

The main impact the rate reduction had in the first place was to make the rich pay an even bigger share of taxes that they paid before.

Look at these tables from the Tax Foundation. They provide some very good data about taxes paid by income levels, including the percent of federal income tax paid by each income group.

Table 6 in particular is interesting. In 2001, the top 1 percent of income earners paid 33.89 percent of all income taxes collected. In 2008, they paid 38.02 percent, down from the 2007 level of over 40 percent.

The real story here is that the proportion of pre-tax income earned by the top 1% has been rising since the late 1970s. The rich paid a higher share of the tax burden in 2008 than in 2001 because they earned a higher share of the income. If de Rugy was right that the Bush tax cuts caused the rich to pay a higher share of the taxes, then the share of the taxes paid by the rich should have fallen during the Clinton era. In fact the opposite occurred.

I understand that libertarians have different philosophical beliefs than I do about the proper size of government. I don't understand why they can't find somebody who expresses their philosophy without committing elementary errors.

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