JONATHAN COHN FEBRUARY 16, 2011
With unemployment still too high and growth still too low, I'm not sure why budget deficits and the federal debt are suddenly the exclusive focus of our political conversation. But a serious conversation about how to stabilize the government's finances is now taking place, in the media and behind closed doors in Congress.
At least, it's supposed to be serious. But comments like this one from Republican Senator John Thune, during an interview with Slate's Dave Weigel, make me wonder:
My view on that is that you've got to start where the problem is, and it's a spending issue. The rapid run-up in spending is why we've got the problem we do. Are there Republicans who would work with the president on tax reform? Absolutely. I don't think there are going to be Republicans that are going to be out there in favor of tax increases that he might propose, but if he wants to propose tax reform, I think Republicans are anxious to work on that, because that's a competitiveness issue.
This is pure bunk.* And the chart above, from the Center on Budget and Policy Priorities, shows why.
It breaks down projected budget deficits, year by year, and the approximate role various factors (Recovery Act spending, the slow economy, wars in Afghanistan and Iraq, etc.) play in creating them. The Bush tax cuts are the huge orange blob in the middle. They're not the only reason for our deficits but they are a big one.
And what would happen if we let the Bush tax cuts expire? As the graph below shows, also from the Center on Budget, we'd basically hold steady the federal debt level, as a percentage of GDP, until 2021:
In the long run, we can't stabilize federal finances entirely by letting the Bush tax cuts lapse. That's probably going to require some spending reductions, too, primarily on health care. But, as both Weigel and my colleague Alex Hart have pointed out, it's ridiculous to have a conversation about balancing the budget that won't even contemplate higher taxes. And while Thune is just one Republican, I think his view is the prevailing one in his party.
*Just to be clear, I assume "tax reform" in this context means simplifying the code and lowering rates, which is not the same as raising new revenue--something that Thune and most Republicans say they won't do.