Progressive Denial

March 5, 2013 06:43

[Y]ou are left in an endless loop that points inexorably to one conclusion: you don’t actually care one iota about the deficit, or the resulting debt, or the economic crash that is sure to result from this whole absurd mess.



By Dr. R.B.A. Di Muccio


A wise man once told me that when any tax-levying entity operates at a deficit, the possible causes number precisely two. Either it is taxing too little for how much it wants to spend, or it is spending too much for how much it wants to tax. It has either a revenue problem or a spending problem.

The problem for Republicans is that George W. Bush presided over massive increases in spending and the conversion of a budget surplus to a large deficit. According to Office of Management and Budget data, federal revenue in 2000 totaled just under $2 trillion, while spending was about $1.8 trillion—a $200 billion surplus. By 2008, we had a deficit of $500 billion because spending had increased 67 percent (to 18 percent of GDP) while revenue increased only 25 percent over Bush’s eight years.

By 2012, Barack Obama’s deficit settled in at about $1.3 trillion, a 160 percent increase over 2008. OMB estimates for 2012 show that while annual revenue increased about 17 percent since Obama took office, annual spending increased 27 percent (to 24 percent of GDP).

So, is that a revenue problem or a spending problem? Well, if you ask Democrat leaders and pundits, it’s definitely not the spending. Congresswoman Nancy Pelosi doesn’t believe we have a spending problem, nor does Senator Tom Harkin—to provide just two recent examples. As for pundits, count The Daily Kos, Mother Jones, and Paul Krugman amongst the “spending problem deniers.”

Democrats seem pretty convinced of this. So, here’s an idea: What if we just agreed that we have a revenue problem and tried to erase the deficit with new taxes alone?

What, then, would a $1.1 trillion (the 85 percent share of the deficit made up by individual income taxes) “revenue” increase look like? We could try to eliminate the deficit “by getting millionaires and billionaires to pay a little bit more.” There are approximately 250,000 households (less than 0.5 percent of all households) in America with annual income over $1 million. Asking them to eliminate the deficit alone would add $4.4 million in new annual taxes per household.

Well, it might not be practical to ask tens of thousands of Americans to pay an amount that is quadruple their total income. But if we expand the definition of “millionaires and billionaires” to households with incomes over $200,000—we now have 4.2 percent of households to work with. If we reduce the incremental burden on millionaires to only $500,000 per household, the additional per household tax bill on those making more than $200,000 goes up to, well, just over $200,000.

Since our tax code is among the most progressive in the world, we could try to share the $1.1 trillion equally among income brackets. This would add only about $9,600 in new taxes for every household—including those in the lower two brackets (which together make up 47 percent of all households), whose federal income taxes would go from 0 percent (or even below 0 percent) to at least 20 percent and in most cases much higher.

What’s the point of all of this? The first point is that there is, in fact, no feasible scenario wherein you can eliminate a $1 trillion-plus deficit with taxes alone. Democrats understand that you can’t confiscate all or most of the income of the wealthy and have no intention of asking the lower 47 percent of households to begin paying federal income tax. And even if you increased the corporate federal tax share from 15 percent of the total to, say, 20 percent (a 33 percent increase), individual households still would have to plug a $1-trillion deficit with new taxes (instead of $1.1 trillion).

The more fundamental point is that progressives’ rhetoric on this topic is cynical and dishonest. Their reactions to the “sequestration” in early 2013 tell the truth of the matter. Best estimates on the proposed “cuts” show they could amount to about 2 percent of the total budget, barely a drop in the bucket. And the reality is that overall federal spending will still increase over last year, and in every category except maybe defense. But even this is being mercilessly demagogued by Democrats, proving that no actual spending cuts are acceptable to them. Of course, economic growth would help. But even Obama’s first chief economic adviser understands that huge tax increases cause economic contraction, not growth.

So, if you’re not willing to reduce spending and you recognize that there’s no way to eliminate the deficit through tax increases alone, you are left in an endless loop that points inexorably to one conclusion: you don’t actually care one iota about the deficit, or the resulting debt, or the economic crash that is sure to result from this whole absurd mess.


Dr. R.B.A. Di Muccio is a guest commentator for The Center for Vision & Values at Grove City College. A former assistant professor and chair of the international relations program in the Political Science Department at the University of Florida, he is now vice president of research and advisory services for a global business advisory firm. He received his Ph.D. in international relations from the University of Southern California.

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