A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Sometime soon, politicians in Washington DC will decide whether to lift the statutory limit on federal borrowing, the so-called ‘debt limit.’ In thinking about this monumental issue, it would be inappropriate to side completely with either the Democrats or the Republicans. The whole matter has careened so far out of control that the abundant blame for this unfortunate impasse has to be shared on both sides of the aisle. But there is a way to achieve compromise here, a topic that I discuss in my column this week for Defining Ideas.
The Republicans are on solid ground by insisting that shrinkage in the size of government is the key to any sustainable policy. But what is the best way to achieve the goal of smaller government? Start with the simple proposition that government can pay for its expenditures in three and only three ways. It can raise taxes; it can borrow money, which can be paid back only with taxes raised at some future time; or it can print more currency, at which point the rapid inflation cheapens the currency and thus works as an implicit tax on anyone who holds American dollars or any creditor (including creditors of the United States) whose debt is denominated in dollars.
All three forms of government funding necessarily rely on either explicit or implicit taxes. So, on this view, the Republican strategy to rail against all new taxes is a misguided position. Hence, they should break ranks with Grover Norquist’s tax advocacy group, Americans for Tax Reform, whose “no new taxes” pledge has been taken by many members of Congress. In fact, the GOP should accept some tax increases, but fight hard to tie those increases to a flattening of the tax rates and to the largest possible increase in spending cuts. That would be a true ’debt limit’ compromise.
I explain further at Defining Ideas.
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May '11
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
When does it stop? How much money is enough? Why must we pay more when they never spend less? Spending cuts are almost always only reductions in spending increases. We just forked out a trillion dollars in TARP money and got nothing for it. We can't afford what they spend and it has to stop.
May '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Same old same-old. The Democrats go on a wild binge. Republicans, to prove they're "responsible," must break the solemn promise they made and pay for it.
Bollocks. Not one penny more. Not while federal dollars are poring into The Corporation for Public Broadcasting, and countless other vile projects.
Let 2 August come. Bring it on.
May '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
I am sorry, but no. We cannot keep raising taxes to fund this madness. We have to spend less.
I understand you are more learned about the law and such than I am, and much smarter than me. However, if the GOP raises taxes, it is over for the GOP.
May '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
And of course, those new taxes will be "balanced" with a promise to cut spending sometime after the year 2020. No way.
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Richard, we have been down this road many times before -- and we have been snookered every time. I would be perfectly happy for there to be an end to all sorts of indirect subsidies -- e.g., the tax deduction for states taxes, for interest on housing, and the like. And I favor tax reform. But a higher percentage of national GDP to go to the federal government? No.
Mar '11
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
The fourth way for government revenues to increase is to have a growing economy. New taxes retard or reverse economic activity, and frequently result in a loss of revenue. Chicago and Cook County have resorted to higher taxes on cigarettes to increase revenue, and have achieved the exact opposite result. Some of this is due to people quitting outright, which is good, but mostly it was because people either bought their cigarettes in other areas or bought them from "black market" street vendors. Illinois just announced a major tax increase this year, then spent the next couple of weeks giving dispensations to local employers who started looking into what Texas might be like.
At a certain point, the golden goose just quits laying, and zero * x% is zero for all values of x.
Edited on Jul 19, 2011 at 5:00amOct '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Time's up !! Just adding a small amount of rocks to the avalanche of taxation and government growth STILL adds to the mess. We either put an actual end to this metastasizing beast, that is the feral government, or it preys on us till all is lost.
As Bryan above notes, your are far better educated than me, but still, my vote also counts... and it will NEVER AGAIN go to the GOP if they cave this time. We are simply fed up with statists, and that is in both major parties.
Jun '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
I agree with the above comments. No new taxes. The Democrats cannot be trusted. If new taxes absolutely had to be raised (and I don't agree that they do), I'd say let's broaden the base, and let some of those who currently pay no income tax, pay for their "fair share" of government.
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Oh my. Professor, I fear your analysis suffers from inexact language. The words, "raise taxes" are not synonymous with raising revenue. Recall please that when the tax rate was lowered to 28 percent revenues soared. The inverse is also true. Raising tax rates in an economy already suffocating from the choke hold of government will further depress revenues. There is a fourth option, as several states are even now proving. Lowering the tax burden and cutting spending can put the ledger book back into a surplus, and I would respectfully suggest we follow their examples.
May '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Kevin Williamson makes a similar case in last week's NR.
The problem is that if we now trade loop-holes, tax credits, exemptions, etc. for spending cuts, as Obama is demanding, we will have nothing left to trade for tax reform in the future, thus making Ryan-like reform impossible.
So abandoning the Norquist pledge is wise, but only in some future context of tax reform, not in our current context of spending cuts.
Jun '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
How about we raise taxes tomorrow and cut spending today? For decades we have always done the reverse. So the R's could develop a package of specific spending cuts from a wide variety of programs (check out Tom Colburn's new 9 Trillion dollar cut package) that would be in effect within 30 days, starting with a trillion and adding to 4 trillion by 2012. Taxes would be changed to eliminate private jet advanced depreciation starting in the year 2014. I haven't done the math, but as much as the Pres talks about those evil jets, he must be talking about trillions of dollars! I am sure we can find some other significant taxes to raise. How about a tax on Arugula, I hate that stuff anyway. We could propose eliminating 50% of all government regulations on business in the next two years, but be specific, and institute a hiring freeze on all Federal employees. Percival was exactly right. The most effective way to increase government revenues is to increase our economy. More tax payers, not more taxes.
Edited on Jul 19, 2011 at 5:53amJun '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
I forgot about the debt ceiling. After the spending cuts are voted on and the tax increases on private jets and Arugula are in place then we allow an increase in the debt ceiling. 1.5 Trillion increase in 500 Billion segments nine months apart. Hopefully we never need the last 500 Billion.
Apr '11
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Obama did proposed actual spending cuts, $4 billion over twelve years.
http://economicsnewspaper.com/policy/spain/obama-proposes-to-cut-four-billion-dollars-of-debt-in-12-years-13540.html
Oct '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
I agree. The no new tax pledge is idiotic precisely because it ignores the two other ways that the government taxes its people - borrowing and inflation.
Tom Coburn presents a plan this week to cut spending by $8 trillion and ATR throws a tantrum because is eliminates about a $1 trillion in special interest tax deductions.
In other words, Coburn proposes an $8 trillion reduction in the tax burden of the American people, and ATR is screaming about maintaining tax breaks for Hollywood movie producers.
Edited on Jul 19, 2011 at 6:34amSep '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Republicans should agree to raise taxes. They should declare that everyone should pay taxes and those who don't pay any at all must pay their fair share. They should institute a tax on all welfare checks, say 5%.
This way they can call it a tax increase and not a spending reduction. This is the mirror image of Democrats finding "spending cuts in the tax code"
And tell me again, what percentage of welfare recipients vote GOP?
Apr '11
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Marxism Never Sleeps
http://www.zerohedge.com/article/marxism-never-sleeps
Apr '11
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
US Treasury Spreads Widen
"The long-end of the treasury curve is acting sick, smack in the face of a clearly slowing global economy."
"The spread between five- and 30-year Treasury yields was near the widest since November as U.S. officials struggled to reach agreement on how to raise the debt ceiling to avoid a default."
"Treasury spreads, oil prices, and food prices (which helped bring us the Arab Spring) would likely make Bernanke's life miserable should he decide any time soon to embark on another round of Quantitative Easing."
"The long end of the curve is acting sick. I do not believe this is merely a "debt ceiling" concern, but rather a "debt" concern.
Democrats and Republicans alike have refused to do much of anything but point fingers and throw stones at the other party."
"At some point the bond market will revolt when Bernanke gets too cute, too many times. That revolt may be sooner than anyone thinks."
http://globaleconomicanalysis.blogspot.com/2011/07/treasury-spreads-widen-on-debt-concerns.html
As well as unprecedented pressure on PIIGS bonds and banks, UK bonds and TBTF banks are also beginning to come under pressure.
Jun '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
We could give the Dems complete control over which regulations get eliminated. Put all the regulations up on a big board shaped like a donkey. The Democrat congressfolks would then be blindfolded and spun around. After which they would each be able to pin a picture of their favorite historical figure on whatever they happen to bump into. The Repubs would remain safe up in the galleys until 50% were eliminated. It could be a great reality show, done weekly for 6 months.
Jul '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
Scott Reusser: Kevin Williamson makes a similar case in last week's NR.
The problem is that if we now trade loop-holes, tax credits, exemptions, etc. for spending cuts, as Obama is demanding, we will have nothing left to trade for tax reform in the future, thus making Ryan-like reform impossible.
So abandoning the Norquist pledge is wise, but only in some future context of tax reform, not in our current context of spending cuts. · Jul 19 at 5:16am
I thought the NR piece was ridiculous. It read more like a hit piece on Grover Norquist with "oh and we need to raise taxes" instead of a reasoned article on the justification for breaking the no tax pledge. It was very poor writing, and dismissive of the growing anger of the electorate regarding Congress' utter refusal to stop spending money we don't have.
Edited on Jul 19, 2011 at 7:30amSep '10
Re: A 'Debt Limit' Compromise: GOP Should Abandon "No New Taxes" Pledge
When a politician gives a sum of money to a special interest group and uses the tax code to do it, doing away with that special gift becomes a “tax increase”. When a politician gives a sum of money to a special interest group and puts it in legislation as a grant, doing away with that special gift becomes a “spending cut’. Makes it difficult to have an intelligent conversation, which may well be what the politicians wanted to begin with.