Open Thread Friday: Spending Cuts v. Tax Increases
This just in: Jon Huntsman is a coward. The former Utah governor whose presidential campaign, as best I can recall, was predicated on standing up to the armies of irrationality he believed occupied his own party, has admitted that he knuckled under to conservative pressure to resist tax increases. Here he is in an interview at the 92nd Street Y in New York City, as reported by Buzzfeed:
Huntsman said he regrets his decision to oppose a 10-to-1 spending cuts to tax increase deal to cut the deficit at the Iowa debate lamenting: “if you can only do certain things over again in life.”
"What went through my head was if I veer at all from my pledge not to raise any taxes…then I’m going to have to do a lot of explaining," he explained. "What was going through my mind was 'don't I just want to get through this?'"
That decision, Huntsman said, "has caused me a lot of heartburn.”
Every time this debate comes up, conservatives rightly note that these sort of compromise packages tend to be a bait and switch, with the tax hikes being implemented but the spending reductions inevitably failing to materialize. But let's suspend disbelief for a moment. If you got the 10-to-1 deal -- with the guarantee that it would be implemented in full -- would you take it?
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Dec '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
1 trillion in spending cuts and 100 billion in new tax revenues is probably right on target for what is the bare minimum for reasonableness for next year.
Edited on May 4, 2012 at 7:56pmMay '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
The deficit is the issue and the likelihood that we can make a serious dent in it through austerity seems extremely unlikely. We are far more likely to grow out of it as we did in the Clinton years. For this reason I would reject your deal and push for cuts.
Later, if you were prepared to offer me the same deal under better economic circumstances I might be inclined to take it, only because past tax cuts have never resulted in a material decrease in the size of government, only an increase in the level of borrowing.
Sep '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
Payroll receipts were down about $46 Billion from 2010 to 2011. Assuming this is due to the payroll tax holliday, I would be willing to trade the expiration of said tax holliday for a $460 Billion cut in spending for next year. By that, I mean that since the Congress spent $3,603 Billion in 2011, they would only have been able to authorize $3,143 Billion for 2012.
This is my definition of a 10-1 trade of spending cuts for tax increases. I can guarantee that it is not Jon Huntsman's definition, however.
Mar '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
If this deal comes with a free Unicorn whose droppings are diamonds of the highest cut, color and clarity then I'm in. As both are of a rather equivalent likelihood this minor stipulation should not prevent us from reaching an agreement.
Re: Open Thread Friday: Spending Cuts v. Tax Increases
Roberto
If this deal comes with a free Unicorn whose droppings are diamonds of the highest cut, color and clarity then I'm in. As both are of a rather equivalent likelihood this minor stipulation should not prevent us from reaching an agreement. · 2 minutes ago
Thought experiment: the tax first, followed by (kept) promise to step down from Congress if cuts not secured *and implemented* afterward. Publicity stunt or game changer?
Oct '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
James Poulos
Roberto
If this deal comes with a free Unicorn whose droppings are diamonds of the highest cut, color and clarity then I'm in. As both are of a rather equivalent likelihood this minor stipulation should not prevent us from reaching an agreement. · 2 minutes ago
Thought experiment: the tax first, followed by (kept) promise to step down from Congress if cuts not secured *and implemented* afterward. Publicity stunt or game changer? · 3 minutes ago
I think both deals are fine, as you and Troy present them. Of course, the problem is that it's questionable how legitimate those cuts are. Under these hypothetical conditions it seems we're implying that there are some major cuts in entitlement spending that have been made, particularly medicare, medicaid, and social security.
Apr '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
For me, the unicorn and diamonds aren't in promises kept, it's repeal of legislation and removal of bureaucracy. Since Reagan we've had low tax rates. Taxes have hiked over the years, but nothing as the levels we had before Ronald Reagan's tax cuts. In all honesty, expansive spending cuts with modest tax hikes could be survived.
But at present, the legal and regulatory burdens on all business, large and small, puts plenty of roadblocks and costs that aren't reflected in tax rates and subsidies.
Jan '12
Re: Open Thread Friday: Spending Cuts v. Tax Increases
If the cuts were guaranteed to happen, a 10-1 deal, 5-1 deal, or even a 2-1 deal don't seem to be objectionable. After all the goal here is fiscal solvency first and foremost, right? Avoiding a credit collapse and hyperinflation is the big problem, right? Why muddy the waters by worrying too much about how the gov't gets back in the black while we're so deep in the red? Debating about the proportion of cuts to revenue increases seems like a luxury we can't afford at best, and at worst a cheap strategy for cynical opportunists to avoid actual work while earning kudos for being "ideologically pure."
Aug '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
If we lived in a fantasy world where politicians did what they promised they would do, we wouldn't need a 10-to-1 compromise.
Mar '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
James Poulos
Roberto
If this deal comes with a free Unicorn whose droppings are diamonds of the highest cut, color and clarity then I'm in. As both are of a rather equivalent likelihood this minor stipulation should not prevent us from reaching an agreement. · 2 minutes ago
Thought experiment: the tax first, followed by (kept) promise to step down from Congress if cuts not secured *and implemented* afterward. Publicity stunt or game changer? · 26 minutes ago
Stunt, Congressional Representatives will step down in order to become highly paid lobbyist for a rewarded constituency.
Change "step down" into chained with ballast and forced off the deck of the USS Ronald Reagan while moving ahead full steam and then we're talking.
Jun '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
The obvious problem when one is dealing with liars is that they don't tell the truth. Another issue when those liars are politicians is that they may not get re-elected, the next liar can not be held to account. So we already see my problem as the word "liar" has appeared four times in this short paragraph. I am from Missouri, the show me State. Give me a real Trillion dollar cut of actual current budget for one year and I will pay an extra 10% in taxes at the end of that year. I would continue paying an extra 10% until the debt was reduced to 10 T. I would also accept a 5 to 10 percent cut in my upcoming SS receipts and would pay an extra 10% for medicare premiums. All of this I would do because it is a great investment. As we stand, without doing these things, my lifetime savings will be diminished by possilbly 25 or 30 percent do to inflation, maybe more. My SS will be zero and medicare will be a death trap. And did I mention, there will be nothing I can do about any of that.
Aug '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
James Poulos
Roberto
If this deal comes with a free Unicorn whose droppings are diamonds of the highest cut, color and clarity then I'm in. As both are of a rather equivalent likelihood this minor stipulation should not prevent us from reaching an agreement. · 2 minutes ago
Thought experiment: the tax first, followed by (kept) promise to step down from Congress if cuts not secured *and implemented* afterward. Publicity stunt or game changer?
Yeah, cuz no longer being in Congress is SUCH a big sacrifice for a bunch of Ivy League millionaires.
How about a (kept) promise to be eaten alive by genetically-modified dire-rabbits?
Dec '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
You'd be a fool to take the deal. The problem is where are you going to get the cuts? Before any fiscal deal can be done you need to reform entitlements. Without that there are no spending cuts to be had. Sure, we'd all like to eliminate the departments of Education and Energy. And, personally, I'd like to eliminate all cabinets departments except for the original 4. But, that's not going to happen. Reform entitlements so they are actuarially sound and then we'll talk about 10-1 spending reductions to tax increases.
Mar '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
I would take the deal if it was for an actual cut in spending. Spending less one year than was spent the year before. Unfortunately Washington "spending cuts" are only cuts to the rate of growth. Even with these "cuts" government spending increases each year.
Nov '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
I'd take the deal, contingent on the cuts being implemented immediately, then we can visit the tax increase down the road (or never, depending on how the cuts turned out.)
Oct '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
The “guarantee that it would be implemented in full” is irrelevant because Congress simply redefines a spending “cut” so as to make it financially harmful---that’s right, not even neutral. The political class has for decades defined a non-increasing budget as a "budget cut." Belt Way fuzzy math works like this: “we projected increased spending on Y, now we will keep the spending steady. Therefore we just ‘cut’ the budget by the amount we didn’t increase spending.” Meanwhile the actual deficit and debt keep going up. In each of those fiscal years (1998-2001) when the federal budget was in "surplus," the debt increased (by a total $394 Billion). The 2010 Republicans, with a huge political wind at their back, still walked back from their solemn pledge to make “real” cuts of $100B in spending “in the first year.” This was already a mere trifle in the context of $1.5T annual deficits and $15T national debt. But they couldn’t muster the courage to make even a promised gesture toward fiscal sanity. So let’s not waste time talking about “guarantees” with either of the Incumbency Party’s two factions (Democrat and Republican).
Sep '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
Huntsman is the answer to a question no one ever asked.
Jun '10
Re: Open Thread Friday: Spending Cuts v. Tax Increases
How about a tax hike that is tied to a spending cap? If the cap is exceeded, the tax automatically reverts to the lower rate.
Mar '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
Troy, I have always thought that one of the problems with the tax hike v spending cut issue is that when it comes to appropriations, one Congress cannot tie the hands of another. Every year it's a clean slate, except for the programs that are on autopilot. Meanwhile, for taxes, it's autopilot forever. One thought I had was that taxes should be subject to an annual "appropriations" process (or misappropriation, perhaps) just like spending. Never happen, I know, but wouldn't it be great if Congress couldn't simply take revenues for granted.
but to answer your question: the only way I'd take one of those 10-1 deals would be if the spending cuts were on the entitlement side as part of structural reform of those programs, such that it'd be very difficult to come back in a subsequent year and start spending again. otherwise there is no rational basis for assuming Congress will keep any spending cut promise.
Jan '11
Re: Open Thread Friday: Spending Cuts v. Tax Increases
It doesn't do much good to bail out all the water in the boat if you don't fix the hole.
The current entitlement state isn't a stable, fixed cost. The budget crisis is more than the fact that we have a huge debt to pay off - it's also that future debt will grow by greater and greater margins. It's the formula that we have to change, not just the cost. A mix of spending cuts and tax increases might relieve the short-term problem, but we can't afford to postpone the long-term fix.