On Jeb Bush and Tax Pledges and Fiscal Reality

 

shutterstock_240547366From Reuters:

Jeb Bush will not sign any “no new taxes” pledges or any other pledges if he decides to seek the 2016 Republican presidential nomination, a spokeswoman said on Saturday. The statement from Bush spokeswoman Kristy Campbell was in response to an appeal from anti-tax champion Grover Norquist for Bush to sign his Taxpayers Protection Pledge, in which candidates agree to oppose tax increases.

“If Governor Bush decides to move forward, he will not sign any pledges circulated by lobbying groups,” Campbell said in a statement. “His record on tax cuts is clear. He didn’t raise taxes.”

Bush’s opposition to such pledges is longstanding. He did not sign such pledges in any of his three previous campaigns for Florida governor, an aide said.

His father, former President George H.W. Bush, was defeated for re-election in 1992 after disappointing Republicans by breaking his “read my lips-no new taxes” pledge as part of a 1990 budget agreement. Norquist, president of Americans for Tax Reform, had told ABC News he believed Jeb Bush would eventually sign the pledge. “Most pledge takers keep the pledge,” Norquist said in a tweet in response to Bush’s decision. “Those who refuse to sign all raise taxes when pushed hard enough by spenders.”

Let’s put the aside the Reuters’ Bush-Norquist angle. The CBO extended baseline has revenue/GDP averaging about 18% over the next decade, climbing to just over 19% in 2039. At the same time, spending rises to 25.9%/GDP, with 21.2%/GDP excluding debt interest. In 2039, publicly held federal debt is 109% of GDP vs. 74% today.  As I recently wrote in The Week:

Is it realistic to cap long-term government spending at 18 percent of GDP — well less than the post-WWII average of 21 percent — when an aging population means increased spending on entitlements such as Medicare and Social Security? Remember, most of the spending increase from health-related entitlements and Social Security — 75 percent over the next quarter century — comes from simple demographics, more people getting benefits over a longer period of time. That works out to about 3 percentage points of GDP in additional spending baked into the budgetary cake. Overall, CBO projects total spending at 26 percent of GDP by 2039. Just keeping long-term spending at its historic average will be a huge challenge, much less sharply reducing it. If you also want to spend a bit more on important public investments such as infrastructure and basic research while keeping military spending constant — well, good luck.

Oh, and to get that sweeping entitlement reform will require that Republicans deal with Democrats. AEI’s Michael Strain and Alan Viard:

The revenue share could remain at current levels if health and Social Security spending were kept at their current shares of GDP. The CBO projections make clear, however, that keeping entitlement spending at its current share would require dramatic and ever-deeper reductions relative to the benefit levels implied by current policies. Keeping these programs at 10.6 percent of GDP, rather than growing to 20.8 percent in 2063, for example, would require that benefits be cut in half from the level implied by current policy.

The political feasibility of that strategy depends on the public’s willingness to support dramatic reductions in entitlement spending (relative to the levels promised by current policy) as an alternative to tax increases. … In a 2012 survey, only 9.7 percent said they would support major Social Security cuts as a way to reduce the deficit, and only 11.8 percent said they would support major Medicare cuts. Support for spending cuts was low even among Republicans, 13.5 percent for Social Security and 15.5 percent for Medicare; support for cuts was actually higher among independents, at 13.9 and 17.5 percent. The polls strongly suggest that the public will not allow entitlement spending to be cut to the point that revenue increases are not required.

But public and political attitudes make it clear that it will be possible to secure significant entitlement reductions only if they are accompanied by tax increases. Democrats’ opposition to entitlement cuts and Republicans’ ambivalence about them make a budget strategy that relies entirely on entitlement cuts politically unviable. Therefore, revenue will have to rise to restore fiscal balance. Indeed, the only significant entitlement benefit reduction in recent years, the benefit cuts in the 1983 Social Security legislation, were part of a bipartisan agreement that also included tax increases, as further discussed below.

Of course, maybe the Singularity will happen …

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  1. Frank Soto Member
    Frank Soto
    @FrankSoto

    Read his lips…

    • #1
  2. user_1008534 Member
    user_1008534
    @Ekosj

    Of course. There is always support for raising taxes. 43% of tax returns filed paid no federal income tax. So, automatically, there are almost half the population who figure ‘fine …make ’em pay more…as long as it’s not me’.

    • #2
  3. Ricochet Member
    Ricochet
    @

    I think a “no new tax” pledge would be pretty easy to sign. I wonder if Bush would be willing to sign a “no slapping his wife around” pledge.

    In any case, I don’t think I’d believe him for one minute about anything, so I don’t really care. If he gets the GOP nomination, hello 4-8 more years of Democrats.

    • #3
  4. Ross C Inactive
    Ross C
    @RossC

    James Pethokoukis:

    His father, former President George H.W. Bush, was defeated for re-election in 1992 after disappointing Republicans by breaking his “read my lips-no new taxes” pledge as part of a 1990 budget agreement.

    This is the narrative and I don’t know if it is true, but if it is, I wonder if those folks who said to hell with HW were happier with Bill Clinton’s tax regime.

    You could ask a similar question of the Republicans who stayed home and did not vote for Romney.

    When will we wise up?

    • #4
  5. Ross C Inactive
    Ross C
    @RossC

    Great Post James,

    This point cannot be made often enough.  Our previous tax burden was based on a younger, faster growing population where the old received less generous benefits.  Our inability to change the inflation index metric or make changes to the retirement age that correlate to life expectancy is sinking us.  It would be bad enough if we had made those changes (or offered privatization options).  Each year though it gets harder and harder to make it up.

    I suspect no changes will be made until the wheels fall off and draconian reductions in old age benefits have to kick in.  The only place they will be able to go then is to the 401K accounts and then it will be the savers against the spenders.

    • #5
  6. Ricochet Inactive
    Ricochet
    @KermitHoffpauir

    I began to have problems with any pledges pushed by any special interest group about 5 years ago.  The end result is not that an elected official gets their feet held to the fire, but pundits start beating on them long before they make good or go back on such pledges.  Populism abounds.

    • #6
  7. Ricochet Member
    Ricochet
    @

    Ross C:

    James Pethokoukis:

    His father, former President George H.W. Bush, was defeated for re-election in 1992 after disappointing Republicans by breaking his “read my lips-no new taxes” pledge as part of a 1990 budget agreement.

    This is the narrative and I don’t know if it is true, but if it is, I wonder if those folks who said to hell with HW were happier with Bill Clinton’s tax regime.

    You could ask a similar question of the Republicans who stayed home and did not vote for Romney.

    When will we wise up?

    I think you make a category error. Conservatives are not Republicans. Conservatives don’t like Democrats – that’s true, but they also don’t like Republicans who are placeholders and Democrat lite. When will the Republican party wise up? Some people arr tired of playing the lesser-evil game the GOP perpetually uses to put their statists into office. They don’t see that kind of candidate as the answer and are sending a message by not voting or voting third party. If the GOP and people like you continue to not get that simple and often articulated message – in fact it’s a political reality not just a message –  who needs to wise up again?

    • #7
  8. Guruforhire Inactive
    Guruforhire
    @Guruforhire

    Ah, the social democracy death spiral whereby the takers are spreading more burden over fewer payers, and the rampant hostility that causes.

    It is the takers versus the makers.  No amount of wishful thinking or poor excuses for sophistry (seriously do better) will change that.

    • #8
  9. Ricochet Member
    Ricochet
    @

    I don’t pretend to be the expert that James is on this, but it seems embracing the “tax hikes are inevitable” mantra, we could be more aggressively advocating some short term fixes that help stave off the tax beast, or at least lessen its bite. For example:

    Change the inflation index metric

    Lower corporate rates and offer repatriation of corp offshore profits at a reduced rate

    Lower the rate creating more tax payers vs. tax dollars – and begin to limit deductions, particularly for those not paying any federal tax dollars

    Raise the retirement age

    “Dramatic” spending cuts not necessary, if we phase them in. Penny plan is a good option

    All that said, aren’t tax receipts at an all time high?  The argument that targeted and effective rate cuts that broaden the base can at least sustain the current gov’t receipts, and drive growth – seems very reasonable to me.

    All that aside, Jeb Bush’s signature would not mean much.  Hopefully, neither will his candidacy.

    • #9
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