Tuesday, March 22, 2011

Not Necessary

Citing a disturbing analysis by the Congressional Budget Office concluding that now through 2021 national debt will never fall below 4% of gross domestic product, The New Republic's William Galston finds

Whatever one may think about the size, timing, and appropriateness of short-term budget cuts, the CBO report adds precision to the common view that our long-term fiscal course is unsustainable.

Galston, understandably, laments the stance of the public revealed in the latest Pew Research survey, in which "lowering domestic spending" is favored by more than 2 to 1- while pluralites oppose cuts in defense/military spending (narrowly), changes to Social Security/Medicare (overwhelmingly), and raising taxes (slightly more overwhelmingly). Galston argues "the only way to change these public attitudes is to level with the people about our fiscal situation and educate them about the true choices we face." Echoing the sentiments of 62 U.S. Senators, he contends "this task is essential and long overdue," disturbed that it appears "former professor Obama isn’t willing to take the lead."

Don't be. This is a sucker's bet. We've all been through this before. The GOP increases spending while reducing income taxes (why not? no one has to pay for it!) during a Repub presidency, expecting a Democratic president to do the responsible thing, talk about our children's future, and decide to cut the deficit.

That can, of course, be done in either of two ways: reduce spending or increase taxes. Given that any suggestion that an income tax increase, even- nay, especially- on the wealthy prompts innumerable Republicans to stomp their feet, throw a temper tantrum, and swear to Grover Norquist they never, ever will vote for a tax increase, there is only one option available. And given that a Democratic president knows that if he cuts defense spending, he'll be accused of all manner of endangering the American republic, aiding the enemy, and possibly violating the Constitution, we know where the ax is expected to fall.

Taxes are down with and, the CBO has reported, in January 2011 “revenues would be just under 15 percent of GDP; levels that low have not been seen since 1950." (The average for the past 40 years has been 18%.) Corporate tax revenues, as the graph below, from the Center for Budget and Policy Priorities indicates, are at near historically low levels. And the highest marginal tax rates are significantly lower than during most of the 1990s, during the longest period of sustained economic growth in U.S. history.

And as the graph below indicates, tax rates for the wealthy have dropped more than for the middle class while incomes have stagnated for the middle class, which has declined in numbers and importance.

So Barack Obama, as only a Democratic President would, is urged to be the adult in the room, to explain to the American people the long-term (by far the greater) danger of increasing debt. Meanwhile, Representative Dave Camp of Michigan- seriously- has proposed to cut the top corporate and income tax rate from 35% to 25%. No, really. No need to mention his party affiliation- only Democrats are expected to be responsible.

Please, no more teachable moments for President Obama, or any more opportunities for him to push "winning the future." Support for sound policy, including this legislative proposal from U.S. Representative Jan Schakowsky, would be far more helpful.

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