Republicans and the “T” Word

Michael Kinsley says that Fred Thompson may not have what it takes to be the Republican nominee:

The real strategy of Thompson’s plan is a familiar one from past Republican tax plans: Give large breaks to businesses and the wealthy (by, say, abolishing the estate tax), bribe the middle class to go along by offering smaller breaks to them, and don’t worry about paying for it all.

But maintaining your indifference to the size of the bill you are running up requires nerves of steel. You must never waver, never, never express the slightest concern that lost revenue may be a problem, and never, never, never even hint at where you might go to find the money. Thompson followed the script, putting out word that the explosion of economic activity after his tax reform would bring in too much money to even count, yadda, yadda, yadda. Then, unfortunately, he blinked. He revealed that he is a political amateur by making ominous noises about finding some savings through changes in Social Security benefits, which has to mean cuts in Social Security benefits or no money will be saved.

Raise your hand if you would be happy to accept lower Social Security payments in exchange for a simpler tax code.

I thought so.

Kinsley also discusses Mike Huckabee’s “fair tax” proposal:

He has endorsed something called the “fair tax,” which involves repealing all federal revenue sources—the income tax, Social Security tax, estate tax, everything—and replacing them with a 23 percent sales tax on everything except education. The fair tax propaganda says, frankly, that it is intended to be “revenue-neutral.” That is, it would bring in just as much money as the taxes it replaces. No monkey business about explosions of new revenue.

This makes it easy to figure out who would win and who would lose in Huckabee’s so-called “fair” tax. It’s a zero-sum game: Every dollar someone’s taxes go down is a dollar someone else’s go up. What you spend every year is the amount you earn minus the amount you save. On average, Americans save practically nothing, but wealthier people save more. Very poor people actually spend more than they earn, while Bill Gates and Warren Buffett couldn’t spend more than a small fraction of their income if they tried. So, wealthy people are going to see their taxes go down, which means that poor and middle-class people are going to see their taxes go up.

In spite of his soak-the-poor tax plan, the right-wing Club for Growth has gone to the mattresses to defeat Huckabee. Leslie Wayne writes in tomorrow’s New York Times:

As Mike Huckabee rises in the Republican presidential polls, fiscal conservatives have been raising alarms about a series of tax increases he oversaw while governor of Arkansas — new taxes on gasoline, nursing home beds and even pet groomers.

The Club for Growth, a politically influential antitax group, has dubbed Mr. Huckabee Tax Hike Mike and poured money into anti-Huckabee advertisements that were broadcast in early nominating states, with more on the way. Mr. Huckabee “spends money like a drunken sailor,” according to the group’s news releases, and it has sprinkled YouTube and the airways with videos that mock him and his policies.

Frankly, your average drunken sailor is a miser compared to most Republicans.

But the record offers a more complex and nuanced picture. While taxes did rise in the 10 years that Mr. Huckabee was governor, the portrayal of him as a wild-eyed spendthrift is hardly apt. For the most part, Mr. Huckabee’s tax initiatives had wide bipartisan support, with the small number of Republicans in the overwhelmingly Democratic state legislature voting for the tax increases and many maintaining that the state was better for them.

David Lightman writes for McClatchy Newspapers:

In the late 1990s, as the nation’s and Arkansas’ economies boomed, that wasn’t difficult, and Huckabee presided over substantial tax cuts. In 1997 and 1998, state lawmakers approved $97.9 million in income-tax relief, and another $14.1 million in smaller tax breaks.

About 65 of Huckabee’s 90 tax reductions were enacted from 1997 to 1999. The centerpiece was $90.6 million annually in individual income-tax breaks, but most of the cuts were small and highly specialized.

Among them: exempting residential lawn care from the gross receipts tax, a Salvation Army sales-and-use-tax exemption and an exemption for sales of biomass to produce electricity.

Huckabee came to Washington in 1999 and boasted about his record. “The big battle was no longer, ‘Which taxes will we raise and by how much?’ but ‘Which taxes will we cut and by how much?’ ” he told the Heritage Foundation, a conservative research center.

Bill Clinton’s economy made being a tax cutter easy and fun.

But as the economy soured early this decade, Huckabee found himself in the same situation as many other chief executives: Massive spending cuts weren’t enough to balance the budget, so he had to find new revenue.

But as the economy soured early this decade, Huckabee found himself in the same situation as many other chief executives: Massive spending cuts weren’t enough to balance the budget, so he had to find new revenue.

The State Supreme Court handed him another problem when it ruled that Arkansas’ education-funding system wasn’t meeting student’s needs and had to be revamped.

So in 2003, Huckabee had a very different message. In his State of the State speech that year, he warned lawmakers that, “If you deem that all new revenue sources, your proposals or mine, are indeed dead on arrival, then you’ll be saying that teacher pay increases are dead, scholarships are dead, medicine for the elderly is dead, that long sentences are dead and that we’ll have a massive early release of thousands of inmates from the (prison) system.”

Unlike the bleepheads of the Club for Growth, Gov. Huckabee actually had to govern a state. But in GOP Land, facing reality is heresy, and as a candidate Huckabee has to prove he can still be oblivious. Back to Kinsley:

Neither Thompson nor Huckabee has anything useful to say about the real problem, which is the huge gap between revenues and spending that George W. Bush, having inherited a surplus, is leaving behind. Thompson’s willingness to take on Social Security would earn him some points for courage if he were planning to use the money to reduce the deficit or address the entitlements problem. But he wants to pour the money into new tax cuts for business, which is not just a bad idea but an incredibly lazy one. There’s more to running for president than buying a round of drinks at the country club and asking what’s on people’s minds.

At least Huckabee’s revenue neutrality would not make the problem worse. For this, the business wing of the Republican Party is hysterically labeling him a “fiscal liberal.”

A what? For Republicans, the epithet liberal used to mean someone who wanted the government to spend a lot of money that it didn’t have. Then it meant someone who wanted the government to spend what it had, but no more. Now, apparently, you are a “liberal” if you only want the government to spend a few hundred billion dollars a year more than it has.

Actually, the spending debate is now over, or should be. The GOP bluff has been called. Republicans had six years in which they controlled the White House and (for most of that time) both houses of Congress. They could have cut any spending they wanted. They did the opposite. None of the realistic Republican presidential possibilities is discussing spending cuts except in the vaguest terms.

But if you peer into the abyss of debt and say that what this country needs is another tax cut, that makes you a good conservative.

What really makes you a good conservative is to believe you can have something for nothing. All their elaborate theories about supply-side economics and “fair” taxes are fiscal alchemy. If we can just find the right formula, they think, government revenue will appear magically, and fairies will provide the government services we want without our having to pay for them.

15 thoughts on “Republicans and the “T” Word

  1. Pingback: The Nigerian… I mean …the GOP money scam « Over the line, Smokey!

  2. You make a valid point, but there is such a think as a bad tax. When you compare compliance costs to revenues raised in the current tax system, you have realize we can do a lot better. Is the FairTax the right way to go? Maybe not. But we can be certain that some simplification is in order, even if it means FAVORED_GROUP_X not getting their little tax favoritism.

    -Klaus, RMF blogging
    [email protected]

  3. Pingback: Economics Topics News » Blog Archive » Republicans and the “T” Word

  4. Here’s a tax idea none of the corporate democrats will propose or endorse. Do away with all corprate income tax. They have gamed the system for decades under Democratic and Republican administrations to the degree they pay little to no taxes. Replace the income tax for business with a tax on declared PROFITS. Wall Street investors hold their breath every month for the actual numbers on business profits. If profits go down, so does the stock. No business can game the system. So a flat tax – not on the income of individuals, but the PROFITS of business.

    Republicans have claimed for decades that you can’t tax business. It is always a tax on the consumer who buys the product or service, passed on through the business to government. To a degree, that’s true. So don’t tax the income – tax the profits.

  5. but there is such a think as a bad tax.

    Yes, and there’s also such a thing as a bad tax CUT. I think sensible people could agree that taxes should be designed to provide adequate revenue for government with the least burden on people. There’s a balance to be struck. Republicans for the past several decades have been bribing contributors and voters with tax cuts and letting the budget go to hell. In truth, these are tax deferments, not tax cuts. Someday the piper has to be paid, meaning we can’t keep borrowing money from China forever.

  6. I find the notion of taxes in the current Republican party to be remarkable. If you watched the debate the other day Huckabee seemed to say something perfectly reasonable about children of illegal immigrants qualifying for college scholarships – Romney jumped all over him, “your wasting our tax money, that is not your money, it belongs to other people…” Here in the U.S. we are too concerned with ourselves to think for one moment about anyone else who may need a little help.

    The most remarkable thing about the republicans is the fantasy world they still live in. They like to say they are fiscally conservative and do not like government waste, yet since Saint Reagan they have been much more fiscally irresponsible than the democrats. The notion that this “tax and spend liberal” red herring still works proves just how stupid the majority of people are in this country. I think a democrat should call out the republicans, how about “I’m a tax and pay democrat” as opposed to the republicans who support spend and not paying.

  7. How can a country ever cut tax rates and government revenues go up over prior years? Answer: supply side tax cuts have demonstrated that total government expenditures will become a smaller percentage of GDP if politicians increase spending less than the increasing revenues.

    Cognitive dissonance anyone?

  8. JG –

    Wonderful theory – and you do talk purty, but that’s not in the same universe we are in. Republicans have spouted that rhetoric since Regan was prez, but the truth is when they had the WH, Senate & House of Representatives for 6 years, spending and earmarks pushed spending thru the roof with nary a veto until Democrats were the authors of bills. (Suddenly, the WH is Jewish or Islamic: pork is a problem.)

    Democrats don’t believe in supply side economics, and Republicans don’t practice supply side economics, so put it – let me clean that up – file it under fiction.

    The conservatives I know all think that the best way – only way – to have spending decrease on the scale they want – to match the decrease in taxes they want – is to eliminate ‘entitlements’. Do away with Social Security and Medicare and anything else they think is socialist. So when I hear someone talk ‘supply side’, usually it’s about 5 minutes more into the conversation they attack entitlements, without identyifying whose throat they want to cut.

    BTW, I predict the biggest political train wreck since the great depression when the aging population in the middle class gets the REAL message; the Republicans will screw them out of SS and Medicare to pad the fattest fat cats this coutry has ever produced. The train wreck happens when they unite and flex their political muscle, because they will be the biggest voting block there is – off the top of my head – 2020.

  9. A few years back Biden said that the motive behind what seems like fiscal irresponsibility on the part of Repubs is actually their way of ‘starving the government’ , specifically starving all those pesky federal programs like Education, Social Security, EPA, Medicare…right out of existence.

    He said that in point of fact Repubs are committed to ridding the federal government of anything and everything put in place by the likes of the New Deal and Johnson’s ‘War on Poverty’ programs. In other words Repubs long for the days of unfettered corporate greed, child labor and no middle-class.

  10. What really makes you a good conservative is to believe you can have something for nothing.

    Republicans really have no choice but to make the claim that tax cuts lead to more government revenue. They’ve staked out the “pay less, get less” side of the government-services debate, while Democrats have staked out the “pay more, get more” side. The first part of the Republicans’ position — pay less — sounds great. Who doesn’t want to pay less taxes? But then comes the second part — get less. (Also known as “smaller government.”) And once R’s are forced to explain which popular programs will get the knife, they lose.

    If only there were some way Republicans could convince voters that paying less actually means getting more….

  11. That’s intruging, Doug.

    I must admit I haven’t been paying enough attention, and I should, because my spouse and I, both late baby boomers, have been getting bombarded by AARP solicitations.

    I think a letter to AARP might be in my future, how we’ll join when they wipe their shameful support of Medicare Part D away by flexing their muscle and get some programs designed to protect their members.

    And in related news, I’ve just about decided to incorporate me, the spouse, and the three cats. It seems to be the only way to get a fair shake anymore.

  12. Republicans have been stranded in a rerun of Fantasy Island for generations now. My father is a perfect example. He wants to cut, cut, cut taxes — “I’m tired of people taking my money!” he always exclaims. So who do you think was one of the first people on the phone trying to collect the FEMA hotel assistance after Hurricane Katrina? You guessed it — Daddy My-Bucks!!! Does he have any concept that the money FEMA “gave” him was money that HE had put into the sytem? No way! He truly believes that the government gave him this gift; the reality in which he fails to believe is that the government was simply doing its job: to protect its citizens — either physically, mentally or, in this case, financially — in a time of crisis. That is IT. The plain truth is that the Republican Party is in the hands of a bunch of self-serving con artists with a privileged frat-boy mentality — a mentality that assumes money simply materializes when needed because, well, that’s exactly what’s it’s done for them their entire lives. Ironically, this economic mentality (and the paranoia of losing its accompanying economic status) has trickled down to “regular” Republicans such as my father — that is, people who HAVE worked hard to achieve his comfortable financial comfort. Until Republicans such as my father come to the realization that the government can’t make money materialze quite as easily as a Bush can, they will continue to throw their votes away on poiticians who have no true understanding of real world economics.

  13. The tax cuts were never meant to work, they were meant to steadily decrease government revenue to the point that all social programs could be destroyed, and they’re getting close to that point. Add in the enormous federal debt and the dollar’s freefall and they will be able to force it through because the only alternative will be a massive tax increase which no one will support.

    The Republicans may be very bad economists, but they are good at wrecking government.

  14. I hate to admit it, but Charley is correct. The Republicans are brilliant, they made a goal in the Goldwater era to do-away with government and managed to manipulate the system with voodoo economics and a dumb population of voters until they starved the beast! You have to give them credit for that right?

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