Thursday, March 22, 2012

More on Republican budgets and taxes

Yesterday I discussed Republican budgets and some of the reasons they are constructed the way they are. Today, Bruce Bartlett traces the history of the main issue regarding Republican budgets, taxes:

Instead of worrying about the deficit, he said, Republicans should just cut taxes and push for faster growth, which would make the debt more bearable.

Mr. Kristol, who was very well connected to Republican leaders, quickly saw the political virtue in Mr. Wanniski’s theory. ...

Republicans didn’t immediately embrace the two-Santa theory, but began to after Ronald Reagan’s victory in 1980, when he ran mainly in favor of a big tax cut, with far less emphasis on deficit reduction. In office, Reagan pushed for domestic spending cuts but also sharply raised spending for favored programs such as the military.

Although the budget deficit rose to 6 percent of gross domestic product in 1983 from 2.7 percent in 1980, Reagan easily won re-election in 1984. This further convinced Republicans that the deficit was a losing issue and only tax cuts mattered for political success.

The final straw was George H.W. Bush’s support for a tax increase in 1990 to reduce the deficit, which many Republicans say sealed his defeat in 1992 by Bill Clinton.

Since then, fealty to tax cuts and lip service to deficits has become Republican dogma.

Politically you can see why this happened. People are always going to dislike taxes when you constantly frame the issue strictly about the gov't taking your money and never really mentioning the benefits you get from it. But it's gotten to a point now where they are making economic arguments based off their political belief that tax rates are the growth golden bullet and you only achieve growth through continuously lower rates. The person who helped get Republicans to that point says this shouldn't be dogma:

I worked for Mr. Wanniski in the mid-1980s and know that he wasn’t obsessive about never raising taxes. He wanted economic growth and thought tax-rate reductions were the best way to achieve it, at least in the 1970s. But if higher taxes would raise growth, then he would support them. As he explained in an e-mail to Ben Bernanke, at the time the chairman of the president’s Council of Economic Advisers, on Aug. 11, 2005 (on which I was copied):

I for one am always ready to listen to arguments for higher taxes, more regulation and restraints on free markets, as I might be persuaded that under certain circumstances they would “invite,” not “stimulate” (a Keynesian idea), long-term growth. I’m not “anti-government,” in other words. (The Grover Norquist idea of opposing all tax increases is dumb, and Grover knows I believe that.)

I'll go further and say that not only is Grover Norquist's idea dumb, but he is dumb for expressing it in the manner he does. How he became so influential is beyond me. It's a shame people like Wanniski and Bartlett don't have more influence than Norquist. If they did I think it would be more likely that we had an economic situation everyone would be happy with; one with reasonable tax rates, a more manageable deficit, and better prospects for growth. Until they get more influence I think we will be forced to hear about the never low enough tax rates of rich people at the expense of everything else.

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