No Split Developing Among GOP on Tax Cuts

No Split Developing Among GOP on Tax Cuts

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Recently on Capital Exchange, Larry Haas and Stan Collender argued about whether there’s a split developing among Republicans over the idea that big tax cuts are too costly to the budget deficit. Larry cites criticism of the Obama-GOP tax deal by potential GOP presidential contenders Mitt Romney, Sarah Palin and Rep. Mike Pence, R-Ind.

Stan pooh-poohed Larry’s idea that the GOP is split in any serious way over tax cuts, arguing that whatever disagreement there might be is virtually always resolved in favor of the tax-cutters, and that there’s no sign that this dynamic has changed.

I wish Larry was right about this, but he’s wrong. Stan is correct. Larry apparently didn’t read all the way through those critical statements by Palin, Romney and Pence. If he had, he’d see that while each of them paid lip service to deficit worries, their real concern was not that the tax cuts drove up the deficit, but that extending the Bush tax cuts for two years wasn’t enough. All three want the tax cuts extended permanently, regardless of the deficit implications, which are stupendous.

Here’s the money quote from Romney’s piece in USA TODAY: “The future for taxes has been left up in the air. And uncertainty is not a friend of investment, growth and job creation. … in 2013, unless Congress acts again, rates will increase dramatically.”

Yes, Romney claims to be worried about the deficit: “The total package will cost nearly $1 trillion, resulting in substantial new borrowing at a time when we are already drowning in red ink.” But this is incoherent. If Romney had his way in extending the Bush tax cuts forever, the 10-year cost of that piece of the deal alone would be $4 trillion.  He never even tries to resolve this obvious disconnect.

Romney’s deficit concern is that the deal spends $56. 5 billion to extend unemployment benefits for 13 months without paying for it: “The deal is sacrificing the bedrock Republican principle that new expenditures be paid for with offsetting budget cuts.”

And the payroll tax cut would go only to workers, not to their employers. “By refusing to lower the cost of hiring a new employee, [Obama] fails to encourage what the American people want even more than lower taxes — more good jobs. Like the income tax deal, the payroll tax deal will add to the deficit.” Yes, it’s arguable that the payroll tax cut should have been given to employers as well, but wouldn’t that make the deficit even bigger? Which is it?

I’ll spare readers similar quotes from Palin (on ABC News) and Pence (on the House floor) because they’re similar or identical. The logic here is that some things are bad because they add to the deficit (un-offset unemployment benefits, payroll tax cuts for workers only) but that other things that balloon the deficit (extending all the Bush tax cuts in perpetuity, cutting the payroll tax for employers) are fine.

The unstated premise is that tax cuts pay for themselves, the bedrock delusion that has persuaded Republicans that reducing taxes, no matter how much, just doesn’t count when it comes to the deficit. I wish I could agree with Larry that this has changed, but Romney, Palin and Pence are telling us as plainly as they can that it has not.

Where Larry has a legitimate reason for at least a shred of optimism is that three Republican senators risked excommunication by backing the Obama deficit commission’s proposal for getting the debt under control, which included raising tax revenues. Bravo to GOP Sens. Tom Coburn of Oklahoma, Mike Crapo of Idaho, and the retiring Judd Gregg of New Hampshire – but those three spent months realistically confronting the options and were much likelier than most of their colleagues to abandon the endlessly recited talking point that the only way to cut the deficit is by cutting spending.

If there were only a way to lock the entire Congress in a room for six months for a private discussion about budget reality, maybe there’d be a way to get past both sides’ reflexive insistence on not raising taxes or cutting entitlements.

Finally, Larry cherry-picks a few historical instances of GOP tax increases, but in my view he draws the wrong lesson from both. In 1990, then-President Bush reneged on his no-new-taxes pledge and made a deal with the Democratic congressional majority for a serious package of spending cuts and tax increases that A) empowered Republicans who opposed it, led by Rep. Newt Gingrich, R-Ga.; and B) helped destroy Bush’s GOP support and turn him into ex-President Bush. The lesson from that episode for Republicans was never to compromise on taxes.

I think Larry similarly misreads the message of President Reagan’s enormous tax increase in 1982, which fell heavily on business and was designed to claw back some of the excess tax-cutting of 1981, when Republicans and Democrats got into a bidding war to make the tax cuts as ruinously large as possible, with zero regard for the deficit.

For one thing, Reagan had crucial help from then Sen. Majority Leader Bob Dole, R-Kan., who showed courage repeatedly in the 1980s in tackling the deficit. For another, Reagan was a genius at stating his principles, abandoning those principles to cut a responsible deal, and then acting as if he’d never changed his mind at all. The difference between Larry and me on this question is that he can apparently imagine a Romney, Palin or Pence backing a significant tax increase as part of a deficit-reduction plan and getting help to pass it from Senate Minority Leader Mitch McConnell, R-Ky. I just can’t.

George Hager is a member of the USA Today editorial board.

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