GOP Position “No New Taxes” Is Rapidly Crumbling
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The Fiscal Times
May 13, 2011

Republicans have a problem. The American people are concerned about the budget deficit and know enough basic arithmetic to understand that it can result in higher spending or lower revenues. Republicans, however, insist that taxes must not be increased by a single penny; indeed, they argue that the government doesn’t have a revenue problem, just a spending problem. Therefore, they will only consider spending cuts in the GOP controlled House, which included another $3 trillion worth in the budget they passed on April 15.

Democrats all know that the Bush tax cuts have added some $2 trillion to the national debt and constitute the largest component of projected deficits going forward. These facts are documented in two recent reports from the Pew Charitable Trusts and the Center on Budget and Policy Priorities. They show that simply allowing all the Bush tax cuts to expire on schedule next year would be sufficient, by itself, to stabilize the debt-to-GDP ratio.

Unfortunately, Democrats have been oddly reluctant to explain the truth about the deficit. They seem paralyzed by fear that they will be attacked for being tax increasers. Consequently, the Republican mantra that spending must be slashed, even if it means effectively abolishing Medicare, and any tax increase, no matter how small, will destroy the economy, is just about the only budget option voters ever hear.

Democrats shouldn’t be so timid. Poll data shows that the Americans are not enamored with the Bush tax cuts and are willing to support higher taxes as part of a deficit solution.

A May 11 Pew report reminds us that the original Bush tax cuts in 2001 were supported only because the budget surpluses of the Clinton administration were expected to continue for some time. Nor were tax cuts peoples’ preferred option for dealing with the surpluses: 37 percent favored increased spending for Social Security and Medicare, 23 percent wanted other domestic spending raised, and only 19 percent favored a tax cut.

Furthermore, people accepted from the beginning that if budget surpluses failed to materialize then the tax cuts would need to be curtailed; 73 percent of people said that the Bush tax cuts needed to automatically be scaled-back if surpluses turned out to be smaller than expected. Of course, the surpluses were much smaller; in fact, they evaporated within a year. Rather than admit their error, however, tax cuts were rammed through.

Although Republicans insist that the Obama administration’s policies are largely, if not exclusively, responsible for the deficit, the American people know better. According to an April New York Times/CBS News poll, 41 percent of people primarily blame the Bush administration for today’s deficit; only 14 percent blame Obama. That same poll found that an overwhelming 72 percent of people support raising taxes on couples making more than $250,000 in order to reduce the deficit. The House Republican budget plan would slash taxes for the rich by reducing the top income tax rate from 35 percent to 25 percent in exchange for limiting or eliminating longstanding tax breaks. The plan would still require larger budget cuts to achieve budget balance.

Polls not only show that Americans have support higher taxes as part of a deficit reduction program. They consistently show that only a small minority of Americans believe that the budget can be balanced with spending cuts alone.

  • A May 11 Ipsos/Reuters poll found that three-fifths of people favor raising taxes to reduce the deficit.
  • A May 4 Quinnipiac University poll found that 69 percent of people, including 49 percent of Republicans, support raising taxes on those couples making more than $250,000.
  • An April 29 Gallup poll found that only 20 percent of people say the deficit must be reduced only with spending cuts; 76 percent say that taxes should play a role.
  • An April 20 Washington Post/ABC News poll found that by a 2-to-1 margin people favor a combination of higher taxes and spending cuts over spending cuts alone to reduce the deficit. It also found that 72 percent of people favor raising taxes on the rich to reduce the deficit and this is far and away the most popular deficit reduction measure.
  • An April 18 McClatchy/Marist poll found that voters support higher taxes on the rich to reduce the deficit by a 2-to-1 margin, including 45 percent of self-identified Tea Party members.

Republicans are working hard to enforce their no-tax-increase-ever orthodoxy, but there are signs that the dam is beginning to break. On April 7, former Reagan budget director Dave Stockman said, “It is simply unrealistic to say that raising revenue isn’t part of the solution. It’s a measure of how far off the deep end Republicans have gone with this religious catechism about taxes.”

On April 17, former Federal Reserve Board chairman Alan Greenspan, who has been the Republican Party’s leading economist since the 1960s, said that raising revenues to deal with the debt is imperative and recommended letting all the Bush tax cuts expire. As he put it on “Meet the Press”, “I think this crisis is so imminent and so difficult that we have to allow the so-called Bush tax cuts all to expire [and] put the rates back to where they were in the Clinton administration.”

Even those representing the GOP’s conservative wing are starting to question the party’s anti-tax obsession. On April 19, former Arkansas governor Mike Huckabee told his radio audience, “I never understood when it became a mark of conservatism to run up debt on your children’s credit card instead of biting the bullet and paying your own bills.” He further noted, correctly, that Ronald Reagan supported many tax increases in the 1980s.

There is some evidence that House Republicans are starting to get the message that their tax position is crumbling. On May 11, a senior Republican staffer told Atlantic reporter Derek Thompson that his party’s position on taxes is intellectually dishonest. “There are two worlds,” the aide said. “One world is political and the sole objective is to maintain party message. The other world is real and in the real world fixing the deficit is a matter of national survival. When you get down to the real world decisions, it’s not about whether to raise taxes; it’s about the ratio of spending to revenue increases.”

Press reports say that Senate Budget Committee Chairman Kent Conrad is preparing a budget resolution that will propose a 50-50 split of higher taxes, including a surtax on millionaires, and spending cuts to reduce the deficit. With the Republican zero tax increase option rapidly falling apart, a workable deal might be put together in which there are $2 of spending cuts for every $1 of tax increase.

Bruce Bartlett’s columns focus on the intersection of politics and economics. The author of seven books, he worked in government for many years and was senior policy analyst in the Reagan White House.