Thursday, July 7, 2011

Debt Ceiling Disagreement Persists

Economist Mark Thoma argues that the disagreement between Republicans and Democrats over whether to increase the debt ceiling is less about reducing the debt and more about controlling the size and role of government by either maintaining or changing the current tax structure. Thoma points out that even conservative supporters are mystified by Republican stubbornness when it comes to arguably helpful ideas about how to steer federal revenue, citing the GOP’s refusal to close the tax loophole on the ownership of corporate jets by way of example. For more on this continue reading the following article from Economist’s View.

If you had any doubt that the fight over the debt ceiling isn't really about the debt:

Paul Ryan Responds To David Brooks: We Won’t Cut Loopholes To Reduce Deficit, Only To Finance More Tax Cuts, ThinkProgress: As the August debt ceiling deadline looms and Republicans continue refusing to consider revenue increases, conservative New York Times columnist David Brooks excoriated the GOP for its intransigence. Writing yesterday that it “may no longer be a normal party” but rather a movement of “fanatic[s]” with a “sacred fixation” on tax cuts, Brooks slammed the GOP for rejecting a “no-brainer” compromise with Democrats, which would include closing tax loopholes for things like corporate jet ownership...

But Brook’s plea for sanity was lost on House Budget Committee Chairman Paul Ryan (R-WI), who responded to the column on conservative radio host Laura Ingraham’s show this morning. Ryan said that if Republicans gave up the loopholes now without securing a deal to lower marginal tax rates overall, they would lose an opportunity to demand new tax cuts in the future:

RYAN: What happens if you do what he’s saying, is then you can’t lower tax rates. So it does affect marginal tax rates. In order to lower marginal tax rates, you have to take away those loopholes so you can lower those tax rates. If you want to do what we call being revenue neutral … If you take a deal like that, you’re necessarily requiring tax rates to be higher for everybody. You need lower tax rates by going after tax loopholes. If you take away the tax loopholes without lowering tax rates, then you deny Congress the ability to lower everybody’s tax rates and you keep people’s tax rates high.

...Ryan is arguing that raising taxes on corporate jet owners and others is only acceptable if the money raised is plowed back into new tax cuts, not to paying down the deficit. He is clearly more interested in cutting taxes than dealing with the deficit, and is willing to let these egregious loopholes stay in the tax code until he can best exploit their removal to lower taxes...

With Republicans nitpicking at spending programs and eliminating their favorite targets, even small ones that don't generate much revenue, I appreciated this:

Ironically, just moments earlier in the interview, Ryan attacked President Obama for wanting to close the loopholes, saying doing so would generate an insignificant about of revenue to pay down the deficit. But when it comes to tax cuts, closing those same loopholes would apparently generate plenty of revenue.

The GOP argues that we must eliminate all wasteful spending no matter how small the expenditure (where wasteful means it does not agree with Republican ideology), deficit reduction demands it! Or so they argue. But closing tax loopholes would generate too little revenue to be bothered with?

But it's the "we're open to tax increases so long as they don't increase taxes," i.e. the insistence that all tax changes be "revenue neutral" that gives away the real game. This is about the size and role of government, it has very little, if anything, to do with the debt.

This article was republished with permission from The Economist's View.

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