Hawks

[kalm]

OK, so this guy totally stole my schtick from the Rahm thread, but he and Bruce Bartlett make a good point here.

BTW, people who are not self proclaimed fiscal conservatives are about as common as those who are pro-abortion.

StoryComments February 3, 2010 in Opinion
Careful what you wish for
Gary Crooks The Spokesman-Review

A Balanced Budget Amendment has been the hobby horse of many politicians who want to pose as budget hawks. It got a lot of attention during the Contract With America campaign of congressional Republicans before the 1994 midterm elections. Because it would be a change to the U.S. Constitution, it would require the assent of two-thirds of both houses of Congress and the ratification of three-fourths of the states. In 1995, the amendment passed the House and came within one vote of passing the Senate. It hasn’t been seriously considered ever since.

However, Gov. Tim Pawlenty, R-Minn., is touting this as a solution to today’s deficit issue, though he opposes any tax increases to help achieve the goal. In fact, he calls for tax cuts. He is considered a possible presidential candidate in 2012.

Let’s say such an amendment is already in place. Could today’s deficit be tamed before the end of the fiscal year without raising taxes? Conservative economist Bruce Bartlett, who has worked in Republican administrations, lays out the challenge:

“It’s doubtful that Mr. Pawlenty has any clue as to the composition of federal spending. In FY (fiscal year) 2009, we would have had to abolish every discretionary spending program, including national defense, to balance the budget and that still wouldn’t have been enough without a penny of higher revenues, as he insists. We would have had to cut more than $300 billion out of Medicare and Social Security as well. Good luck with that.”

This is the enormity of the federal deficits. It’s not just a matter of reducing spending in the future. We already bought a bunch of stuff (two wars, tax cuts, a prescription drug benefit, banking bailout, stimulus package, etc.) that we need to pay for. So whenever you hear politicians talking about constitutional amendments or spending freezes or tax cuts, ask them how this pays off the current balance.

Perhaps the proverbial kitchen table discussion would help illuminate matters:

Dad: “We have some serious household budget issues to discuss. We’ve maxed out the credit cards. We need to pay them off. By the way, your mom and I have decided to bring in less money. Who has ideas?”

Daughter: “I don’t need that new laptop.”

Son: “We could cancel the premium cable channels.”

Mom: “I can forgo the kitchen remodeling.”

Dad: “OK, but what about the current balance?”

(Several moments of awkward silence, then …)

Daughter: “I could drop out of college.”

Son: “We could sell the TVs.”

Mom: “We could sell the house.”

Dad: “Now you’re talking! But we’re still short. I suppose we could try to bring in more money.”

[ngineer]

Good and simple analysis. It is that type of analogy that needs to be made to have people understand what they're talking about when they demand balancing the budget. It aint so simple. Some take the broad view that we 'owe it to ourselves', therefore, the whole deficit 'thing' is just a smoke and mirrors argument. I know it can make one's head spin. (I miss the rotating head smilie... )

[blueballs]

Seriously flawed and therefore not credible from the standpoint that cutting the marginal tax rate has been proven to increase income to the feds time and again. It worked for JFK, it worked for Reagan, and it worked for Bush.

The problem with our economic situation is NOT that the american worker and business owner is undertaxed ... but he's right on target about so many politicos running their mouth without having the foggiest idea of what they're talking about. Unfortunately this author exhibits the same trait.

[Rob Iola]

On the Income side of the ledger it's pretty simple - we need to increase tax revenues. The argument is whether that's best accomplished by raising or lowering tax rates. Most "true" fiscal conservatives believe that lowering tax rates results in much greater tax revenues due to a much more robust economy.

On the expense side it's much thornier - you have debt service, entitlement programs, and defense programs that can't simply be cut by whatever amount that is needed to meet a balanced budget requirement (at least without dire ramifications).

I'd start by leaving Afghanistan. Make employee health care benefits taxable. Rescind the prescription drug benefit. Freeze SS COLAs and allow private investment alternatives.

And yes, cut corporate tax rates. The idea is to make international companies preferentially base operations in the US instead of off-shore.

[Pwns]

A good thing to do to increase revenues is to cut taxes. There's such a thing as the Laffer curve, and we are probably still to the right of the peak.

But I don't expect Obama to cut any taxes. He has already said (when he was asked why he would raise capital gains taxes when lowering them has been shown to increase revenues) that he was going to raise the CGT just for the sake of fairness. Maybe Obama wants to increase taxes just to tear the rich down and not lift the non-rich u?

[CID1990]

I don't dispute the information in the article. It is pretty much spot on, especially if you accept the premise that we are trying to bring the balance sheet back into the green in one year. The article actually bases the argument on what we would had had to do in 2009 alone to balance the budget (without Clinton voodoo math).

However, nobody says that the budget deficit has to be rectified iin one year. In fact, it CAN'T be rectified in one year. Not even the Democrats would raise taxes to the level they would need to raise them to balance the sheets this year. They want to be re-elected.

A more balanced approach would be to cut spending (although not as radically as selling the TV and dropping out of college) and reduce certain taxes that have proven effects on small businesses and job creation. When the economy is good, revenues go up. It is that simple. Spend less, tax a hair less, and maintain that policy and the budget deficit will come under control.

Like I said, the article is correct, but the fix suggested is the AMEX solution... you have to pay things off right now.

[kalm]

Seriously flawed and therefore not credible from the standpoint that cutting the marginal tax rate has been proven to increase income to the feds time and again. It worked for JFK, it worked for Reagan, and it worked for Bush.

That is highly debateable. Supply side economics is only a theory.

I don't dispute the information in the article. It is pretty much spot on, especially if you accept the premise that we are trying to bring the balance sheet back into the green in one year. The article actually bases the argument on what we would had had to do in 2009 alone to balance the budget (without Clinton voodoo math).

However, nobody says that the budget deficit has to be rectified iin one year. In fact, it CAN'T be rectified in one year. Not even the Democrats would raise taxes to the level they would need to raise them to balance the sheets this year. They want to be re-elected.

A more balanced approach would be to cut spending (although not as radically as selling the TV and dropping out of college) and reduce certain taxes that have proven effects on small businesses and job creation. When the economy is good, revenues go up. It is that simple. Spend less, tax a hair less, and maintain that policy and the budget deficit will come under control.

Like I said, the article is correct, but the fix suggested is the AMEX solution... you have to pay things off right now.

Very good post CID.