Pay-Go: Fiscal Responsibility or Political Cover to Raise Your Taxes?
By Rep. Eric Cantor Posted in Congress — Comments (20) / Email this page » / Leave a comment »
When the new majority implemented "pay-go" spending rules last fall, the American people thought they were getting a check on runaway congressional spending - not an excuse to raise taxes. Congress would offset any dollar of new government spending, we were told, with spending reductions in other areas.
Sadly, this year the majority has done nothing to change its profligate ways. Congress’ spending proposal came out $23 billion over the president’s budget request, an overall increase of over 10 percent from last year’s levels. Instead, Democrats have used pay-go as a pretext for a wave of new tax increases. Their strategy, disguised in the garb of “fiscal responsibility,” threatens to deal a decisive blow to American prosperity at a tense moment for our economy.
How does their stealth work? Consider the ongoing logjam over Congress’ attempt to patch up the alternative minimum tax (AMT). Because this tax was never indexed for inflation, 19 million additional taxpayers this year will be caught in its ever-expanding web, swelling the ranks of AMT payers to 23 million. Previous congresses have implemented a patch for middle-class AMT payers. But the inaction of this Congress has placed 23 million taxpayers at risk of a $2,000 tax increase this fiscal year.
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You have to smile at Democratic claims that opponents of AMT offsets are trying to pass the costs of the patch on to our children and grandchildren. That’s because another AMT patch would not increase the federal deficit. Preventing 19 million unsuspecting taxpayers from getting clubbed for the first time by an alternative tax hardly constitutes a spending increase or a new tax cut. The government has never collected AMT revenue from these taxpayers and never intended to.
House Democrats refuse to accept that reality. The opportunity to sell tax hikes as “offsets” is too tempting. Conveniently characterizing the patch as new spending, the House used a one-year AMT fix to muscle through an antigrowth 133-percent tax hike on investment partnerships. The ill-conceived Democratic legislation, which passed last month, increases taxes ostensibly to cut taxes.
The AMT struggle magnifies the differences between the two parties as we formulate tax policy for the future. The Democrats’ budget baseline for pay-go assumes more than just the revenue from 24 million AMT payers. It assumes that the Republican tax cuts of 2001 and 2003, which lifted us from the depths of recession and fueled extraordinary economic growth, will expire in 2011. Taken together, these assumed revenues amount to an unprecedented $3.5 trillion tax increase on the backs of American families.
The Democrats’ inflexible adherence to this flawed form of pay-go puts the House at odds with the Senate, which passed a clean AMT patch on Thursday. More importantly, it imperils Congress’s ability to put America on sound economic footing. As we slog through a difficult economy, the last thing American families need is to be hit over the head with new tax hikes.
The problem is nothing is ever paid for by cuts.
Given the size of our government its difficult to believe there isn't one or two programs that could be cut in every congress.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
"Starving the beast" has never worked. Paygo is more effective because it incorporates spending and borrowing. I am a fiscal conservative who believes that if you eliminate AMT, you have to pay for it. You cut the budget, raise revenues, or borrow the amount needed. If you think eliminating these AMT taxes magically causes a reduction in spending or borrowing, without a precise measure, you don't know Congress.
so we're talking about a tax increase that will happen next year if they don't do anything about it. Personally, I'd say, forget fixing the AMT this year, let it hit.... Yeah, I'm not thrilled about a tax increase, but maybe we could force something else through along with a fix then.
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Should be putting in a counter-proposal of programs/pork to cut in order to put the AMT fix into place rather than saying that we should just fix it and be labeled as fisally irresponsible.
The Democrats may want to raise taxes to fix the AMT problem, the Republican response should be to cut spending on liberal Democratic programs
???WhoamI????
The assumption of course is that whatever level the government is taking in taxes is the level at which the taxes should remain; until taxes can be raised. After all, it's really their money anyway.
As has been proven in the past, tax cuts raise revenues, tax increases diminish revenues as the economy is driven down under the new load or consumers (who pay ALL taxes) adjust their habits to accomidate the new taxes.
The reason the Left fails to understand this is that it is counter to the concept of the masses owning the economy and the fairness of socialist redistribution which are central to their theology.
Just as the deficits of the Reagan years are blamed on Reagan (who doubled tax revenues through tax cuts) the current deficits will be blamed on President Bush. Not ot mention the balanced budgets of Newt Ginrich which are credited to President Clinton. It would be well to remember, both, that the Constitution gives spending authority to Congress and those famous words of Mr. Tip O'Neil upon recieving President Reagan's budget: "Mr. President, this budget is dead on arrival."
By cutting some programs to keep the AMT Tax increase this year. If it turns out that tax revenues goes up then we have just reduced the deficit and can take credit as fiscal conservatives.
We are still in a deficit spending situation at this point in time. We fiscal conservatives should be taking the high road here proposing spending cuts to as the Democrats say "Pay for" the AMT fix. Then the debate would be between the Democrats who want to raise a tax to prevent a tax increase vs. the Republicans who want to cut spending to prevent a tax increase.
Wouldn't that be a good debate to have next September with the Liberals!!!
???WhoamI????
If wishes were fishes there would be no hungry. As conservatives we should be proposing conservative solutions. Traditionally conservatives have supported small government not just fiscal responsibility. The debate we should be having is over less government, which is the real division between Liberals (the rule of government over individuals) and Conservatives (the rule of responsible individuals over government).
Indeed, the Left is using our own cudgel (deficits) against us to continue the ratcheting up of government largess. Conservatives should see the danger to our base philosophy that is posed by mistaking our cudgel for our end. Our end has always been the classic liberal position of individual liberty and it's enemy has always been collectivism driven forward by well meaning but mistaken desire to solve problems best left to individual means.
Beyond this my point was that reducing taxes increases revenues. If more tax income is the goal then we should be fighting for lower tax rates to reach that goal.
In my view this is not about reducing taxes it is about preventing a tax increase...either the AMT or the tax on Hedge Funds and reducing government spending...and your response is a lot of high level platitudes.
I don't get it. I would like to see Rep Cantor propose an ammendment that cuts spending equal to the proposed tax increase to counter the Democrats assertion that another tax needs to be raised to compensate for averting the tax increase that unfortunately was included in the budget last year.
Then in the Democrats vote that down (which they will) Republicans will have some fiscal responsibility to campaign on. Now they look like they are just posturing.
If that money was not included in the budget when the temporary fix was put in last year we would not be in the situation we are in now.
???WhoamI????
United States Senator Eric Cantor sounds A LOT better than Representative Cantor...
But if you stay in the House, I'm hoping a future Majority Leader and/or Speaker of the House.
I agree with some of your comments, but your last paragraph has no standing in the economics that I learned in college. While it is true that some reductions in tax rates have led to increases in revenues, given other factors, it is not a rule that reductions in tax rates ALWAYS lead to higher revenues. It is also not an economic rule that decreasing tax rates ALWAYS improves the economy.
Then we would maximize tax revenue by reducing all tax rates to zero (0). In economic theory, tax revenue maximization would depend on the current rate and where you are on the curve.
???WhoamI????
Well, cutting taxes increased revenues for Kennedy, Reagan and now Bush; alternatively raising taxes did not raise revenues for Nixon or Clinton. This may not be taught in econ101 but it works. I suppose that there is a limit. If taxes fell to a point where they were more or less invisible then a further decline would have a small effect. I believe we have a way to go before we reach that point.
Prior to Reagan the Laffer curve was, well, laughed at. Not so much any more. Just because the Ivory Tower has a certain belief does not make it so. When experience conflicts with theories I'll stand by experience.
As conservatives our interests are served by diminishing government and taxes. Allowing government to keep the tax structure in order to reduce the deficit will result in higher taxes with the same deficit (remember "read my lips?"). The only way to reach smaller government and lower taxes is to force the reduction of government through lower taxes.
Our goal should be small government.
No credible economist thinks tax cuts pay for themselves - tax cuts may increase economic activity to offset some of the static lost revenue; but the idea that it pays for itself at our current tax rates is absurd.
Of course if you don't believe me, how about Bush's Council of Economic Advisors:
"The modest effect of government debt on interest rates does not mean that tax cuts pay for themselves with higher output. Although the economy grows in response to tax reductions (because of higher consumption in the short run and improved incentives in the long run), it is unlikely to grow so much that lost tax revenue is completely recovered by a higher level of economic activity." p57-58, Economic Report to the President, February 2003.
Or Mankiw's esitamtes of how much revenue they recover which rnage from 17% to 50% based on teh kind of cut.
Or the CBO report under former Bush White House Economise Holtz-Eakin which estimates 22% recovery in first 5 years.
In other words, real economist (academic, professional and political) do laugh at anyone who claims tax cuts pay for themself.
And as for Starve the Beast - well anyone who looks at the budgets under Reagan or Bush should have a hard time believing lower tax revenues impact Congressional spending at all. The only way to reduce spending, and ultiamtely taxes, is to convince the public it is better for them and get them to vote in people who are willing to do it - and vote them out as soon as they succumb to the powers in Washington that strive to perputate themselves.
Mind you, I am not counseling fiscal irresponsibility. We should, for the most part, live within our tax revenues. The deficit incurred from 2001 till "recently" was pure Keynesian economics and could be justified by the double whammy the economy took in 2001 and 2002.
This does not justify continuing deficits. The Democrats complain about the deficit that they are spending. Of course, they blame the deficit on the tax cut, not their profligate ways; the tax cut that increased tax revenues. The reason for this hypocrisy is the same reason they want a redeployment to save a defeat: to use against the Republicans politically. The more the Democratically run Congress can run up the deficit the more blame they can heap on Republicans because the MSM hasn't caught on that it is Congress that writes the checks, not the President. If we give in and let them have their taxes they will still incur the deficit and then BLAME BOTH ON THE REPUBLICANS.
Some record to campaign on!
Your last point is the one that I would say the Republicans should propose cutting spending in order to prevent the tax increase that is currently in the budget as a contrast to the Democrats plan to raise another tax to prevent a tax increase rather than just to say lets add it to the estimated deficit and hope that the government will take in more tax revenues as a result.
That would be fiscal discipline that would beat the Democrats.
???WhoamI????
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
"There isn't a man alive who hasn't wanted to boot an infant." - W.C. Fields