Credit former Vice President Walter Mondale. His call last Sunday for higher taxes in a national opinion column comes as bold and clear as his infamous 1984 pledge to the Democratic National Convention to raise taxes if elected president.
I admire the vice president’s clarity. But with respect to him, there’s a whole lot more at stake than an embarrassing campaign result if we get things wrong this time.
The former vice president’s voice is not the only one joining the public relations barrage to place at the center of American thought the false choice that part of the remedy to our national debt crisis lies in the bitter medicine of tax increases.
Former Federal Reserve Chairman Alan Greenspan endorsed the expiration of Bush-era tax policies as part of the fix to our country’s staggering budget crisis.
Though the bi-partisan deficit commission put forward some good and thoughtful ideas in its final report, it also endorsed a mix of spending cuts combined with tax increases.
And of course the President weighed in during a major speech on deficit reduction last week. He managed to score a perfect 10 in rhetorical gymnastics by labeling the Bush-era tax relief as “spending” in the tax code. Are there special interest tax breaks that should be eliminated in favor of lower, simpler and fairer tax rates? Absolutely. But referring to tax cuts as “spending” is immoral and offensive. It’s an assumption that your money is the government’s first.
This false choice—that we cannot rein in spending without raising taxes—is showered on us as time runs short. Tune it out. We need spending cuts and growth, not higher taxes.
America has reached its debt limit—again—and we are advised of looming catastrophe if we don’t oblige and raise it. On Monday, the Standard & Poor’s credit-rating firm changed its outlook on America’s AAA-bond rating to “negative” from “stable.” Needed revenues to fund government services that millions of Americans depend on to get well, help an old parent or feed a hungry child remain too low. Unemployment near nine percent is chronic and, at best, will fade only over a period of years. Jobs are still going overseas. New federal statistics show that companies cut their work forces in the U.S. by 2.9 million during the 2000s and increased foreign employment by 2.4 million. Large business continues its so-called capital strike by sitting on job-making cash reserves until economic clarity emerges. Individuals are also afraid to invest.
Right now, almost everything that is being done in Washington and many state capitals works against growth. In my own view, we are doing very little in the U.S. to encourage it and will damage it by putting government fingers deeper in Americans’ pockets.
Particularly misleading is the idea that those with the deepest pockets represent our best target, that increasing taxes on “millionaires and billionaires” can lead us back from the precipice our nation now faces. As the Wall Street Journal pointed out in a Monday opinion piece of its own, confiscating 100 percent of all taxable income by this economic group would yield something in the neighborhood of $938 billion—“sand on the beach,” the paper noted, “amid the $4 trillion White House budget.” It is also worth noting that $938 billion is precisely the cost of just one new government spending program—the President’s own health-care overhaul.
As we struggle to avert the dire consequences of doing nothing, or doing harm to our fragile recovery with increased taxation, we should stand firm and stop any tax increase proposals masquerading as a reasonable and fair part of a bipartisan fix. We should go about the hard work of repairing the tax code -- of lowering rates, simplifying it and turning it into an instrument that promotes economic growth and brings job back to America. Economic research by the President’s own former top economic adviser, Professor Christina Romer, shows that lawmakers can generate as much as a 3 percent jump in the economy, if taxes are cut by just 1 percent of GDP.
With proper growth incentives in place, U.S. Treasury Department revenues would grow and be available for deployment in jobs and education for more Americans. Americans would then use those skills to go to work and earn taxable income. It is an energetic positive cycle waiting to be unleashed. It is a positive choice -- not a false one -- within our reach with no qualifications.