I realize it's a hot talking point on the Left these days to blame new projections of trillion-dollar-plus deficits on the new tax law -- but as we explained at length last week, the federal government has a spending problem, not a revenue problem. The tax cuts simply allow Americans to keep more of what they earn and bring the formerly-uncompetitive US corporate rate in line with the rest of the developed world. In doing so, it pulls down federal government revenues (as a percent of GDP) by a few tenths of a percentage point, to a level that is still above the average over recent decades. To borrow and alter a phrase, it's the spending, stupid. Uncle Sam is now poised to spend more than $1 trillion more than it takes in, annually, over the next few years. The fresh bipartisan budget agreement is a major contributor to this development, establishing a spending baseline that is expected to balloon deficits by around $1.5 trillion over a decade. This isn't going to end well. House Speaker Paul Ryan understands the score:
.@SpeakerRyan just said military spending not the reason there are growing deficits. "It's entitlements." Also health care and inflation. "We could get rid of the military and we still would have a deficit." Ryan says entitlement reform is the way to deal with the debt crisis. pic.twitter.com/sFOef8pcHE— Mark Knoller (@markknoller) February 8, 2018
Actions speak louder than words. In fairness to Ryan, he's one of the few who has actually tried to address the entitlement-driven debt tsunami issue, offering real solutions about which denialist critics have lied and demagogued. Nevertheless, Republicans finally control the House, Senate and presidency -- and they're increasing spending, busting budget caps, and do not appear remotely serious about making mathematically-imperitave reforms to entitlements (in part, because the president has ruled them out). This satirical piece cuts pretty deep:
"Republicans Announce Plan To Pretend To Be Fiscally Conservative Again The Moment A Democrat Takes Office"https://t.co/tJnn2pH9ym— Brian Riedl (@Brian_Riedl) February 10, 2018
During a budgetary discussion Friday, Republican lawmakers announced a plan to pretend to be fiscally conservative again if a Democrat takes office again in 2020 or 2024. The GOP said it would begin to decry deficit spending and the $20 trillion debt in order to win votes as soon as political power swung back to the opposing party. “The second a Democrat is back in the White House, we will once again start yelling about fiscal responsibility,” Speaker Paul Ryan said in an address to the House of Representatives Friday. “For now, we will continue to vote for unsustainable and irresponsible budgets that your children’s children’s children will pay for for centuries to come.”
Oof. Democrats never really acknowledge or grapple with the unsustainability of programs that fuel the looming debt crisis, only bothering to voice concerns over deficits from time to time, in order to attack GOP-proposed tax reductions. Republicans, by contrast, got quite exercised about deficits and debt during the Obama years; many blasted their own party's spendthrift ways during the Bush administration, swearing that they'd come around to seeing the error of their ways. The Tea Party was going to hold them accountable if they didn't turn the page. Well, not so much. When I pointed out some inconvenient truths about the coming insolvency of "popular programs" (one typical argument for ignoring the simple arithmetic and pretending like everything's fine) like Medicare and Social Security, leftists trotted out another lazy, denialist trope:
The fact is that the federal government has handed out tens of trillions in unpaid-for promises regarding these programs; confiscatory tax rates for "the rich" wouldn't come close to covering the gap. (These existing realities underscore the insane recklessness of BernieCare, by the way):
When the accrued expenses of the government's entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit. Nothing like that $8 trillion amount is available for the IRS to target. According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws. In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn't be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.
Also, the notion that wealthy Americans aren't already paying their "fair share" is torn apart by the data. Consider this: The top quintile of US earners pay approximately 70 percent of all federal taxes; furthermore, top tax rates are already set at levels (even post-reform) that are higher than what most Americans perceive as "fair." That's why Democratic whining about the recent tax cuts isn't compelling. The record shows that they don't actually care about deficits or debt, and their apocalyptic predictions about what the law would do have been blown out of the water. To wit, here's the latest company to unveil tax reform bonuses, to the tune of up to four grand per employee:
Houston-based Insperity is providing $4,000 tax reform bonuses to employees who have been with the company for more than two years...Employees who have been with Insperity for less than two years will receive tax reform bonuses of $1000, $2000, or $3000. Insperity is an American success story. It was founded in 1986, launched from a tiny home office, with just two employees. Today the company has 60 offices and 2,700 employees across the United States. The good news was announced to employees via internal message from CEO Paul Sarvadi..."In December Congress passed a tax reform bill which among other changes, lowered the tax rate for corporations. Insperity is one of those corporations which will benefit accordingly. This change leaves more of our hard earned dollars available after tax to invest in our business as we see fit. We believe all constituencies should benefit from this change including our amazing employees. Therefore, as was communicated with this morning’s news release we will be paying a one-time bonus as a result of the U.S. tax reform act."
Do these qualify as slightly larger "crumbs"? Are recipients allowed to enjoy their windfall without been ridiculed or sneered at by liberal elites? I'll leave you with a reminder that the new tax cuts did not disproportionately benefit one-percenters over the bottom 80 percent of taxpayers. It did pull tax rates down closer to what most people consider "fair." Now, it's essential to get spending under control. Unfortunately, there is little appetite to do that within the "small government" party, and virtually none among the opposition. The combination of low taxes and low spending has a very limited constituency. Except for math, that is. But math doesn't vote. On that note, this is pitiful, but not surprising:
Trump budget to give up on longtime Republican goal of eliminating deficit https://t.co/V0CIA4TV5d— Washington Post (@washingtonpost) February 12, 2018