Stephen Moore: Remember History ... Forget Tax Hikes in Exchange for Spending Cuts
Back in 1982, President Reagan got snookered into a grand bipartisan deficit reduction deal known as the Tax Equity and Fiscal Responsibility Act. He "reluctantly" agreed to what was then one of the largest tax increases in American history -- only because he was assured there would be $3 of federal spending cuts for every dollar of higher taxes. For the remainder of his presidency, whenever new taxes were proposed, the Gipper huffed: "I'm still waiting for those $3 of spending cuts the Democrats promised me."
Like moths attracted to a bug zapper, the White House and many congressional Republicans now want to negotiate a blockbuster budget deal to tackle the stampeding cost of entitlements. Meanwhile, Democrats and left-leaning think tanks are already laying the groundwork to build a Washington tax-hike consensus. As Robert Rubin, the Democrat's economic guru and one of the architects of the 1993 Clinton tax hike, recently said of the proposed commission, "It only makes sense substantively, in my judgment, to get together around this if everything is on the table, including the tax cuts."...
Some conservative leaders are starting to feel paranoid. Former Speaker of the House Newt Gingrich, a front row participant in several such events in the past, calls bipartisan budget deals a "a functional invitation to raise taxes" and notes that "the end result is spending cuts always prove to be phony and government always grows bigger."
One case in point was the 1983 commission to close the Social Security funding gap, which "fixed" the financing crisis by scheduling a series of economically damaging payroll tax increases while dismissing personal retirement accounts. The head of that commission was Alan Greenspan, who some are touting as the ideal chairman of this one.
The White House is understandably concerned by the multitrillion dollar funding gap in the old-age entitlement programs. According to the latest projections by the Congressional Budget Office, if we leave Social Security and Medicare spending on auto-pilot, federal expenditures will climb inexorably from 21% of national output today to 30% in 2030 and then 37% by 2050.
Would Democrats cooperate in curtailing these runaway costs? Earlier this year, when the Republicans enacted microscopic cuts of 1% off the double-digit growth rate of mandatory spending programs, the Senate Democratic Policy Committee screamed that Republicans were ripping gaping holes in the social safety net by slashing "key programs that help mothers provide basic needs for their children . . . bring aid to widows and orphans and provide Social Security death benefits for families who need assistance in order to bury their loved ones with dignity."...
If the White House is concerned with Mr. Bush's legacy, it might ponder a meltdown of his one unarguable domestic policy triumph. "This compromise gambit," warns budget expert Peter Ferrara of the Free Enterprise Fund, "could lead to an effective reversal of the Bush tax cuts. If federal spending is slated to rise to 35% of GDP, where is a political compromise with the liberals going to leave taxes and spending? Probably even above the all-time high 25% of GDP."...
Just in the three years since the Bush capital gains and dividend tax cuts, the net worth of American households has soared by more than $12 trillion -- and asset growth of that magnitude makes the imposing long term debts all the more manageable. If productivity, GDP and asset values continue to grow over the next 25 years at the pace they have over the past quarter century, the economy will be twice as large, and our net wealth will be well over $100 trillion. The Republicans' best strategy to get there is by maintaining pro-growth economic policies while pressing the case for sweeping, market-based reforms for Social Security and Medicare that are attractive to the younger and ever-expanding owner-society voter base. And the first step in that strategy is to remain resolute in its opposition to new taxes.
Read entire article at WSJ
Like moths attracted to a bug zapper, the White House and many congressional Republicans now want to negotiate a blockbuster budget deal to tackle the stampeding cost of entitlements. Meanwhile, Democrats and left-leaning think tanks are already laying the groundwork to build a Washington tax-hike consensus. As Robert Rubin, the Democrat's economic guru and one of the architects of the 1993 Clinton tax hike, recently said of the proposed commission, "It only makes sense substantively, in my judgment, to get together around this if everything is on the table, including the tax cuts."...
Some conservative leaders are starting to feel paranoid. Former Speaker of the House Newt Gingrich, a front row participant in several such events in the past, calls bipartisan budget deals a "a functional invitation to raise taxes" and notes that "the end result is spending cuts always prove to be phony and government always grows bigger."
One case in point was the 1983 commission to close the Social Security funding gap, which "fixed" the financing crisis by scheduling a series of economically damaging payroll tax increases while dismissing personal retirement accounts. The head of that commission was Alan Greenspan, who some are touting as the ideal chairman of this one.
The White House is understandably concerned by the multitrillion dollar funding gap in the old-age entitlement programs. According to the latest projections by the Congressional Budget Office, if we leave Social Security and Medicare spending on auto-pilot, federal expenditures will climb inexorably from 21% of national output today to 30% in 2030 and then 37% by 2050.
Would Democrats cooperate in curtailing these runaway costs? Earlier this year, when the Republicans enacted microscopic cuts of 1% off the double-digit growth rate of mandatory spending programs, the Senate Democratic Policy Committee screamed that Republicans were ripping gaping holes in the social safety net by slashing "key programs that help mothers provide basic needs for their children . . . bring aid to widows and orphans and provide Social Security death benefits for families who need assistance in order to bury their loved ones with dignity."...
If the White House is concerned with Mr. Bush's legacy, it might ponder a meltdown of his one unarguable domestic policy triumph. "This compromise gambit," warns budget expert Peter Ferrara of the Free Enterprise Fund, "could lead to an effective reversal of the Bush tax cuts. If federal spending is slated to rise to 35% of GDP, where is a political compromise with the liberals going to leave taxes and spending? Probably even above the all-time high 25% of GDP."...
Just in the three years since the Bush capital gains and dividend tax cuts, the net worth of American households has soared by more than $12 trillion -- and asset growth of that magnitude makes the imposing long term debts all the more manageable. If productivity, GDP and asset values continue to grow over the next 25 years at the pace they have over the past quarter century, the economy will be twice as large, and our net wealth will be well over $100 trillion. The Republicans' best strategy to get there is by maintaining pro-growth economic policies while pressing the case for sweeping, market-based reforms for Social Security and Medicare that are attractive to the younger and ever-expanding owner-society voter base. And the first step in that strategy is to remain resolute in its opposition to new taxes.
For 25 years, virtually every bipartisan budget deal has meant higher taxes, higher spending and political carnage for the GOP. The most notorious of these budget deals, forged at Andrews Air Force Base in 1990, led George H.W. Bush to repudiate his"read my lips, no new taxes" pledge, and to lose his presidency to Bill Clinton. Republicans forget this lesson of history at their own peril.