Archive for Budget
The GOP Choice: Smaller Government or Lower Deficits
Posted by: | Comments“The goal is to reduce the size and scope of government spending, not to focus on the deficit.” Grover Norquist
You’ve got to give Grover credit. Unlike most everyone else in Washington, at least he says what he believes. In a remarkably candid interview with Ezra Klein at The Washington Post, the head of the anti-tax lobby Americans for Tax Reform beautifully described the challenge faced by Republican lawmakers today.
When the GOP was out of power, it could easily paper over a profound internal disagreement: Should Republicans be the party of small government and low taxes, or the party of fiscal prudence? At first glance, these principles sound like the same thing. But they are not. And how a deeply divided GOP chooses between them says everything about the likelihood of both deficit reduction and tax reform any time soon, to say nothing about the party’s political future.
It is much easier for Republicans to take Grover’s route and build a legislative strategy around the goal of small government and low taxes. They can focus on slashing regulation and corporate taxes (for which the business community will continue to show them the love) and on cutting a few high-profile examples of “waste, fraud and abuse” which will win them the support of many in the tea party movement.
Aiming to slash the deficit, by contrast, takes the GOP down a very different road. It carries significant political risk and, thus, requires much more courage. That’s because cutting regulation and waste reduces the deficit by depressingly little, while slashing taxes almost always makes fiscal matters worse.
There is no evidence to support the old supply-side theory that major cuts in federal taxes increase revenues. Similarly, Grover’s claim that government can discourage spending by slashing taxes (aka starve the beast) got a real world test during the presidency of George W. Bush, who cut taxes, but also spent like the proverbial drunken sailor, fathering a huge new Medicare drug benefit and fighting two costly wars. The result: Bush and Congress turned a budget surplus into a $458 billion deficit. It turns out that one doesn’t need to tax and spend when one can more easily borrow and spend.
That leaves only politically unpleasant choices. Politicians who are serious about deficit reduction, rather than modest cuts in the size of government, have no choice but to confront middle-class entitlements such as Medicare and Social Security, and support tax increases within a tax reform bill.
Based on the usually reliable rule that it is always best to judge a politician based upon what he does and not what he says, most Republicans remain squarely in the smaller government and lower taxes camp. Just look at their unanimous support for extending all the Bush-era tax cuts and their current focus on cutting only a narrow slice of domestic spending. Still, a handful of GOP pols (such as Indiana Governor Mitch Daniels) are thinking more broadly. I suspect Republicans will be fighting this internal battle throughout the upcoming presidential primary season. Watch closely to see how it turns out.
Conrad Builds a Case Against Tax Subsidies
Posted by: | CommentsInteresting to see Senate Budget Committee Chairman Kent Conrad (D-ND) working hard to build a case for trimming the $1 trillion in tax breaks that infect the revenue code. Yesterday, as part of that effort, he brought in a broad range of tax experts to testify before his panel. They agreed that many of these preferences (aka tax expenditures) must go—although they were hardly on the same page when it came to which ones or what to do with the money.
In the normal course of events, the budget committee has little to say about tax preferences, although as a member of the Finance Committee, which does have jurisdiction, Conrad is not without influence. And he seems much more enthusiastic about tackling the politically thorny deductions, credits, and exclusions than Finance panel chairman Max Baucus (D-MT). Besides, Conrad may figure that a framework for tax reform will be written in high-level talks between the White House and Congress—a process he’d clearly like to influence.
At his hearing, Conrad wanted to make four points—none new, but all worth repeating. The first is that many of these tax breaks are the functional equivalent of spending and should be treated as such. The second is that tax breaks can be a very inefficient way to deliver government subsidies. The third is that the biggest beneficiaries are often the wealthy rather than the middle class. The last is that eliminating or at least shrinking these benefits should be “at the heart” of any tax reform, with the revenues used to cut both rates and the deficit.
Conrad is a member in good standing of the so-called Gang of Six—a bipartisan group of senators struggling to find a consensus on deficit reduction. As a member of President Obama’s fiscal commission, he supported the controversial recommendations of panel chairs Erskine Bowles and Alan Simpson. And he is a lame-duck, having announced his retirement at the end of this Congress.
The former North Dakota tax commissioner is nothing if not persistent. For years, he and his ubiquitous charts and graphs have been a fixture on the Senate floor, as he warns about the dangers of the deficit. Conrad’s voice on the need to include revenue increases—in the form of cuts in tax preferences—is an important one.
As I noted a couple of weeks ago, three GOP senators—Saxby Chambliss of Georgia, Mike Crapo of Idaho, and Tom Coburn of Oklahoma (the three GOP members of the Gang of Six) have also been arguing for cuts in tax preferences. They have been much more circumspect about whether they’d be willing to use any revenues for deficit reduction but, in their way, they too are moving the debate forward.
In the currency of Capitol Hill, hearings are cheap. Votes matter more, and Conrad—who supports many farm subsidies and voted to extend all the Bush-era tax cuts last December—can be a situational fiscal reformer (not unlike other deficit hawks). But the record he’s building matters in the halting journey towards both a sensible tax code.
HUD Secretary Outlines Housing Goals. Discusses 2012 Budget
Posted by: | CommentsPosted To: MND NewsWire
In his prepared remarks on the Dapartment of Housing and Urban Development’s fiscal year 2012 budget, HUD Secretary Shaun Donovan yesterday told the House Financial Services Committee that any spending allocations must meet a number of challenges. Assisting responsible families in the midst of housing crisis, providing quality affordable rental housing, transforming neighborhoods racked with poverty, rebuilding the nation’s federally-assisted public housing stock and ensuring that its tenants are part of the skilled workforce the new global economy requires are just a few. Adding stress to the situation, these lofty goals must be met in a cost-conscious manner because of America’s growing federal budget deficit and struggling economy. Clearly education plays a major role in sustainable homeownership…(read more)