I've long admired Fareed Zakaria's work, but what a piece of lazy slop his latest column is. He's in favor of letting all the Bush tax rates lapse, thereby granting us a shot at cutting "deficits by about a third—more than $300 billion!—permanently and relatively easily." You know the drill: Returning to Clinton-era tax rates would mean $3.9 trillion in more revenue over the next decade. Hitting up the top 2 percent or 3 percent alone would bring in about $700 billion over the next decade. Hitting just the lower 97 percent would bring in $3.2 trillion. Zakaria is jumping on the responsibility and fairness wagon, saying all should pay more.
Clinton raised taxes in 1992 and ushered in a period of extraordinarily robust growth. Bush cut taxes massively in 2001 and got meager growth in return....
I don’t like our current tax system. It’s unwieldy, taxes the wrong things (income instead of consumption), and is filled with loopholes that are legalized corruption. But we are not going to create the perfect tax code today. We have in front of us a simple, easy way to bring America’s fiscal house in order, reduce our dependence on foreign borrowing, restore U.S. credibility and power, and give us a stable revenue base from which to make key investments for future growth. All we need is for Congress to do what it does so well—nothing.
Clinton, of course, didn't raise taxes in 1992 (he only took office in 1993). And when he did raise taxes, the economy was deep into recovery and, more importantly, Bill the Pander Bear was actually cutting discretionary spending in real terms by what would amount to 8 percent in his first term. That's a very different scenario than what we've got now. Shitty growth and projected increases forever in federal spending.
More important, Zakaria claims that the "Bush tax cuts remain the single largest cause of America’s structural deficit" and that "federal taxes as a percentage of the economy are at their lowest level since the presidency of Harry Truman."
Let's assume that's all true (it's late, I've got a dinner to get to, and I don't have time to check). The problem with deficits is not one of revenue but one of spending. Forget about the dip in government revenue due to the recession.
It's a simple, plain, and nearly universally unacknowledged fact that the feds haven't been able to raise revenue much past the 19 percent of GDP bar for any period of time since World War II. Doesn't matter the the top marginal rate is, or the bottom, or nothing. The government is going to pull in just under 19 percent maximum. Some years it might be a bit higher and some a bit lower, but it ain't budging over the long haul (defined as the last 60 or so years). That is the limit of what we can spend if we want to have a balanced budget. Obama's own budget projections have the feds spending more than 22 percent of GDP each year over the next decade. You do the math.
What the government can do is change how much goddamn money it shells out. As noted above, over the course of Clinton's first term, for instance, real discretionary spending actually went down (we used to call it the peace dividend). But since Bill Clinton left office, total federal outlays have increased 60 percent in constant 2010 dollars. And there's your problem, Fareed. Stupid programs like the Medicare Part D, the prescription drug program that paid off seniors who were spending, on average, under 4 percent of their total income on prescription drugs. Two long and increasingly unpopular wars. No Child Left Behind, a federalization of education policy that costs hundreds of billions of dollars over time without any chance of helping poor kids escape crap schools. All the other parts of Medicare that are set to explode.
We are in debt because we spend too much, not because we make too little as a country. Let's say it again, this time in bold: We are in debt because we spend too much, not because we make too little as a country.
Fareed Zakaria, who surely makes well north of $250,000 a year, is welcome to give all his income to a government that has only managed a nominally balanced budget a handful of times since we beat the Axis powers.
But can he have the generosity not to include the rest of us who make far south of a quarter-mil a year in his delusion that higher taxes will mean smaller deficits?