Tag: Tax Policy

Debate Three: CNBC Faceplants

I was carving pumpkins and doing other things last night, so only caught bits of the debate. So only a few thoughts:

First, it’s time to winnow the field. It’s been nice having this big collection of politicians around. But it’s time to end the silly fantasies and cut the field down to, at most, seven candidates.

Second, the biggest cheers were for attacking the moderators. The moderators did do a poor job and kept interrupting each other and the candidates. Going after them is a cheap cheer, but a fun one.

Third, my impression of the candidates? Trump is still a joke. Carson is nice but has little clue about policy. Fiorina can debate but has yet to advance a coherent policy platform. Bush is sinking rapidly. I don’t care for Cruz or Huckabee. And I’m unclear on what Kasich, Paul and Christie are still doing around. Rubio still crosses me as the best candidate.

One final point I want to make: I am sick of all these bullshit tax cut plans. Every candidate, it seems, has some plan to massively cut taxes. And they are all huge steaming piles of excrement.

Not a single one of those plans is likely to happen. And they never should happen because we are still running a deficit with huge obligations for Social Security and Medicare bearing down on us. If the Republicans cut spending far enough to start running a surplus, then we can talk about tax cuts. Until then, this talk of trillion dollar tax cuts is a good reason to not take any of these guys seriously. It’s a good reason to hope for divided government.

Revenue-neutral tax reform would be fine. In fact, you could actually have tax reform that increases revenue but benefits the economy by eliminating the deadweight loss of our tax code (e.g., Reagan’s 1986 tax reform). I am all in favor of a massive overhaul of our tax system. But not one that blows trillion dollar holes in our finances.

When I raise this point, the usual responses are that “the tax cuts will pay for themselves” or “we need to starve the beast”. The former is only true when tax rates are extremely high — 70-90%. Just ask Kansas. To makeup the revenue of these tax cuts, we would need growth rates in excess of 10%. No one thinks this is going to happen.

I have addressed the later theory before:

Starve the Beast was the theory that if we cut taxes, it would force the government to cut spending because the resulting deficit would be unsustainable (this was before people decided that the Laffer Curve was, in fact, the Laffer Line and that all tax cuts paid for themselves). Starve the Beast sounded tempting, especially to faux conservatives who were big on tax cuts and not so big on cutting spending. But it ran aground on several rocks:

First, spending cuts don’t just fall from the sky. You have to actually cut spending at some point. And the people who had to cut spending were the same people trying to force themselves to cut spending. It was like trying to lose weight by eating a box of doughnuts hoping that will force you to go the gym.

Second, the lesson Congress learned from Starve the Beast wasn’t that they couldn’t tolerate big deficits. The lesson they learned was that they could. As a result, we’re now enjoying our fourth straight year of trillion dollar deficits.

Third, and this is a point I keep harping on, Starve the Beast made spending painless for the taxpayer. This was especially true in the Bush years when we started two wars and put in a prescription drug program while removing millions from the tax rolls. The impression given to the taxpayers was that wars and drug programs were free, or at least were paid for by somebody else (somebody rich). It has continued in the Obama years, with spending and taxes being manipulated so that Obamacare appears to decrease the deficit when it, in fact, does not and tax hikes only acceptable if they hit the dreaded rich.

I keep saying this and I am going to keep saying it: the most important aspect of any government budget is that spending should hurt. Spending should hurt either in cutting other services or in raising taxes. If you aren’t doing either of those things, you are giving people government on the cheap. And they will have no incentive, none whatsover, to support spending cuts.

Would you turn down services that are discounted 40-100%?

One of the problems we face in balancing the budget is that spending cuts are popular in general and unpopular in detail. When you ask people what spending they support cutting, the only thing that even gets 50% is foreign aide. But a big reason for that is that, for most Americans, government spending doesn’t hurt them. They can support all these wonderful things confident that the money for it will come out of somebody else’s pocket.

Until one of these guys puts forward a concrete plan to cut spending and balance the budget, I’m going to ignore their NeverNeverLand tax cut proposals. And I’m not going to take them seriously as responsible conservatives. A responsible conservative balances the budget first. Then … maybe … he talks about tax cuts.