March 20, 2013
This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published March 20, 2013 on the American Thinker website.
Democrat Party cheerleader Rep. Chris Van Hollen (D-MD) ridicules Paul Ryan’s House Republican budget as “extremist” and “radical.” Rep. Steve Israel (D-NY) used the Huffington Post platform to allege that Ryan’s budget reflects “extremist Tea Party control” of the House Republican majority.
But it is the Senate Democrat budget that is extreme and radical, as I demonstrate below, reflecting extremist socialist party control of the Senate Democrat majority.
Bursting Through the Long Term Postwar Consensus on Spending and Taxes
For 60 years after World War II, from 1948 to 2008, federal spending as a percent of GDP was remarkably stable, hovering around an average of 20%. During that same period, federal taxes were remarkably stable as well, hovering around an average of 18% of GDP. With federal spending and taxes at those levels, America was free enough to prosper during this time as the richest nation in world history, with resulting, unprecedented military dominance as well.
Ryan’s budget merely returns federal spending and taxes back near those long-term postwar averages, with both federal taxes and spending after 10 years at 19.1% of GDP, almost perfectly splitting their long-term historical difference. It is abusive, dishonest rhetoric to call that “extremist” or “radical.” In reality, in returning America to those long-term postwar averages, Ryan’s budget can only be called “traditional.”
In sharp contrast, the Senate Democrat budget proposes to increase the current bloated levels of federal spending by $2.1 trillion a year by 2023, to $5.7 trillion in that one year alone, which would be almost double Bush’s 2008 federal spending of $2.983 trillion at the height of the financial crisis and all the bailouts. The Senate Democrat budget proposes to spend $46.4 trillion over the next 10 years, which would be the biggest government spending in world history, increasing annual federal spending over that time, compared to this year’s federal spending, by a combined total of $10.4 trillion. That is what is extremist and radical. Even the home of Swedish socialism is turning away from Big Government spending, but not America’s Democrat party, which is now the world’s leading left-wing party.
At the insistence of President Obama and Congressional Democrats, federal taxes have been raised twice already this year. That includes $1.1 trillion for the new Obamacare taxes that went into effect on January 1, and $600 billion for the expiration of the Bush tax cuts for the nation’s job creators, investors, and successful small businesses (which socialist Democrat demagogues call “the rich”). CBO now projects that federal revenue will double from $2.45 trillion in 2012 to nearly $5 trillion ($4.96 trillion) by 2023. But that is still not enough for the Senate Democrats, who propose in their budget still another $1.6 trillion in tax increases. That is what is extremist and radical.
What the Senate Democrat budget proposes is effectively a Big Government breakout from the long-term postwar averages from 1948 to 2008 for both federal spending and taxes, permanently increasing both beyond those long-term averages. Indeed, because the Senate Democrat budget so zealously rejects any entitlement reform that would make any meaningful long-term difference, under that budget spending and taxes would soar well past their long-term postwar averages after the current 10 year budget window. That is what is extremist and radical.
Ryan’s plan balances the budget after 10 years with no further tax increases while continuing to increase spending every year by 3.4%. Apparently, balancing the budget is extremist and radical to today’s Democrats, but we will see in 2014 that it is not so to the American people. After 10 years and another $1.5 trillion in tax increases, the Senate Democrats’ own budget confesses that the federal deficit would still be $566 billion in 2023. That would be the highest federal deficit in American history, higher even than the former record Bush deficit of $458 billion in 2008, except for the four straight years so far of Obama deficits over $1 trillion.
Ryan’s Tax Reform: Another Republican Middle Class Tax Cut
As I first reported in this column months ago, Ryan’s budget includes very positive tax reform, proposing to replace the current 7 tax rates in the individual income tax with just two, 10% for families making below $100,000, and 25% for families making over $100,000. The New York Times, which is a Democrat Party controlled publication, misleads its readers by saying, “[N]aturally Mr. Ryan doesn’t explain how this could happen without raising taxes on middle- and lower-income people.”
That is a typical brain dead comment from the Times, which reads these days like a college, Marxist, student newspaper. So let me correct the Times. Ryan is Chairman of the House Budget Committee. It is not his job to explain how tax rates can be cut without raising taxes on middle and lower income people. Those details are never in the budget documents. That is the job of House Ways and Means Committee Chairman Dave Camp (R-MI), in whose Committee that tax reform bill will now be written.
Now let me scoop the New York Times. When Chairman Camp writes the tax reform legislation, it will involve another tax cut for the middle class. The current rate of 15%, which applies to couples making between $17,850 and $72,500, will be reduced to 10%. The current 25% rate, which applies to couples making between $72,500 and $146,400, will be reduced to 10% for those making less than $100,000.
While Budget Committee Chairman Ryan has specified that the tax reform overall will be revenue neutral, which is to be achieved by reducing tax loopholes, deductions, and credits, even the Senate Democrat budget recognizes that those tax preferences primarily benefit the higher income taxpayers. Harvard economist Martin Feldstein, who is a former chairman of the President’s Council of Economic Advisors, explained last year in the Wall Street Journal (a much more honest and informative paper than the New York Times) that there are more than enough such tax preferences that can be reduced or closed to finance tax reform as Ryan has proposed, without raising taxes on middle class or lower income taxpayers.
Here is the scoop. When Camp passes his tax reform bill through his Ways and Means Committee, it will involve another, major, tax cut for the middle class. Indeed, with the middle 20% of income earners now paying just 2.7% of total federal income taxes, the Camp-Ryan tax reform bill may well eliminate federal income taxes on the middle class entirely. There you go. You read it here first. If you read this column every week, instead of the New York Times, you will be ahead of the curve, and much better informed about what is happening in Washington, D.C., and what is coming.
When that happens, the New York Times will apologize to the American people for dishonestly misleading them when it should have known better (as I did, with no investigative resources at all), or there will be protests outside the Times in New York City demanding such an apology until it is forthcoming.
Of course, the last major tax cut for the middle class was adopted in 2001, under a Republican majority Congress, and Republican President George W. Bush. Most Democrats voted against that bill, though in permanently extending those middle class tax cuts in January this year, President Obama and Congressional Democrats tried to style themselves as great middle class tax
Ryan’s proposed tax reform also includes revenue-neutral corporate tax reform, proposing to reduce the top federal corporate income tax rate from 35% to 25%, in return for closing corporate tax loopholes. America currently suffers the highest corporate tax rates in the world at near 40%, counting state corporate tax rates on average, except for the socialist one party state of Cameroon. Even the Communist Chinese feature a 25% corporate rate. The average in the predominantly socialist Europe Union is below 25%. Formerly Communist Russia now enjoys lower corporate rates as well.
But today’s Democrat party is rigidly in the same camp as the Socialist Party of Cameroon, competing for the highest corporate tax rates in the entire world. The Senate Democrat budget proposes no tax reform to reduce rates, calling instead for still higher taxes on American businesses and employers, which are already uncompetitive in today’s global economy with the current imposed tax rates. That budget also does not propose any new tax cut for the middle class.
The Camp-Ryan Republican tax reform bill will greatly aid in restoring long overdue, traditional American growth and prosperity, through lower tax rates providing incentives for increased productive activity. That increased economic growth will substantially reduce the deficit as well. CBO reports that every increase in economic growth of 0.1% reduces the deficit by $314 billion over the next 10 years. Increasing the weak, real, economic growth of around 2% over the last 2 years to a more traditional rate of 4% during economic recovery from a recent recession would consequently further reduce deficits by over $3 trillion over the next 10 years.
A further boost to booming economic growth would result from fundamental reform of monetary policy and the Fed, now championed by Joint Economic Committee Chairman Kevin Brady (R-TX) and Rep. Ted Poe (R-TX). Their proposed reforms would tie down Fed monetary policy to the value of long-term stable commodities such as gold. That would promote economic growth by assuring investors that the return on their investments will not be depreciated by inflation or a declining dollar. That along with regulatory relief would complete the package for booming economic growth as enjoyed under President Reagan.
Republicans and conservatives should use the Senate Democrat budget as the defining statement of Democrat party policy, to rout the Democrats in 2014, the same way they were routed in 2010.