The Myth that Holds the GOP Together
If there is one thing that continues to unite the GOP, it is support for tax cuts. That is the one issue about which the neocons, paleocons, theocons, and libertarians all seem to agree. Just this week, the GOP-controlled Congress approved yet another set of tax cuts. The Washington Post reported on Friday:
Indeed, tax cuts are pretty much the only domestic "accomplishment" the Bush administration can point to in its six years in office. It is the issue that has defined modern Republicanism and, not surprisingly, it is what the GOP plans to run on in 2006.
But here's the problem. GOP tax policy is based on an economic theory that has no serious logical or empirical foundation. It's based on the idea that cutting taxes leads to increased government revenue, an idea that George H.W. Bush once rightly dismissed as "voodoo economics."
Sebastian Mallaby has a great op-ed in today's Washington Post on this subject. He notes that "nobody serious believes that tax cuts pays for themselves" but that "most senior Republicans flunk this test of seriousness." He then quotes most top Republican leaders (Bush, Cheney, Frist, Santorum) repeating this mindless mantra.
So what do the experts have to say? Mallaby writes:
Mallaby continues:
Should that really surprise anyone at this point? This is, after all, the GOP's approach to just about every major issue. It would be a shame to let inconvenient facts spoil a nice little theory or get in the way of a good campaign slogan.
As I've pointed out before, the modern GOP does not have a coherent governing philosophy. All it has is a collection of campaign-tested slogans that do not translate into any kind of sensible or sustainable economic policy. And sadly enough, these incoherent mantras are the glue that holds together a party that is otherwise badly fractured on issues of social policy, foreign policy, civil liberties, and immigration. What will happen when reality has its day and this free-lunch economics is exposed as the nonsense that it is? What will become of the GOP governing coalition?
In the Greek myth, Daedalus warns Icarus not to fly too close to the sun, for it will melt the wax that holds his wings together. With every tax cut, the GOP flies closer to the sun. It's only a matter of time before the wax melts, and the feathers that have helped the GOP ascend to power are scattered forever in the wind.
The Senate gave final approval yesterday to a five-year,
$70 billion tax package that would extend deep cuts to tax
rates on dividends and capital gains for two years, effectively
locking in all of President Bush's first-term tax cuts through
the end of the decade.
On a vote of 54 to 44, the Senate approved the sixth tax cut
in the past six years, handing the White House a much needed
victory and the embattled Republican Party an achievement
that members believe they can use to pull themselves out of
a political hole.
Indeed, tax cuts are pretty much the only domestic "accomplishment" the Bush administration can point to in its six years in office. It is the issue that has defined modern Republicanism and, not surprisingly, it is what the GOP plans to run on in 2006.
But here's the problem. GOP tax policy is based on an economic theory that has no serious logical or empirical foundation. It's based on the idea that cutting taxes leads to increased government revenue, an idea that George H.W. Bush once rightly dismissed as "voodoo economics."
Sebastian Mallaby has a great op-ed in today's Washington Post on this subject. He notes that "nobody serious believes that tax cuts pays for themselves" but that "most senior Republicans flunk this test of seriousness." He then quotes most top Republican leaders (Bush, Cheney, Frist, Santorum) repeating this mindless mantra.
So what do the experts have to say? Mallaby writes:
Okay, so let's review this issue with the help of some experts.
I'd like to cite Richard Kogan of the Center on Budget and
Policy Priorities, because his work inspired this column. But
to win over reasonable conservatives, I'm going to choose
N. Gregory Mankiw of Harvard, a proponent of tax cuts who
chaired the Council of Economic Advisers in the Bush White
House. Mankiw is a top-notch economist hired by Bush and
Cheney to advise them. And last year he published a paper on
how far tax cuts pay for themselves, reporting enthusiastically
that this self-financing effect is "surprisingly large."
How large, exactly? Mankiw reckons that over the long run
(the long run being generous to his argument), cuts on capital
taxes generate enough extra growth to pay for half of the lost
revenue. Hello, Mr. President, that means that the other half of
the lost revenue translates into bigger deficits. Mankiw also
calculates that the comparable figure for cuts in taxes on
wages is 17 percent. Yes, Mr. President, that means every
$1 trillion in tax cuts is going to add $830 billion to the national
debt.
Mallaby continues:
Hey, maybe they just overlooked that Mankiw paper?
Or maybe, despite hiring Mankiw to head the Council of
Economic Advisers, they later acquired reasons to doubt his
judgment? In that case they should at least have listened to
Douglas Holtz-Eakin, another conservative economist who
worked in the Bush White House and who went on to run the
Congressional Budget Office.
In a study published under Holtz-Eakin's direction last
December, the CBO estimated the extent to which a 10 percent
reduction in personal taxes might pay for itself. The conclusions
confirm that the free-lunch mantra is just plain wrong. On the
most optimistic assumptions it could muster, the CBO found
that tax cuts would stimulate enough economic growth to
replace 22 percent of lost revenue in the first five years and
32 percent in the second five. On pessimistic assumptions, the
growth effects of tax cuts did nothing to offset revenue loss.
So Mankiw isn't with them. Holtz-Eakin isn't with them. Which
raises a question: When top Republicans go around claiming
that tax cuts pay for themselves, which economic authorities
are they relying on? None, is the answer. These people's
approach to government is to make economics up.
Should that really surprise anyone at this point? This is, after all, the GOP's approach to just about every major issue. It would be a shame to let inconvenient facts spoil a nice little theory or get in the way of a good campaign slogan.
As I've pointed out before, the modern GOP does not have a coherent governing philosophy. All it has is a collection of campaign-tested slogans that do not translate into any kind of sensible or sustainable economic policy. And sadly enough, these incoherent mantras are the glue that holds together a party that is otherwise badly fractured on issues of social policy, foreign policy, civil liberties, and immigration. What will happen when reality has its day and this free-lunch economics is exposed as the nonsense that it is? What will become of the GOP governing coalition?
In the Greek myth, Daedalus warns Icarus not to fly too close to the sun, for it will melt the wax that holds his wings together. With every tax cut, the GOP flies closer to the sun. It's only a matter of time before the wax melts, and the feathers that have helped the GOP ascend to power are scattered forever in the wind.
posted by A.L. at 11:10 PM
7 Comments:
Y'know, I did pretty well in Business school, and I THINK it was there that I acquired my perception that tax cuts somehow drew out the money that was stuffed under matresses and whatnot, resulting in a net increase in tax revenue... Never really examined that assumption, though. Thanks for the links - I'll have to read the cites.
bamage,
It's not that tax cuts don't draw out money. They can and do, depending on the type of cut. But in order to "pay for themselves" they have to generate enough new revenue to make up for the lost revenue caused by the cut itself. And there's just no good empirical or logical reason to think that happens.
Clearly the optimum tax rate from a revenue generation standpoint is somewhere between 0% (which generates no revenue) and 100% (which stifles all productivity and spending). This the whole Laffer curve idea. But there is little evidence that we are currently above that optimum rate, especially considering we have historically low tax rates and among the lowest in the world.
I spent the weekend with an old friend of mine, and we went fishing. We have been friends for almost twenty years, and even though we took different paths in life (he remained employed in a grocery store and now works construction, I went on to get a PhD), we still are tight. For the purposes of this blurb, I will call him blue-collar, which is largely accurate.
However, and as is known by many, the BushCo brand of politics continues to sway blue-collar types, even though the policies actually hurt them greatly (e.g., tax cuts aren't going to them, minimum wage stagnation). For some reason the Bushes came up in conversation. My friend's mother said "I hate when people criticize Bush; that Barbara Bush is a wonderful woman---noone messes with my peeps," she said. Most of my friend's family assumes (and rightly so) that I'm a 'liberal.' But I never, ever soapbox or grandstand or try to engage in discussion, because when I had in the past I got the blank looks, the muttering about how 'they' are 'unAmerican.'
What I see is a swathe of America who has been (and continues to be) bamboozled by a system that most definitely does not have their best interests at heart, but knows that it needs them for votes, and yet continues to be successful in maintaining the belief amongst them that its policies most certainly have their best interests in mind. Of course these days one really has to be on one's toes to read between the lines of spin, accomplished by visiting sources (such as this site) that provide a decidedly different view of events, and through reading other media. The success of BushCo and those who think as they do is that they know that people such as my friend and his family do not, and will not (likely) ever seek to inform themselves outside of Fox News and similar outlets (and yes, that was the channel that they watched while I was there). I would wager that so many people who support BushCo are similar. They tell you what to fear, and who is to blame for it--a perpetual boogeyman that only they can best.
What does this mean for my friendship? I do not know. I would like to think that we could continue to meet up and go fishing, or do other things that we have enjoyed to do over the years. But it is becoming inreasingly toxic, going down to visit them. Through their news outlet, I have noted a palpable change in atmosphere when I visit--that I am 'one of them college liberals.' We certainly cannot talk politics--we argued the last time I tried (just before the Iraq war, in response to my friend's Saddam/Al Qaeda link comment). I just hope that we can get through this era in our nation's history, that we learn from it, and that we move to ensure that this kind of intra-national coldness between 'those who know' and 'those who choose not to know,' fostered and manipulated by a system whose power rests on these divisions, never happens again.
(sorry for the long post.)
Yeah their economic philosophy is perhaps the most disingenuous thing about American cons. Every time they implement it in any way they show that they couldn't care less about the well being of average Americans or the health of the nation in the long run. They care about one thing only - getting theirs. They fleece this country for all they can. When will the common man realize that they have been duped? Probably never.
The Republicans are so anxious to cut taxes for the rich that they're willing to raise taxes on the poor (the non-taxpaying class--those lucky duckies!) to make it more politically feasible to cut taxes for themselves. Yes you read that correctly.
No reason to apologize terraformer - it was a good post. I feel your pain. To be truthful though I have, within the past year, purposefully distanced myself from my con friends. I can no longer stomach them or their ignorance. Call it arrogance call it bitterness, call it what you will but I see them as evil now. I simply no longer want to associate myself with the willfully ignorant. I am polite if/when they call but I do not attempt to contact them. It is sad really but then it is a choice I can live with - one I actually feel good about as I have come to believe that cons in general are simply "people of the lie".
In the past I would have dismissed their nuttiness as inconsequential but these fools are the continuing enablers of those that are destroying our great nation. I have grown to despise them for it. They are no friends of mine and they are no friends of America. I am not one to hold a grudge but I do not think I can ever forgive them at this point.
You forgot another thing that holds repugs together, tight sphincters and santorum dripping out the rectum.
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