10 Things Republicans Don't Want You to Know About the "Fiscal Cliff"
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Or as former Reagan Treasury official Bruce Bartlett explained it in the New York Times:
In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010. Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.
For their part, Republicans remain unencumbered by the truth. During the height of the 2011 debt ceiling crisis, Speaker Boehner insisted "Medicare, Medicaid - everything should be on the table, except raising taxes." Now with the approaching fiscal cliff, as ABC News reported, Boehner and his GOP allies want upper-income tax rates to come down:
The GOP deal would create $800 billion in new revenue through tax reform, but Boehner insisted that tax rates should not go up on the top 2 percent of taxpayers. Instead, the GOP wants lower tax rates after closing loopholes, limiting tax credits and capping deductions.
Of course, Boehner's plan won't work. One reason why is simple. Despite decades of Republican supply-side snake oil to the contrary, tax cuts don't generate enough economic growth to offset the loss of revenue the previously higher rates would have produced.
In his version of the Republican myth that " tax cuts pay for themselves," President Bush confidently proclaimed, "You cut taxes and the tax revenues increase." As it turned out, not so much.
This chart shows just how dire the tax revenue drought has become. For those Republicans who claim "tax cuts pay themselves," it's worth noting that federal revenue did not return to its pre-Bush tax cut level until 2006. (While this graph shows current dollars, the dynamic is unchanged measured in inflation-adjusted, constant 2005 dollars.)
As a share of American GDP, tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003. As the Center on Budget and Policy Priorities concluded, the Bush tax cuts accounted for half of the deficitsduring his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus-- combined.
As the Washington Post summed up the CBO's conclusions regarding the causes of the nation's mounting debt, "The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts." An analysis by the New York Times echoed that finding:
With President Obama and Republican leaders calling for cutting the budget by trillions over the next 10 years, it is worth asking how we got here -- from healthy surpluses at the end of the Clinton era, and the promise of future surpluses, to nine straight years of deficits, including the $1.3 trillion shortfall in 2010. The answer is largely the Bush-era tax cuts, war spending in Iraq and Afghanistan, and recessions.
But as Ezra Klein explained, the revealing charts above don't tell the full story of the impact of Bush-era policies on future debt facing Barack Obama:
What's also important, but not evident, on this chart is that Obama's major expenses were temporary -- the stimulus is over now -- while Bush's were, effectively, recurring. The Bush tax cuts didn't just lower revenue for 10 years. It's clear now that they lowered it indefinitely, which means this chart is understating their true cost. Similarly, the Medicare drug benefit is costing money on perpetuity, not just for two or three years. And Boehner, Ryan and others voted for these laws and, in some cases, helped to craft and pass them.
Nevertheless, as the Republican Party first waged its all-out attack in 2010 to preserve the Bush tax cuts for the wealthy, the GOP's number two man in the Senate provided the talking point to help sell the $70 billion annual giveaway to America's rich. "You should never," Arizona's Jon Kyl declared, "have to offset the cost of a deliberate decision to reduce tax rates on Americans." For his part, Senate Minority Leader Mitch McConnell rushed to defend Kyl's fuzzy math: