Thanks to Decades of Conservative Spin, Americans Are Hopelessly Confused About Taxes, Spending and the Deficit

A few weeks back, Paul Krugman, a Nobel Prize-winning economist, felt compelled to take time out of what is presumably a busy schedule to explain that “taxes are, first and foremost, about paying for what the government buys.” That he felt compelled to do so is a sad reflection of the state of our economic discourse.

A good number of Americans are hopelessly confused about taxes, deficits and the debt. And it's no mystery why – conservatives have spent 30 years divorcing the taxes we pay from the services they finance. They've bent themselves into intellectual pretzels arguing that cutting taxes – on the wealthy – leads to more revenues in the coffers. They've invented narratives about taxes driving “producers” to sunnier climes, killing jobs by the bushel, and relentlessly spun the wholly false notion that we're facing “runaway spending” and are “taxed to death.”

And they've had great success. But they haven't done it alone – credit the media with an assist for muddying the waters around our fiscal situation. Consider a poll released this week by the highly respected Gallup organization. Their headline reads, “Americans Blame Wasteful Government Spending for Deficit.” Is that true? Well, here were the options – the only options – that respondents were offered:

Which do you think is more to blame for the federal budget deficit: Spending too much on government programs that are either not needed or wasteful, or not raising enough taxes to pay for needed programs? (Emphasis added.)

“Accordingly,” says Gallup, “Americans generally favor spending cuts rather than tax increases as the way for Congress to reduce the deficit going forward.” According to that distorted narrative – that false choice -- of course they do. I'm sure the results of a poll asking if people would prefer an ice cream sundae or a sharp stick in the eye would prove equally conclusive (not to mention bipartisan).

The problem is that after decades of anti-government rhetoric, there's very little in the way of “wasteful spending” left unless you look hard at the military budget, which neither party seems willing to do in any serious way.

We are, simply, under-taxed relative to the things we want the government to do. According to the Congressional Budget Office, the biggest driver of the projected deficits over the next ten years are not the wars in Afghanistan and Iraq or social safety net programs; it's the Bush tax cuts.

Last year, the revenues collected by the federal government were the lowest since 1950 (as a share of our overall economic activity). But it's important to understand that back then, we had no medicare program. The population was younger, and health care costs were a fraction of what they are today – in 1960, just before Medicare was established, we spent 5 percent of GDP on health-care; today, we spend about 17 percent.

As economist Dean Baker noted, if we spent the same per person on health-care as any one of the 35 countries with longer average life expectancies, our deficits would turn into surpluses in a few short years.

Offering health-care to children, seniors and the poor is anything but “not needed.” Is it wasteful? Health-care costs have skyrocketed for years in this country, but more slowly in the public sector than in the private.

While we're clearly under-taxed, the right's anti-tax crusaders have largely had their way shaping the discourse. About 7 in 10 Americans want the deficit to be addressed. Many believe that running a large, short-term deficit is hurting the economy when the opposite is true. We lost $14 trillion in wealth in the financial crash, and that – along with high unemployment and an ongoing foreclosure nightmare – has led to a huge drop in consumer demand. Public spending has, to a painfully inadequate degree, filled some of the gap.