• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Hoyer Makes, and Misses, His Mark

    Entitlements will Consume All Tax Revenue by 2052

    Over the past weekend Steny Hoyer (D-MD), the House Majority Leader, gave one of the most expansive and surprising speeches of the year.  State-of-the-Unionesque in scope and partisan tone it nevertheless laid out some interesting ideas for debate.

    On one top tier issue Mr. Hoyer hit the nail on the head when he said:

    More than ever, it’s possible to imagine a government with nothing left to spend on educating our children, on securing our borders, on conducting groundbreaking research. More than ever, it’s possible to imagine a government of, by, and for interest payments and entitlements.

    In response to this rapidly increasing federal spending Mr. Hoyer recommends raising the eligibility age and introducing more progressive Social Security and Medicare benefits. Both of these recommendations should be welcomed as positive steps toward fiscal sustainability.

    Mr. Hoyer would have done well to stop there.  Unfortunately, his comments on unsustainable entitlement spending were the lone policy rose along a stem of thorns:

    1) Congressman Hoyer (D-MD) says that not passing the $862 billion economic stimulus bill would “would have resulted, as economists now know, in millions more out of work.” Economists disagree. According to the latest survey of its members by the National Association of Business Economists:

    “The vast majority (73%) of respondents reported the fiscal stimulus enacted in February 2009 has had no impact on employment to date. While 68% also believe a jobs bill, such as the one recently enacted into law, will have no impact on payrolls, 30% do believe it will boost payrolls moderately.”

    2) Congressman Hoyer claimed: “Raising revenue is part of the deficit solution, too,” that middle class tax cuts should not be “totally sacrosanct.” This is a stunning admission by Mr. Hoyer that he favors breaking President Obama’s revised promise not to raise income taxes on the middle class.

    Hoyer’s stated preference reflects a vision that it is more important to preserve the massive increase in federal spending so far experienced under President Obama than that middle class should not fear higher taxes.  The simple fact is the explosion in the deficit in coming years is due to higher spending, not a shortage of tax revenues even if all the 2001/2003 tax cuts are extended.

    3) On a related point, Hoyer singles out the Heritage Foundation for criticism when he quotes Heritage (accurately) as saying “it is Congress’ out-of-control spending … which is causing major deficits”.  Hoyer observes “that kind of language makes for good attack ads – but it has little basis in reality”.  Citing out-of-control spending is perfectly in line with reality, as Congressional Budget Office projections for 2012 and beyond make abundantly clear.

    4) Hoyer praises PAYGO as an effective tool for fiscal discipline. Unfortunately, this does not give him any fiscal discipline bona fides: PAYGO budget rules exempt discretionary spending which comprises around a third of the total budget, they don’t apply to existing mandatory spending that he notes is a core problem, and if Congress so chooses they can and frequently do completely ignore it all together. PAYGO is an unworkable budget gimmick.

    5) When it comes to defense spending, Hoyer conveniently conflates two issues.  First he talks about the need to spend defense dollars wisely, with which all can surely agree.  He goes on to say that “any conversation about the deficit that leaves out defense spending is seriously flaws before it begins.”   The trouble is, under Obama’s budget, federal spending on defense is already slated to fall from 4.9 percent of our economy to 3.9 percent.  This reduction already threatens to undermine military modernization and reduce the military’s fighting capacity for decades to come.

    6)Congressman Hoyer correctly calls for “permanent solutions for the estate tax, AMT, and the ‘doc fix.” He fails, however, to suggest what those solutions might be.  Solutions are not that hard:  repeal the death tax and make both permanent the AMT patch and the docfix permanent.

    Where Hoyer finds the thorns, however, is in his preference that these solutions “be developed in the context of the broader budget agreement”. These issues are relatively straightforward and well-understood.  If a broader budget agreement of spending cuts can be crafted quickly, then such an approach would be acceptable.  As no such agreement appears anywhere on the horizon, Hoyer should use his position in the Democratic leadership to press Congress to pass on the package and pass the solutions.

    These are just some of the many partisan issues Hoyer develops in his speech.  Some are sure to rile his friends on the left, the far left, and the very far left, which no doubt necessitated his obligatory repetition of left-wing boilerplate and swipes at Heritage.  Even so, though a rocky one, perhaps the Hoyer speech can be the opening round of a more productive discussion.

    Steve Keen co-authored this post.

    Posted in Economics [slideshow_deploy]

    5 Responses to Hoyer Makes, and Misses, His Mark

    1. West Texan says:

      The sign on the fuselage of our aircraft should read "To Hell or Bust". I feel like a trapped passenger at over 30,000 feet with careless pilots intoxicated on power at the flight controls. Americans are to remain seated while the congressional leadership and Obama take us to the impact site.

    2. Laura, Asheville NC says:

      Why can't the Heritage Foundation support the FairTax? I heard Dan Mitchell say that he likes the FairTax better than the Flat Tax but that the Heritage Foundation supports the Flat Tax. By continuing to support a tax on the incomes of Americans, you lessen your effectiveness and lose the support of millions of FairTax supporters. We've already had a flat tax and look where it is now. Supportt the FairTax and see what happens.

    3. Pingback: » Financial News Update – 06/23/10 NoisyRoom.net: The Progressive Hunter

    4. Bryn says:

      Mr. Foster .. what are you thinking? Repeal of the Estate Tax, makes for very bad social sense. Please explain how eliminating a tax on only 1% of the population, and forgoing billions in drastically needed tax revenue can help our country. Most individuals that will incur an Estate tax are savy enough to complete the proper planning to reduce or eliminate exposure to their heirs. You've got to take off those selfish glasses and look around. The US has a 13 trillion dollar National Dept / 1.2 trillion annual deficiet / spending over 8 billion a month on 2 wars / Social Security in trouble / 50 million illegal aliens draining our entitlement programs / 50 trillion in unfunded entitlment program debt / 50% of population do not pay any income taxes / the most inefficient health care system on the planet / our elderly are eating cat food / 2 million mostly young minorities in prison / 9.2% unemployment / US ranks #36 in the world for infant mortality / only 50% of our high school seniors graduate / highest homocide rate in the world / the rich are getting richer, and the poor are getting poorer .. there is no such thing as trickle down. So please explain why we should borrow billions more annually. I think instead you should knock on your elderly neighbors door, and offer some help.

    5. Ken St Louis says:

      Hoyer hasn't moved toward the center, he's just spouting some left wing verbage that at first glance sounds like it. He still reverts to th e same old garbage. On the matter of social security, it s not and entitlement program to those of us who paid into it over 40 or 50 years!!!Thats our $ that got pi– ed away by these irresponsible left wing nut jobs, who probably couldn't balance their on check books!! Once again I say that the only fix left to us is to SECEDE ! It would please me immensely for Missouri to be the first State to announce plans to SECEDE !

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×