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Conservatives Beware: The Boehner Plan Leads to Tax Increases

Posted By David S. Addington On July 25, 2011 @ 5:34 pm In Economics | Comments Disabled

Conservatives have a clear objective: Debt limit legislation should drive down federal spending on the way to a balanced budget, while preserving the ability to protect America, and without raising taxes.  The plan suggested by Speaker of the House John Boehner fails to meet that objective — indeed, it sets America up for tax hikes.

The Boehner plan has two steps.  The first step cuts spending by $1.2 trillion — but over ten years, and, as usual with these plans, the deep cuts come in the later years, which makes it less likely that they will ever occur.  Moreover, the cuts do not get under control the ever-growing spending in the entitlement programs that continuously drive up America’s debt.   In the first step, the American people get only a little bit of spending cuts now, but President Obama gets authority to borrow $1 trillion.  He gets $325 billion immediately and $675 billion upon making a later request, a request that automatically takes effect as long as the President keeps the support of the one-third of a House of Congress necessary to sustain a veto of a disapproval resolution, support he would have.  So, the first step of the plan has iffy cuts in spending, but guarantees big increases in borrowing.

The second step in the plan is a set of recommendations from a new dozen-member joint select committee of Congress.  The committee’s recommendations to Congress would not be subject to amendments and would get a straight up-or-down vote.  The plan directs the committee to propose reductions in the deficit by at least $1.8 trillion over 10 years.  The government runs a deficit when it spends more than it takes in from Americans as taxes, and the government has run deficits in most years for decades.  As always, there are two ways to reduce a bloated government’s deficit — the right way of cutting spending and the wrong way of hiking taxes.  While the second step of the Boehner plan may produce some useful spending cuts, the second step also allows the Committee to propose raising taxes as part of its unamendable, fast-track legislative package.  Thus, the second step greases the way for tax hikes.

Tax hikes in a weak economy slow economic growth and kill jobs.  As students of American history (or the movie “Ferris Bueller’s Day Off”) know, enactment of the tax hike known as the Smoot-Hawley Tariff Act during the Great Depression hurt the already weak economy and made unemployment worse.  Job-killing tax hikes in the current weak economy, as millions of Americans go without jobs and the unemployment hovers above 9 percent, will have a similar effect.  However good the intentions of the drafters of the Boehner plan may have been, the plan sets up America for higher taxes and fewer jobs.  Conservatives should continue to fight plans that either hike taxes now or set America up for tax hikes in the future.

For decades, Congress has promised on vote after vote we will really get spending under control “next time,” and, as all those “next times” went by with that same empty congressional promise, the public debt mounted.  The message of the 2010 election was clear — cut the size and spending of government now — and the voters who sent that message deserve better treatment from their government.

The House of Representatives took a step in the right direction last week when it passed the Cut, Cap and Balance Act by a vote of 234 to 190.  But the Boehner plan to retreat from the Cut, Cap, and Balance Act is a long step in the wrong direction.  The House Leadership should step back and recover its focus on the objective. The time to put America on the path to getting control of federal spending and borrowing on the way to a balanced budget, while preserving our ability to protect America, and without raising taxes, is now.


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