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  • Super Committee Proposal: Tax Hikes Should Be a Nonstarter

    For months now the so-called super committee has been meeting in secret, tasked with delivering a budget-cutting (er… make that deficit-cutting) plan. Many have doubted they could actually reach their minimum target of $1.2 trillion in cuts. Few, if any, details had leaked—until today, when we learned that the Democrats are trying to break the logjam and “go large” by offering up a deficit reduction package approaching $3 trillion.

    So, score one for the Democrats for exceeding the minimum cuts? Not so fast. As the old saying goes, the devil is in the details. Nowhere could this be more true than in public policy. The size of any deficit-reduction package is just as important as the policies it contains. A larger deficit-reduction package, it seems, should be a good thing. But if it is filled with flawed and misguided policies that exacerbate the current flaws in government programs, it is worse than no proposal at all.

    The Democrats’ offering is yet another 50/50 package—half cuts, half tax hikes. Tax hikes of $1.5 trillion on American taxpayers, already suffering from persistent 9 percent unemployment.

    Next, we will read news outlets’ panicked cries: Why won’t Republicans sign on to such a scheme?

    A few budget facts are in order here:

    • By 2021, tax revenues will exceed their historical average of 18.4 percent of GDP—even if the Bush tax cuts were made permanent.
    • Spending in 2021 will reach 26.4 percent of GDP—higher than the historical average of 20 percent.
    • After 2021, spending will really take off, reaching nearly 35 percent of GDP by 2035 and fueled largely by entitlement spending. (Article continued below chart)

    Houston, we have a spending problem, not a tax problem.

    And, when taxes go up—or even when Washington lectures the nation about the “rich” and corporations paying their “fair share” or gratuitously promises to raise taxes to get more revenues—business, large and small, are just not that thrilled about it. That kind of talk makes them unwilling to take risks, buy new equipment, expand… and hire new employees. So any deficit-reduction plan that hikes taxes should be a nonstarter! Even talking about tax hikes chills economic activity and job creation.

    Oh, and that deficit-driven stimulus plan to create jobs? Proven failure. Democrats ought to strike that element (reportedly between $200 billion and $300 billion) from their plan.

    According to Politico, the Democrats are “including landmark changes impacting Medicare and Social Security,” yet the details that have been leaked reveal no such landmark changes. Instead, the usual suspects are being bandied about: increasing premiums for Medicare (a good idea) and more cuts to providers (hasn’t worked yet). As for Social Security, discussions are rumored to include changing the Consumer Price Index (a good idea as well, though it would result in tax hikes on that side of the budget ledger.) But these are hardly landmark changes.

    Also rumored are $100 billion in savings to the Medicaid program, but here too, there are no details.

    Truly landmark changes are required if Congress is to solve our spending and debt crisis. These must include bold, transformational changes to entitlement programs and a true growth agenda through revenue-neutral tax reform that underpins strong growth and job creation. And lastly, Congress must ensure that the federal government can deliver one of its few constitutional functions—defending the nation.

    For the real, bold solutions necessary to fix our spending and debt crisis, the Super Committee should look to Saving the American Dream.

    Posted in Featured [slideshow_deploy]

    8 Responses to Super Committee Proposal: Tax Hikes Should Be a Nonstarter

    1. steve h says:

      We most certainly have a tax problem. They are at historic lows. Right now you show then at 14.8% – that is insanity, espcially after GW and Repub congress passed Medicare Rx law (via reconcilliation) and put us into two wars overseas, costing us trillions. Any decent economist would know that when a recession hits, spending goes up and taxes go down (even after the rates have been reduced to historic lows).

      We need to let the Bush tax cuts expire at the end of next year. The conservative fiscal policy of cutting taxes and cutting spending has never worked well. We see decade after decade of making things worse.

      Deficit- Driven of stimulus spending was a failure? Then why did GDP go from 4 quarters of negative growth (-8.6% in 3rd quarter of 2008) and then shoot up after ARRA was passed. Why did job numbers go from losign 750,000 a month to adding over 200,000 a month after ARRA was passed.

      • Mike, Wichita Falls says:

        The President himself told us that raising taxes in a recession would harm any recovery, and letting the Bush tax cuts expire does as much, so let's see the recovery first.

      • Bobbie says:

        if taxes are at a historic low that would reflect strong governance, not disoriented leadership. The less government, the more freedom! Only people who are insecure or can't trust themselves would put trust in government over personal liberties, responsibilities and personal pursuits! the skies are suppose to be the limit for the people, not your lover government!

    2. Lloyd Scallan says:

      How much longer before we admit the "supercommittee" members were chosen specifically to NOT
      reach any agreement. When this pure farce was approved and the members were known, anyone with an IQ over 50 understood they were again being lied too and deceived. This entire matter was set up
      by Obama and the Dems to get exactly what they wanted in the first place. To reduce the budget of our
      Defense Department. And what did the gutless Repbs do, just stand their afraid to make waves by not
      agreeing to what we all recognize as for what it is.

    3. chatmadu002 says:

      I can't understand why everyone is calling for "compromise", when compromising has gotten us into our fix. Every spending measure for the last umpteen years has been through compromise. Compromise only leads to bigger and bigger government spending. Our choice now is between Big Government socialism or Small Government capitalism, there is no in-between.

      • Bobbie says:

        that's why compromise can't take place. we are now at a point of drastic measures and necessary actions thanks to years of compromise and hidden corruption within the control of government and behind the backs of Americans that has taken America off her track. keep this in mind, capitalism doesn't control us, government does! so less government and less their limitless expenses, enhances freedoms, OUR FREEDOMS! less government expense the more we have for OUR LIVELIHOODS and liberties etc… and socialism doesn't come with freedom.

    4. Jim says:

      "revenue-neutral tax reform"? How about, no.

      The most legitimate taxes are usage taxes, like a gasoline tax to pay for road maintenance, and an equally assigned head tax to pay for things that effect everyone more or less equally, like national defense. Of course, that would mean taxes have to be kept to an absolute minimum so that even the poorest can pay them without hardship. And that would necessarily mean a military only capable of national defense, rather than one capable of fighting a war in Iraq, Afghanistan, and Libya simultaneously, while still keeping 10,000 troops in the UK, 10,000 in Italy, 29,000 in South Korea, 33,000 in Japan, 54,000 in Germany, and who knows how many in the 150 or so other countries they're in presently, plus maintaining as many aircraft carriers as the rest of the world combined.

    5. rannan3 says:

      Show me some cuts to the many Govt. agencies — than I'll take them seriously.
      These agencies are TOO big, employ thousands TOO many, have numerous redundant
      off-shoot agencies, tasked to do the SAME things.
      DOE, EPA,HHS, NHS, NLRB, most of the 'alphabet agencies' need SERIOUS reform.
      SOME should be eliminated entirely.

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