Thursday, February 17, 2011
In politics, simple phrases can hide complex agendas. The budget debate offers the perfect stage for mouthing "home truths" that are not quite true. Let's air a few examples.
-- Big government, not the Bush tax cuts, created the deficits. Yes, higher spending -- including the wars plus a deep recession -- helped fuel the deficits, but so did the schemes to lighten rich people's tax burdens.
The Bush tax cuts were scheduled to expire on Jan. 1. Had Congress let that happen, projected deficits for the next 10 years would be $3.3 trillion lower than they are, according to the Congressional Budget Office.
That's a good chunk of change. President Obama's new budget plan, despite deep slashes in spending, is projected to add $7.2 trillion to the national debt through 2021.
Congress extended the Bush tax cuts for two years. But after that time is up, lawmakers can fix much of the deficit problem by doing nothing -- that is, sitting back and letting the Bush tax cuts go poof.
But aren't these tax cuts necessary for long-term economic growth? Hardly. Economists have found "virtually no evidence in support of the Bush tax cuts as an economic elixir," writes former Reagan Treasury official Bruce Bartlett. And, he concludes, "no one should delude themselves that continuing tax cuts that did nothing for growth over the last 10 years will do anything to stimulate growth in the future."
-- Social Security is now driving up deficits. Ohio Republican Sen. Rob Portman said that on "PBS NewsHour," noting, "This year, Social Security will pay out more than it brings in."
True ... but. Like others intent on privatizing the program, Portman ignores the Social Security Trust Fund. For more than a quarter century, American workers have been paying extra taxes into the fund to cover this very situation. The fund's assets are invested in U.S. Treasury securities.
Portman's claim is like parents saying that when they tap their college savings account to pay tuition that they couldn't afford with that year's earnings, they are spending money they don't have.
Portman then argues that, anyhow, the Social Security Trust Fund is empty. "For years," he says, "the Social Security trust fund has been used for everyday government spending."
Well, that is true of all the money that the U.S. government borrows -- which it does by selling Treasury securities to investors across the globe. If the U.S. government defaulted on these bonds, the world economy would rapidly collapse into a pile of smoking ashes.
Is Portman suggesting that the U.S. Treasury must honor its debt obligations to the Chinese government but can stiff the American workers who loaned it money through the Social Security Trust Fund? I think he is.
I know the accounting is screwy, but for purposes of determining the financial health of Social Security, our politicians should just tack the money the Treasury owes the trust fund onto the money it owes everyone else.
-- You can't tax your way to prosperity. How many times have you heard that? And how appealing to those who don't like paying taxes, which is about everybody.
Listen to Rep. Paul Ryan's reaction to Obama's budget plan: "You really can't borrow and spend and tax your way to prosperity, but unfortunately, that is exactly what this budget does."
It must have slipped the Wisconsin Republican's mind that in 2003, he voted for the famously reckless $1 trillion Medicare drug benefit, every penny of the cost borrowed. As chairman of the House Budget Committee, Ryan surely knows that one way to avoid borrowing is to pay for things the old-fashioned way, with taxes.
Now that's simplicity we can believe in.
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