The Tea Party: Tax Cuts and Smaller Government, But More Red Ink
Treasury Secretary Tim Geithner, among others, thinks the tea party movement might help drive deficit reduction. I disagree. I don’t believe most tea party leaders or candidates are remotely interested in slowing the flow of federal red ink.
They are plainly interested in tax cuts—a core belief that appears repeatedly on Websites, position papers, and speeches throughout the movement. And while tea partiers say they favor smaller government, many in fact propose to shrink it in only trivial ways—by cutting earmarks or waste and abuse. Candidates elected on platforms supporting very large tax cuts and small spending reductions are likely to oppose aggressive efforts to reduce deficits, not back them. While some analysts see the tea partiers as the 21st century progeny of Ross Perot’s fiscal conservatism, nothing could be further from the truth.
Of course, it isn’t easy to sort out their views. The tea party is many organizations and individuals attracted to a loose ideology of conservative populism. They loathe taxes and President Obama with equal fervor, but otherwise agree on little. Yet, according to an April CBS News poll of self-described tea party supporters, nearly half say their main goal is to reduce the role of the federal government. Only 6 percent say it is to cut the deficit. And as tea party candidates begin to win Republican primaries the outlines of the movement’s agenda is coming clearer.
Two national organizations provide logistical and financial support to this faction: The Club for Growth and Freedom Works, the creation of former House GOP leader Dick Armey and others. Their goals are similar: low taxes, Social Security private accounts, free trade, and reduced government spending. The Club for Growth, whose Political Action Committee gets much of its funding from the financial world, would eliminate taxes on capital (an interesting view for a populist movement) and replace the current income tax with a flat tax. Deficit reduction, however, is of little interest to either organization.
It is the same with many tea party candidates. Pennsylvania GOP Senate nominee Pat Toomey opposes what he calls a “dangerous spending spree” in Washington and favors lower taxes on both income and capital. Reducing the deficit, however, gets barely a mention on his Website. Toomey, who once served as president of the Club for Growth, does remind voters, however, that he “never voted for a tax increase.”
Sharron Angle, a tea partier likely to win today’s GOP nomination to challenge Senate Democratic leader Harry Reid for his Nevada Senate seat, holds similar views. Angle says she’d abolish the Internal Revenue Code but doesn’t quite say how she’d finance government. While she’d repeal Obama’s health reform, including its insurance subsidies for people under 65, she’d protect current retirees from cuts in Medicare and praises the government-run insurance program for veterans and their families.
Her ambivalence on health care mirrors that of many rank-and-file tea party supporters. One-third are 65 and older and many would exempt Medicare from their vision of smaller government. This view makes deficit reduction a challenge at best, especially when paired with big tax cuts.
Rand Paul, the tea partier who won the GOP Senate nomination in Kentucky, is a rare candidate who seems to give equal weight to balancing the budget and cutting taxes.
But for the most part, these candidates and their tea party backers have been quite clear. Deficit reduction, as opposed to tax cuts, is far down their Hit Parade. To borrow a phrase, I knew Ross Perot and these people are no Ross Perot.
No they never will! The American people can take their country back and that wipes oit all debt. States can also break away since each state is like a country in itself.
It seems that all conservatives want smaller government except in those few agencies from which they personally benefit. I am sure that the Tea Party backed candidates are very aware that if they threaten YOUR benefits you will get upset and not vote for them. It is politically expedient to talk only of tax cuts to stimulate the economy and balancing the budget. While balancing the budget may in fact mean cuts to agencies, if they said it, they would have lost votes.
I think you don't understand the Tea Party rank and file, It is the debit and the increase in Government that we are against much more than favoring a tax cut.
It may be easier to marginalize us away by saying we are all for tax cuts and more debit, but, honestly I think you are mis-representing the majority of the Tea Party movement. I back this up by the fact that we are so active in the Republican primarys across the nation. Old guard cut taxes, spend and go into debit candidates are not in favor with the Tea Party.
I would not call cutting Government waste trivial. I think that there is much more than the liberals (and some “Conservatives”)want to admit.
We need full employment now, not a balanced budget. Consumer demand must be sustained or we'll lose jobs. Government debt is a long-term problem — people come first.
The Tea Party is led by corporate wizards hiding behind the curtain and has liittle to do with populist, grassroots America….just read about their response to the oil spill, an affront on America by a foreign corporation here> http://wp.me/pNmlT-f7
The Medicare HI fund must be self supporting, although it does get support from periums and the general fund as well. OASDI does not take money from the general fund except to the extent that it has loaned money to the general fund. These repayments must come from some form of non-OASDI tax. Obviously we could increase other taxes to do this – but the most likely tax to increase is personal income. Right now we are borrowing – however borrowing is simply creating an obligation for future personal income taxation. Benefit cuts to OASDI – such as means testing – may extend the life of OASDI and allow it to continue to subsidize spending – however that does not help repay the Social Security Trust Fund.
But neither Medicare nor OASDI is self supporting so the intent is irrelevant. Furthermore, since dollars are fungible, self-supporting is meaningless. Let's say instead that you prefer tax increases to means testing. That's your right but when you portray it as the “only” solution, you are being disingenuous.
As to the consensus on the program being broad based, this is an untested and arguably silly position. How many Federal programs are broad based? Almost none. How many are perpetuated year after year? Almost all. So the data would seem to deny any correlation between the breadth of the base of a program's recipients and its likelihood of being sustained. No rather, the broad base argument is just the first refuge of people who want to see more taxes as opposed to benefit reductions.
If you can provide an affirmative argument as to why people with little wealth should give money to people with a good bit more wealth, I'd be interested to hear it.
The Medicare and OASDI programs are meant to be self supporing. If this fiction is to be continued, then raising the income cap is the best way to keep OASDI solvent for the far future. There is no cap on hospital insurance – so to get more money for this fund, the rate must go up. Means testing is an interesting idea – however doing so will damage the consenus on the program being broad based. The closest thing to means testing OASDI is the taxation of benefits as income.
The repayment of the OASDI trust fund can only be done with general revenues – not cuts to the program or tax increases. It can occur with more debt or more taxation. Letting the Obama and Bush cuts expire might put a dent in the financial impact – however doing so at the lower income levels would decrease spending by consumers, which would not be good right now (raising the payroll tax would not be good now either – but will be necessary down the road).
Nice that you think that but the data doesn't support it. I've done the math. You can balance the budget pretty easily at Clinton level tax rates if you means test ALL transfer payments. The fact that you favor tax rates over the Clinton levels is simply an indication that you prefer raising taxes to controlling spending.
Why is raising the FICA tax a good idea for its own sake? Why raise the FICA tax as opposed to some other tax. I'll make you a bet. Offer the people affected the choice between raising the FICA tax and accepting a means test on SS benefits upon retirement. I'll bet you a lot of money the means test would win.
It's not the Bush (sic) cuts on the wealthy that need to be reversed but all of the Bush and Obama cuts.
The gloom and doom scenario is reality unless you believe that foreigners will continue to roll over their US government bonds and buy even more of them despite our ever-increasing debt to GDP ratio. When the government cannot sell its debt, the only way out is to default on the debt explicitly or to print money, triggering hyperinflation in fairly short order. Either of these will devastate the safety net.
All for Clinton tax rates, although I still think an increase is needed to cover aging seniors, who if sick will eventually run out of money. No one talks about the Medicaid problem, which is already means tested and which gives state budget offices fits.
Raising the cap on FICA and crediting employer contributions equally is also a good idea for its own sake and would allow some degree of privatization.
I agree that the gloom and doom scenario is overblown, as long as we let the Clinton cuts on the wealthy be reversed.
Michael,
With affection, I call BS. Means testing entitlement programs would save massive amounts of money without throwing people out on the street or forcing people to cut their lives short.
It is entirely possible to balance the budget with Clinton tax rates (the current law baseline), moderate cuts in defense ($100 billion or so), means testing entitlements and holding spending growth to the rate of inflation in all other areas.
I'm not sure why you refuse to see this except that you somehow believe the wealthy are undertaxed, despite the fact that, on a relative basis, their effective Federal tax rates have declined by less than any other segment of the population.
Without progressive taxation, the US would have to disarm and the debt would likely default. Welfare is a fraction of what you think it is, unless you are talking about weapons system procurement, veterans benefits or Social Security, Medicare and Medicaid to seniors in nursing homes. If you have aging parents or will have them sometime in the next 30 years, ending these programs mean that they will live with you and you will have to care for them and pay for all of their costs. This will also be true for your employees and coworkers. Good luck on having a productive economy when elder care is totally privatized. The answer is not cutting government, but to transfer the same functions to mandatory private funding. You will always have to pay for these costs – even in a system where everyone is totally responsible for their own costs – since anytime you buy something a portion of the money will eventually go to care for someone's elderly parent – either because the worker funds the parent or the company pays for the care of retirees. It is fantasy to think these costs will go away or that you can somehow avoid them (since without public funding, either employees or employers will include these costs in their price structures). Some form of public funding or requirement distributes these costs more equitably (freeing people with few siblings or living parents from excess costs and imposing a fair share of the burden on those from large families or dead parents).
Fiscal conservatives will never win this argument.
Social Security is easily resolvable by tax increases at the higher end. Medicare and Medicaid are trickier to deal with, as cuts on providers will be fought tooth and nail. There are only two ways to have an impact on these deficits. The first is to shift to single-payer catastrophic care, with Health Savings Accounts funded by employers (or the government for beneficiaries) and concurrent mandatory Flexible Spending Accounts funded by beneficiaries. This will reduce costs around the edges and may be a market mechanism to control payment rates. In the long, run, however, it won't control end of life care costs or long term nursing home costs. Unless you are willing to tell the children of aging baby boomers that they must care for their parents at home, the only answer is to increase revenue for their care through a broad based payroll tax increase or the shifting of this tax purden to a business income tax or a value added tax.
No other benefit programs have enough of an impact on the deficit to matter – unless you are willing to attract the ire of veterans during a war by cutting their benefits. That will never happen.
Peace or withdrawl may be the only other options. This would be fine with me, provided they are done in such a way as to stop future terror attacks.
I don't pay close attention to tea party activists, but their unifying theme is clear: Government spending needs to be cut. 100% of tea party people agree with that proposition.
Are some tea partiers ignorant about the basics of the fiscal hole we are it? Sure. Every political movement has its ignorant adherents. Some tea partiers want to repeat the Reagan tax cuts despite the fact that top rates are not at 50%+ today and the fiscal hole is much deeper now than it was then.
However the spending cut theme is much more prominent than tax cuts. If the spending is cut more than taxes are cut, the deficit will be reduced. QED.
What may be confusing Howard is the distinction between present and future tax rates. Advocates of spending cuts correctly fear huge tax increases that are inevitable in the absence of huge spending cuts. Opposing paying for promises that cannot be kept in any case could be creatively interpreted as advocating tax cuts relative to what otherwise would have to happen.
In other words, it's possible to play word games with the choice of baseline and call the lack of a huge tax increase a tax cut. If that's what Howard means, then I agree that the tea party people strongly favor tax cuts relative to the current law baseline and relative to the baseline of fully paying for all promised benefits. However I'm confident that the current law baseline is irrelevant to people outside the beltway.
If we want to have a productive discussion about this topic, we need to carefully distinguish between current vs. future tax rates. We also need to either avoid the term “tax cut” or fully describe the purported cuts relative to both 2010 rates and the (fantasy IMHO) current law baseline. Otherwise the discussion is merely in exercise in one-sided and therefore deceptive framing. There's enough of that on the Internet already, and the Tax Policy Center should remain consistently above partisanship.
Besides, all this debate will be moot once the government bond market crashes. Formerly unthinkable cuts will suddenly be unavoidable instead. Tax cuts will be completely out of the question. Stimulus (with printed money) will be a sick joke. And as I have said, progressives will rue their lost opportunity to compromise on much smaller benefit cuts before the crisis arrived.
I am not a 'tea-partier', but I do agree with less tax (actually, an overall of the tax code- progressive taxation needs to go away). Moreso, I want smaller government; aka, I want welfare reduced in a big way. No more free rides. Cut welfare programs, and we will save $10 trillion in the next 10 years.
I agree with your article- the problem is tax cuts are only one small part of the big picture. Cutting government on a grand scale is the only solution.
One more thing, the Toomey/Armey strategy is great for personal fundraising, which can buy a lot of astroturf. It need not result in changed policy. Indeed, successful policy change would be disasterous to their ability to raise money and run candidates.
This is a good summary of the thoughts of the people in the leadership. I just wonder if it reflects the rank and file (if there is such a thing – as it may be that the movement is entirely made up of activists). There may be quite a fear in the hustings about the deficit and that may be what the Secretary was referring to. Additionally, there are likely those who object to filling out tax forms more than paying taxes. They may yet support an expaneded business income tax and/or a Value Added Tax if it meant that the annual responsibility of filing went away – although the anti-taxers you mention hate such an idea since it allows for the efficient raising of money. Armey and Toomey want taxes to be onerous, not easy. If the public paid attention to this fact, they might not support the Tea Party so readily and instead support a less intrusive tax system.