How Party of Budget Restraint Shifted to ‘No New Taxes,’ Ever

By BINYAMIN APPELBAUM, New York Times, Dec 23, 2012

WASHINGTON — On a Saturday afternoon in October 1990, Senator Pete V. Domenici turned from a conversation on the Senate floor, caught the eye of a clerk by raising his right hand and voted in favor of a huge and contentious bill to reduce federal deficits. Then he put his hand back into his pocket and returned to the conversation.

It was the end of an era, although no one knew it then. It was the last time any Congressional Republican has voted for higher income taxes.

The conservative revolt against that 1990 legislation — and against President George Bush, who violated his own “Read my lips” vow not to increase taxes — was a seminal moment for Republicans. The party of balanced budgets became the party that opposed tax increases.

When conservatives sank Speaker John A. Boehner’s plan last week to acquiesce on tax increases for the most affluent Americans as part of a potential broader deal with the Obama administration to avert tax increases for everyone else, several said that 1990 accord was a reason. They regard Mr. Bush’s broken promise as a major reason he was not re-elected, and they say the budget agreement proved that such compromises do not restrain the growth of government.

But the 1990 legislation also highlights a basic challenge now facing the party, which the chaos within the House caucus helped bring into public view on Thursday night.

Republicans continue to embrace the no-new-taxes stand as a centerpiece of the party’s identity, even in the face of public opinion that strongly supports tax increases on high incomes. And some Republicans fear that the party’s commitment to prevent tax increases more and more is coming at the expense of those other, older kinds of fiscal responsibility.

“Republicans used to be interested in not running continual rivers of red ink,” said former Representative William Frenzel, a Minnesota Republican who as the ranking member of the House Budget Committee in 1990 helped to negotiate the deficit deal. “If that meant raising taxes a little bit, we always raised taxes a little bit. But nowadays taxes are like leprosy and they can’t be used for anything, and so Republicans have denied themselves any bargaining power.”

The resulting debate has created perhaps the greatest test of the tax stand in the last two decades. Republicans who are willing to accept tax increases as part of a broader deal are pitted against a conservative wing, restocked by the Tea Party wave of 2010, that insists that opposition to tax increases is particularly important at times like these, when the temptation is greatest to avoid spending cuts by asking Americans for just a little more. Many in the antitax camp come from deeply conservative districts and were re-elected by wide margins.

They were not even swayed by Grover Norquist, the activist and arbiter of antitax orthodoxy, who has pushed politicians for the last 25 years to promise that they will not vote to raise taxes, a pledge a vast majority of Congressional Republicans have signed. Mr. Norquist said Mr. Boehner’s proposal was not a tax increase, but he could not convince the generation of politicians he helped create.

“We know that our big problem is too much spending,” Representative Louie Gohmert, Republican of Texas, said on Fox News last week, explaining his opposition to Mr. Boehner’s plan. “We know that President Reagan fell into the trap and President George H.W. Bush fell in the trap of ‘Here, just raise taxes on somebody, and we’ll come along with the cuts later.’”

The Republican Party’s embrace of tax cuts is often traced to the 1970s, when conservative thinkers began to argue that cuts were not just politically advantageous but also fiscally responsible. The economist Arthur Laffer advanced the theory that cuts could even be self-financing, because they could generate enough economic activity to increase revenue.

Others said that cutting taxes would force the government to cut spending too, an idea colorfully described as “starving the beast.”

But the movement did not truly take hold until the early 1990s. Some Congressional scholars argue that opposition to tax increases offered a new kind of ideological glue after the cold war. Others cite changes in the political landscape, including the rise of advocacy groups like Mr. Norquist’s Americans for Tax Reform, and the purification of Congressional districts through gerrymandering, which led House members to fear primaries more than general elections. And the electoral success of the political strategy — many voters are swayed by promises of a lower tax bill — became its own justification.

In the early 1980s, majorities of Congressional Republicans voted for a pair of deficit deals orchestrated by President Ronald Reagan, even though tax increases accounted for more than 80 percent of the projected reductions. But by 1987, a majority of Republicans opposed a third deal, even though only 37 percent of the reductions came from tax increases.

The 1990 battle echoed the present situation. The economy was struggling. Deficits were growing. Congress had enacted automatic spending cuts that it was racing to avoid. Republicans did not want to raise taxes. Democrats did not want to cut spending. Mr. Bush, convinced that the government needed to balance its books, reluctantly agreed to break his no-new-taxes pledge. Once again, less than 40 percent of the money came from tax increases. Once again, a majority of Republicans voted no.

By 1993, not a single Republican would vote for a deficit package drafted by the Clinton administration and Congressional Democrats that laid the groundwork for the first balanced budget since the late 1960s.

Instead, in 2001 and 2003, Republicans passed tax cuts that more than reversed the increases during the Clinton administration.

“When I entered politics, the frame of reference was a balanced budget as the principal conservative precept,” said former Representative James Leach, an Iowa Republican who served from 1977 to 2007. “Today, it’s the level of taxes.”

In order to maintain that commitment, Republicans need to develop a similar consensus about how to reduce federal spending. The federal budget, particularly spending on health care programs, is projected to grow rapidly as the country ages and as medical costs continue to rise, leaving Washington in need of more revenue.

The party’s conservative wing wants to circumscribe those benefit programs, despite their popularity among voters. The goal of balancing the federal budget has all but vanished, replaced by the idea that deficits should be reduced to sustainable levels.

The 1990 deal still won the support of 47 Republicans in the House and 19 Republicans in the Senate. Only 4 of those 66 are still in Congress, and Senator Richard G. Lugar of Indiana and Representative Jerry Lewis of California both will be gone at the end of the current session, leaving just two: Senator Thad Cochran of Mississippi and Representative Frank R. Wolf of Virginia.

Mr. Domenici, the New Mexico Republican who played a significant role in negotiating the 1990 deal, which he regarded as necessary to reduce federal deficits, left the Senate in 2009. But he has continued to advocate a similar approach as a co-chairman of a commission organized by the Bipartisan Policy Center that called for a mix of revenue increases and spending cuts to stabilize the federal debt.

He said he was frustrated by the reflexive opposition of conservatives to any kind of tax increase, but he added that Democrats had also shown little willingness to negotiate necessary cuts in spending on federal entitlement programs.

“There has been a hardening in the Democratic line, too,” he said. “There isn’t any Democrat in here that is going to help with these cuts.”

http://www.nytimes.com/2012/12/23/us/politics/how-party-of-budget-restraint-shifted-to-no-new-taxes-ever.html?nl=todaysheadlines&emc=edit_th_20121223

Some Better Targets for the People Who Hate Government

by Paul Buchheit, December 10, 2012 by Common Dreams

One of the pleasures of a weekend away from the city is visiting with people who express points of view that are different from my own. A lot of them hate government. Their comments are sprinkled with colorful references to taxes, waste, and socialism.

Countering with facts and statistics doesn’t seem to work. Instead, listening to their rants can be educational for a progressive, because the anti-government sentiment highlights the masterful job done by conservatives and the wealthy over the years, as they have basically convinced much of America to argue against themselves on matters of politics and the economy.

It would make more sense to take on the real villains.

1. Medical Providers

They’re taking a lot more of our money than Medicare does. According to the Council for Affordable Health Insurance, medical administrative costs as a percentage of claims are about three times higher for private insurance than for Medicare. The U.S. Institute of Medicine reports that the for-profit system wastes $750 billion a year on waste, fraud, and inefficiency. As a percent of GDP, we spend $1.2 trillion more than the OECD average.

That’s an amount equal to the entire deficit wasted on private medical care companies. One out of every six dollars we earn goes to doctors, hospitals, drug companies, and insurance companies. All good reasons to redirect our hatred.

2. Retirement Brokers

Various reports have concluded that administrative costs for 401(k) plans are much higher than those for Social Security — up to twenty times more.

It would be difficult to find, or even imagine, any short-term-profit-based private insurer that is fully funded for the next 25 years. Social Security is. It works for all retirees while private plans work for a limited number of investors.

3. Banks

Government is often blamed for local budget shortfalls, but cities and towns around the country have been repeatedly victimized by a “bid-rigging” process that diverts billions of dollars — a few thousand at a time — from numerous unsuspecting communities to the accounts of a few big banks.

Individual homeowners, especially minorities, have also been victimized by the banks. Because of the housing crash and the corresponding decrease in home values, black households lost over half of their median wealth, and Hispanic households almost two-thirds.

There are scandals and scams galore: the privately run Mortgage Electronic Registration System (MERS) headed up the illegal foreclosure business; the banking association LIBOR was guilty of interest rate manipulation; and plenty of financial institutions have engaged in the subtle art of imposing hidden fees. Credit cards are loaded with “gray charges” like surprise subscriptions and auto-renewals that cost the average consumer $356 a year.

Yet we’re forced to keep paying. Shockingly, it has been estimated that 40% of every dollar we spend on goods and services goes to banks as interest.

Public banks, on the other hand, focus on the needs of communities and small businesses rather than on investors. The most well-known example is the Bank of North Dakota (BND), which has successfully worked with local banks throughout the state, promoting business growth through loans that a larger bank might be reluctant to make, while managing to turn a profit every year for the past 40 years.

4. Higher Education Operators

Outside of the banking industry, there may not be a more egregious example of public abuse than the expropriation of higher education by profit-seekers who have subjected underemployed young people to years of student loan obligations. The collection of outstanding student debt is managed in good part by big banks like JP Morgan and Citigroup.

In most countries tuition remains free or nominal, but in America, as noted by Noam Chomsky, the belief that education strengthens a country is giving way to a philosophy of paying for your own educational benefits. Meanwhile, the “corporatization of universities” has led to a dramatic increase in administrators while relatively expensive programs like nursing, engineering and computer science are being cut.

But the easy loans keep accruing interest long after college ends. With a hint of foreboding, the Consumer Financial Protection Bureau and Department of Education reported that the student loan debacle has been fueled by the same forces that led to the subprime mortgage collapse.

5. Big Box and Fast Food Companies

Smaller government is promoted by the very companies that make record profits while forcing their employees to accept public assistance.

While McDonald’s enjoyed profits of 130 percent over the past four years, and Yum! Brands (Pizza Hut, Taco Bell and KFC) made 45 percent, and while the Walton family made $20 billion in one year, the median hourly wage for food service workers and Walmart employees is about $9 an hour. Many workers are stuck at the $7.25 minimum wage, which according to the National Employment Law Project is worth 30 percent less than in 1968.

Food service and big box store employees, among the fastest-growing job segments in the nation, are making barely enough to stay out of poverty. And it’s not just the employees who are subsidizing their bosses. We all are. Low-wage employees are more dependent on the food stamps and Medicaid that are paid for by our tax dollars.

Some Alternative Targets: Panic, Poison, Plowing, Postage, Prison

What is the incentive for private companies to deal with tragedies like Hurricane Sandy? The Pacific Standard aptly stated that “the free market doesn’t want to be in the flood business.”

What is the incentive for private companies to keep the poisons out of our drinking water? Without sufficient government regulations the Clean Water Act was violated a half-million times in one year.

What is the incentive for private companies to plow the county roads? Or to reduce the number of prisoners in profit-seeking prisons? Or to allow you to send a birthday card for just 45 cents? Or to simply treat its customers with respect rather than as a source of profit?

The “invisible hand” of the free market is unable, or unwilling, to satisfy the needs of society in all these areas. For that it is worthy of our contempt.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of “American Wars: Illusions and Realities” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

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Source URL: http://www.commondreams.org/view/2012/12/10