The Supercommittee Succeeds in Preventing Deficit Reduction without Raising Taxes

Posted by PITHOCRATES - November 27th, 2011

Week in Review

The supercommittee failed.  Deadlocked over higher taxes.  What a surprise.  And by surprise I mean it’s what everyone expected.  Because it never had anything to do with deficit reduction.  It was just yet another opportunity for Democrats to raise taxes.  And when they failed it was yet another opportunity to blame Republican intransigence.  While all the time refusing to budge from their demand for new taxes (see Supercommittee Failed, and Spending Is Still the Problem by Curtis Dubay posted 11/25/2011 on The Foundry).

Overspending, especially on entitlements such as Social Security, Medicare and Medicaid, is the cause of our debt problem.

Higher taxes are unnecessary because there is enough revenue flowing into Washington as long as Congress holds spending to historical levels. According to the Congressional Budget Office (CBO), with all current tax policies, including the Bush tax cuts, tax revenue will surpass its historical average as a share of the economy in a decade. And should the economy break the shackles of growth-impeding Obama policies faster than CBO anticipates, tax revenues will exceed that mark much sooner.

On the other hand, in 2021 the federal government will spend 26 percent of the economy, well in excess of its historical average of 20 percent. And it will keep growing on this trajectory, primarily because of the growth in entitlements. The data is clear. We have a spending problem – not a taxing problem.

They’re forecasting tax revenue at record amounts.  Yet it’s not enough.  It’s never enough.  Why?  Because the government spends it faster than they can collect it.  And that’s the problem.

Advocates of raising taxes often resort to the argument that debt reduction requires spending cuts and tax increases. But they’re merely revealing their preference for bigger government. Higher taxes lead to bigger government because Congress always spends the extra revenue it raises. The new taxes never go to deficit reduction. That’s why any deal that offers spending cuts in exchange for tax hikes is fundamentally unbalanced – despite the president’s claims.

Higher taxes would go to pay for the spending increases that President Obama and his allies foisted upon the country – including stimulus spending, Obamacare, and a host of other big government programs. Unless they’re reformed, entitlement programs would also devour new tax revenue as more baby boomers retire.

Presidents Reagan and George H.W. Bush learned the tax-and-spend lesson the hard way. They agreed to deals that were supposed to cut spending and raise taxes. While the tax hikes became permanent law, succeeding Congresses were under no obligation to abide by the agreed-upon spending levels and quickly undid them. The same would be true today if Congress strikes a similar deal.

How to you get a deficit?  By spending more than you collect in taxes.  Note the word ‘spending’.  That’s key.  Because if you don’t spend more than you collect in taxes you don’t have deficits.  Record lows in tax revenue didn’t cause Barack Obama’s record deficits.  Record government spending caused those record deficits.  Again, spending is key.  Because you have to overspend to get a deficit.

This isn’t chicken and egg stuff.  Spending clearly came first.  Then deficits.  So the logical and rational way to deficit reduction is to cut spending.  Not to raise taxes.  Because raising taxes just supports further overspending.  And you know they will.  Because they always do.  Because you don’t buy votes with deficit reduction.  You buy votes with spending.

Which is why the supercommittee failed.  Because it was supposed to fail.  If the full House couldn’t agree to spending cuts neither could a supercommittee.  Because they all report to the same leadership.  This was just theater to raise the debt ceiling.  And a delaying tactic by the Democrats who hoped they could turn public opinion into favoring tax hikes.

So now what?  I’m guessing more lies.  And more theater.  At least until 2012.  When the curtain finally falls on this tragic comedy.

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