Comment & Debate
“A Real Debate on Taxes.” New York Times Editorial. August 23, 2010: “An honest debate needs to start with the numbers. The tax cut packages of 2001 and 2003 — heavily skewed to high earners — cut taxes by $1.65 trillion. In 2001, supporters argued that with the budget in surplus, the cuts were affordable. In 2003, they argued that the cuts would spur investment and growth and pay for themselves.
It has not turned out that way. Since 2002, the federal budget has been chronically short of revenue. According to calculations by the Center on Budget and Policy Priorities, if the tax cuts of the Bush years had never been enacted, publicly held debt at the end of 2009 would have been about $5.2 trillion, or 37 percent of gross domestic product. Instead, it was $7.5 trillion, or 53 percent of G.D.P. (it now stands at 60 percent).
The center estimates that if tax cuts and other current policies continue, debt would equal 90 percent of G.D.P. by 2020 — with 20 percent of that debt attributable to forgone revenue from extending the tax cuts. The truth is, the Bush tax cuts were not affordable when they were passed and they are not affordable now.”
“Our view on balancing the budget: To help control the deficit, let the Bush tax cuts expire.” USA Today Editorial. July 21, 2010: “The best approach, though the least likely, would be to put aside the political maneuvering and do what is in the nation’s long-term interest. That would be to let the tax cuts expire — first for the wealthy and more gradually for everyone else — then couple that move with large-scale spending cuts in a two-pronged attack on the deficit.
While that might seem a bit harsh, consider this: Nearly half of the nation’s households now pay no federal income tax at all, an unhealthy level that undermines the national sense that everyone is in this together. Taxes have been cut so much that federal receipts are less than 15% of the U.S. economy, the lowest level since Harry Truman was in the White House 60 years ago.
Some of this drop in revenue comes from tax cuts in recent economic stimulus bills. But the vast majority comes from the cuts of 2001 and 2003. At a 10-year cost of $2.3 trillion in lost revenue, their impact on the deficit has been greater than Obama’s stimulus, the war in Iraq and the 2003 Medicare drug benefit combined.
No less an authority than former Federal Reserve chairman Alan Greenspan, who gave a crucial endorsement in 2001 to the tax cuts, now says unequivocally that they should expire. “Unless we start to come to grips with this long-term outlook, we are going to have major problems,” he told Bloomberg News. “I think we misunderstand the momentum of this deficit going forward.”