Thursday, December 6, 2012

'Raising Taxes Before Cutting Spending Is As Dumb As...'

President Bullwinkle and Speaker Rocky
You hear some funny things when you serve on a congressional committee.  Any congressional committee.

We were honored to work on the House Budget Committee, Republican side, from 1991-1994 when the GOP had about as much power in Congress as, well, the Democrats now have in the North Carolina state legislature where both houses have Republican veto-proof majorities and Republican Governor Pat McCrory starts work in the Governor's Mansion in about 4 weeks.

It has 'only' been about 140 years since that last happened back in 1872 when the Lincoln Republican Carpetbaggers ran the state after the Civil War. No, that is not a typo. It was not 1972 but 100 years earlier in 1872 since that last happened in North Carolina.

This current impasse over the 'fiscal cliff' brings to mind some of the great lines we used to hear in the Budget Committee about the folly of raising taxes before seriously addressing the reduction of spending in many (all) of the existing federal programs.

  1. 'Raising taxes before cutting spending is as dumb as eating more Twinkies, Ho-Hos and Ding-Dongs when you want to get skinny!'
  2. 'Raising taxes before cutting spending is as dumb as drinking more booze to get sober!
  3. 'Raising taxes before cutting spending is as dumb as smoking crack cocaine to get off your addiction!'

From our buddy Jim Dornan, distant cousin to former Congressman Bob 'B-1' (he loved the B-1 Bomber) Dornan of California:
'The White House saying they are 'saving money' from defense when everyone knows the wars in Iraq and Afghanistan are already winding down is like a college student telling his parents he is 'saving' them a year's worth of tuition because he is graduating in 'only' 4 years instead of 5!'
Who says fiscally responsible budget tightwads don't have a sense of humor?

You gotta believe that there is some slack in every single program, except the payment of the net interest on our burgeoning national debt, that can be ferreted out and cut if Congress and the President would work together to get this done first, don't you agree?

Many of the comments we heard were said behind closed doors in the Republican meeting room behind the committee room.  Some were not for repetition in polite society.

But many were said out loud and in public by various brave members of that intrepid minority of fiscal hawks at the time which included (hold onto your hats for some of these cause you might not believe it):  Then-Republican Leader and later-Budget Chairman and now-Governor John Kasich of Ohio, Alex McMillan (NC), Olympia Snowe (Maine), Dave Hobson (OH), Jim Kolbe (AZ), Jim Bunning (KY) and so on down the line.

Believe it or not, they comprised the Band of Brothers (and Sister) which produced a spending reduction proposal of $500 billion over 5 years right on the money in 1993, all spending restraint, no tax hikes.  'Cutting Spending First' eventually became the core of the 1997 Balanced Budget Act signed into law by President Bill Clinton after Erskine Bowles negotiated with the GOP Congress and the likes of Newt Gingrich, Dick Armey and Tom DeLay...without one stitch of higher taxes anywhere to be found in the document.

See?  It can be done.  Even on a bi-partisan basis. If everyone in the White House and the leadership in both the House and Senate wants to do it, that is.

We don't think the Obama White House or the Democratic Senate 'wants to' reduce spending at all. They want to raise taxes, especially 'on the rich' as fully evidenced by Treasury Secretary Timothy Geithner yesterday on CNBC when he almost 'gleefully' said:

'The White House is willing to go over the cliff unless we get higher tax rates on the wealthy'.

How is that any better than the GOP if they say they are willing to go over the cliff 'if we don't keep tax rates the same as they are today?'

The Republicans have already signaled they would accept some limitations on tax deductions at the high end of the income scale that will yield as much revenue as President Obama said in the past he wanted to raise.  Yet, there is no solid proposal on the table from the White House or Senate Democrats on what specifically they would accept as reductions in spending in entitlements in return for these revenue concessions.

Negotiating with this White House is like negotiating with a will-o'-the-wisp that beckons travelers to leave the path of safe travels and enter the world of the unknown.

We think the Republicans under Speaker John Boehner have actually come about as far as they can by proposing the limitations on deductions which will raise about $800 billion over 10 years in additional tax revenue as part of their deficit-reduction proposal. This amounts to about $60 billion per year in year one and scales up over the next decade.

There are close to $1 TRILLION in lost revenues to the US Treasury, ladies and gentlemen, each and every year due to the convoluted, byzantine, sclerotic income tax system that shelters income from taxation known as 'tax expenditures' we now have in place.  $60 billion out of $1 trillion represents 6% of the annual amount of lost tax revenues due to excessive tax shelters.

If you are a 'more tax' advocate, if this is not another great reason to can the entire income and payroll tax system in America and move to a simple consumption tax, we don't know what other 'proof' we can show you. Moving to a pure consumption tax would expose far greater avenues to generate the tax revenue we need to keep our country safe and provide a sound social safety net.  Oh, and yeah, pay down this massive debt we have allowed to accumulate, especially over these past 12 years under both parties in Congress and the White House and frighteningly so in these last 4 years under President Obama.

Now, if we could just stick to the 4-to-1 spending cut (that people can see, touch and make sure are in effect right off the bat in Year 1, not Year 1000) to enhanced revenue ratios typical of most other budget deals which includes reductions in entitlements, we can get this fiscal cliff solved and move on.  Today.

Former Congressman McMillan, whom I worked for in Congress, introduced $177 billion in federal health care spending reductions/reforms in 1993 for the Republican Budget Alternative...and lived to talk about it.

Republican Fearless Leader Kasich almost had a coronary when we showed the committee these $177 billion in Medicare/Medicaid reductions over 5 years (not the 10-year time frame now used) which constituted over 35% of the entire savings of the Republican Alternative at the beginning.

'We can't do that!' other Republicans almost screamed in the ante-room of the Budget Committee.

'We have to do that!' Congressman McMillan almost screamed back at them. 'Where do you think the savings of that magnitude will come from, the elimination of the blind albino squirrel research program at Frostbite Falls University?'

Indeed.  We are not in Frostbite Falls anymore, Rocky.

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