As media make their case to the American people that the Bush tax cuts should expire, one of the strategies being employed is to claim that Republicans are refusing to "pay for" their extension.
A perfect example of this tactic was seen on Sunday's "Meet the Press" when host David Gregory badgered House Minority Leader John Boehner (R-Oh.) on this subject for over three minutes.
After playing a clip from the previous week's program when former Federal Reserve chairman Alan Greenspan said that he's against tax cuts "with borrowed money," Gregory proceeded to hammer his guest on this issue (video follows with transcript and commentary):
DAVID GREGORY, HOST: It's interesting, you talk about the importance of cutting the debt, the importance of cutting government spending, and you worry about the Democrats raising taxes. The Bush--the Obama administration wants to extend the Bush tax cuts only for those who make less than $250,000, and he wants to let them expire for those wealthy Americans making more than that. You're opposed to that. You want to extend the tax cuts, and the Republican leadership does. But Alan Greenspan, who was on this program last week, chairman of the Federal Reserve, said that's the wrong idea. Here's what he said.
(Videotape, last Sunday)
DR. ALAN GREENSPAN: Look, I'm very much in favor of tax cuts, but not with borrowed money. And the problem that we've gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day that proves disastrous. And my view is I don't think we can play subtle policy here.
MR. GREGORY: You don't agree with Republican leaders who say tax cuts pay for themselves.
DR. GREENSPAN: They do not.
(End videotape)
MR. GREGORY: Leader Boehner, he puts it right to you.
REP. JOHN BOEHNER (R-OHIO): The only way we're going to get our economy going again and solve our budget problems is to get the economy moving, get more people back to work where they can care for their own families and begin to expand the tax rolls to bring more revenue to the federal government. And what we have to do is we have to get our arms around the spending spree that's going on in Washington, D.C.
Advertisement | ad infoMR. GREGORY: But Leader Boehner...
REP. BOEHNER: That's the only way we solve the budget problems.
MR. GREGORY: ...I'm sorry, you're--that--you're not, you're not being responsive to a specific point, which is how can you be for cutting the deficit and also cutting taxes, as well, when they're not paid for?
A few interesting issues are colliding here. First, extending existing tax code is not a tax cut. As such, why would this need to be "paid for" - meaning offset with spending cuts - as it is already part of the current budget and has been for years?
But maybe more importantly, the concept of cutting taxes is to give people their own money back so that they'll spend more and help the economy.
This is much like a store owner cutting prices to stimulate sales. If these cuts were "paid for," it wouldn't be much of a sale, would it?
Of course, the storeowner hopes that his price cuts will generate enough sales to make this strategy worthwhile.
As it pertains to fiscal policy, a government official's hope is that tax cuts will stimulate the economy enough to hopefully spark a surge of employment as well as result in higher tax revenues in the future.
Whether Gregory and his ilk want to admit it, that's exactly what the Bush tax cuts did.
Although the Gross Domestic Product was already beginning to tick up before the second of these cuts in 2003, unemployment remained troublesome as the economy was still shedding jobs each month. In fact, the Democrats and their media minions were pounding the President about a jobless recovery.
With this in mind, a second round of tax cuts was implemented.
Regardless of what Gregory and his economically-challenged colleagues believe, these cuts worked, for the GDP in 2004 rose by 3.6 percent - its best showing since 2000! - and unemployment in the next several years dropped from a 2003 high of 6.3 percent to a 2007 low of 4.4 percent.
In the years that followed this second round of tax cuts, employers added over 8 million workers to their payrolls.
As for the fiscal impact, tax receipts in 2003 were $1.782 trillion. This grew to $2.568 trillion by 2007, a 44 percent increase.
THAT'S how tax cuts really get "paid for," Mr. Gregory.
Of course, this isn't the only example of tax cuts "paying for" themselves.
In 1992 before Bill Clinton was inaugurated, the GDP grew by 3.4 percent, its best performance since 1989. Yet, after Clinton's 1993 tax hikes, the GDP only grew by 2.9 percent that year.
Most media members like Gregory conveniently forget that in 1997, the Republican controlled Congress forced Clinton to sign the Taxpayer Relief Act of 1997 which cut taxes.
This was when the economy really took off as the GDP grew by 4.4 percent in '97, 4.5 percent in '98, 4.8 percent in '99, and 4.1 percent in '00. During this period, employers added over 12 million workers to their payrolls!
As for budgetary impact, tax receipts in 1997 were $1.579 trillion. This grew to $2.025 trillion in 2000, a 28 percent increase.
Once again, tax cuts more than "paid for" themselves by stimulating the economy, creating jobs, and eventually resulting in higher tax revenues.
Of course, there is a great debate as to whether or not tax cuts result in dollar for dollar receipts in the future, but this seems somewhat irrelevant, especially during a recession.
Government's primary concern during periods of rising unemployment should be to get people back to work, and as the best method in the past three decades has been to cut taxes, whether they're "paid for" today with associated cuts in spending elsewhere seems somewhat moot.
This is particularly the case given this Congress's extraordinary spending record. Consider that in fiscal 2007 under the last budget created by Republicans, government outlays were $2.728 trillion. In 2010, this is projected to be $3.721 trillion, a 36 percent increase.
For some reason Gregory wasn't at all concerned with "paying for" this as he continued badgering Boehner about tax cuts:
REP. BOEHNER: Listen, you can't raise taxes in the middle of a weak economy without risking the double-dip in this recession. President Obama's favorite Republican economist, Mark Zandi, came out several weeks ago and made it clear that raising taxes at this point in, in the economy is a very bad idea.
MR. GREGORY: But do you agree that tax cuts cannot be paid for...
REP. BOEHNER: You cannot balance the budget without a...
MR. GREGORY: But tax cuts are not paid for, is that correct?
REP. BOEHNER: I am not for raising taxes on the American people in a soft economy.
MR. GREGORY: That's not the question, Leader Boehner. The question...
REP. BOEHNER: And the people that the president wants to tax...
MR. GREGORY: ...is, are tax cuts paid for or not?
Advertisement | ad infoREP. BOEHNER: Listen, what you're trying to do is get into this Washington game and their funny accounting over there. You cannot get the economy going again by raising taxes on those people who we expect to create jobs in America and to get the economy going again. If we want to solve the budget problem, we've got to have a healthy economy and we have to get our arms around the runaway spending that's going on in Washington, D.C.
MR. GREGORY: I just want to clarify this. I mean, if you--I'm relying on what Chairman Greenspan said. Maybe--if you're accusing him of funny Washington games. He says that tax cuts that aren't paid for are not--they are not cutting the deficit, that they are not actually paid for, it's borrowed money. And so do you believe tax cuts pay for themselves or not?
REP. BOEHNER: I do believe that we've got to get more money in the hands of small businesses and American families to get our economy going again, and the only way to get that economy going again is to do that and to get our arms around the spending.
Why is it liberals that never question how non-defense related government outlays will be funded are suddenly concerned about "paying for" tax cuts?
Deliciously ironic, dontcha think?
After all, it is OUR money.
On the other hand, let's assume Boehner took the bait, and offered Gregory a list of budget cuts to offset the supposed lack of revenues associated with extending the Bush tax cuts. Would this have placated the host?
Yes, that was a rhetorical question.
