Amid all of the tributes to Ted Kennedy’s lengthy career of expanding the scope of government and its cost to taxpayers, CNN’s American Morning on Friday dug up a six-week old op-ed from the Tax Policy Center’s Len Burman warning that massive trillion-dollar deficits are a catastrophe that could lead to the end of the U.S. as a great power “or even a mediocre one.”
With the on-screen graphic reading “Higher Taxes Inevitable?” business correspondent Christine Romans announced to viewers “I’ve just got to tell you about this handwringing that's happening, and what it's going to mean for you. We're spending vastly more than we take in. We will for the foreseeable future. We're racking up these deficits, we pay interest on all of this debt.”
Co-anchor John Roberts noted how the House health care bill calls for higher taxes on the rich. Romans shot back that the tax experts “are saying that there's no way you can just raise taxes on the rich to fix all of our problems. It's got to be dramatic slashing in spending or much higher taxes down the road. ”
Romans also noted how ex-Clinton Labor Secretary Robert Reich has complained about “deficit hysteria,” declaring on his blog that this year’s $1.6 trillion deficit “strikes me as alarmingly small. I'd prefer the government run a larger deficit.” Substitute co-anchor Carol Costello, who normally offers liberal opinions, rolled her eyes. “Oh, come on,” she declared. “That's why people are really so angry at these, some of these, town hall meetings. It's because they're afraid we're going to put ourselves so deeply in debt we won't get out.”
Burman originally sounded the alarm about the consequences of the government’s out-of-control deficits in a July 14 op-ed in the Washington Times headlined “Catastrophic Budget Failure.” An excerpt:
Next year, our debt will exceed 60 percent of our total economic output, or gross domestic product (GDP). We would not meet the standards Poland and Estonia needed to qualify for admission into the European Union....With these massive deficits, rates will eventually rise to reflect the growing riskiness of government bonds. Berkeley economist David Romer has shown that investors may, overnight, go from being willing to lend to the government at low rates to being afraid to hold T-bills at any price. If this happens, the rise in rates could be extreme - not just a percentage point or two.
Can't happen? It was just a few months ago when exactly the same fate befell highly rated corporate bonds. Suppose the Treasury held an auction and nobody came?...
When the bubble bursts, two things could happen, both bad. One is that the U.S. defaults on its bonds. This would cripple financial institutions that are legally required to hold government securities and create a foreign policy fiasco since other governments hold so much of our debt.
Or, we could print money to pay back the bonds coming due. This creates inflation - a lot of inflation. Think Weimar Republic or Argentina. (CBO helpfully points out that hyperinflation is economically inefficient since it drives people to barter.)
At the same time, the government would have no choice but to slash spending and raise taxes. This, plus very high interest rates, would drive the U.S. and world economies into a depression that could span decades - dwarfing today's painful downturn.
Taxes would rise to levels that would make a Scandinavian revolt. And the government would not be able to provide anything but the most basic public services. We would no longer be a great power (or even a mediocre one), and the social safety net would evaporate.
Burman and his Tax Policy Center — a joint creation of two liberal think tanks, The Brookings Institution and Urban Institute — were a lot more popular with the media during last year’s presidential campaign. The Center’s data was frequently cited on the broadcast networks as validating Obama campaign claims their candidate would offer a bigger tax cut to average Americans.
Now that Burman is scolding an out-of-control Democratic government, a Nexis search of ABC, CBS and NBC finds no stories mentioning either the Tax Policy Center or Burman during the past three months.
Here’s a transcript of CNN’s August 28 story, which aired shortly before 8am ET and began with the playing of the Beetles' "Tax Man."
The bad news is your taxes are probably going higher -- maybe not today, maybe not tomorrow, it's not a news flash, but look, there's a real vigorous debate this week about this big budget deficit numbers we've been talking about for a week now -- 9 trillion dollars, hard to wrap your head around that.
But, I just wanted to -- I feel like I've just got to tell you about this handwringing that's happening and what it's going to mean for you. We're spending vastly more than we take in. We will for the foreseeable future. We're racking up these deficits, we pay interest on all of this debt. You know, think of it this way -- the more we use and we live on this credit card, the more it makes us beholden to our foreign creditors. If they get concerned about anything we're doing -- the size of our debt, our ability to pay it back -- they could demand higher interest rates, and they could, maybe, look someplace else to borrow money -- or to loan money. And, at that point, that's when it starts to get pretty ugly.
But, look, this is what people are saying. In the near term we really -- no one's saying we need to raise taxes today, no one's saying back away from some of the measures we've taken today to rescue the economy, but they're saying we have to have a much more frank and honest discussion about what we're going to do in the longer term.
CO-ANCHOR JOHN ROBERTS: Hang on, because in the health care bill they're saying raise taxes, raise taxes now.
ROMANS: On the rich. On the rich.
ROBERTS: But they're still saying raise taxes.
ROMANS: But these people are saying that there's no way you can just raise taxes on the rich to fix all of our problems, it's got to be dramatic slashing in spending or much higher taxes down the road. And this is something we keep pushing off -- 'well, it's not a problem right now.'
I will say, however, Robert Reich, the liberal economist who was in the Clinton adminstration, he wrote in his blog this week something I think was really interesting. He says deficits and debts mean just about nothing anyway, he says the only thing worth looking at in this concern about these deficits we're running is the $1.6 trillion number for our budget deficit this year. He says the only thing shocking about that is that it's too small. We need to be spending more.
CO-ANCHOR CAROL COSTELLO: Oh, come on.
ROMANS: That's what he says.
COSTELLO: I mean, that's why people are really so angry at these, some of these, town hall meetings. It's because they're afraid we're going to put ourselves so deeply in debt we won't get out.
ROBERTS: Have you got a "Romans' Numeral" for us today?
ROMANS: I do, it's 40%. The number is 40%. It's a way of putting this debt in perspective, for next year in particular. It's about borrowing. It is-
COSTELLO: I'm not good at pop quizzes.
ROBERTS: How much of every dollar goes to debt service?
ROMANS: Pretty close. Next year, of all the government revenue, 40% of the money we take in, we've borrowed. Think of that -- 40% of our revenue next year is projected to be borrowed money.
COSTELLO: That's why people are worried.
ROMANS: I know, and a lot of people can't get it, why we have to borrow money to get out of a problem caused by too much debt. You know, that starts to get a little--
ROBERTS, LAUGHING: It does....Thanks Christine, appreciate it.
