09 March 2011

Fiscal conservatism vs. Grover Norqust

Politico highlights a burgeoning divide in the Republican Party between fiscal hawks and anti-tax zealots. The debate is framed as a battle between two conservative giants with otherwise unimpeachable fiscal credentials: Oklahoma Sen. Tom Coburn and Grover Norquist, head of Americans for Tax Reform.

In the story's second paragraph, Carrie Brown cuts to the chase:

Norquist says it’s simple: No new taxes means no new taxes. Under no circumstances should Congress raise new revenues to solve the problem, he says.

Coburn usually would agree. But when it comes to taming the $14 trillion debt — a challenge Coburn has called “a matter of national survival” — he won’t rule it out.

Later, Norquist argues that, "You can't [cut the deficit] with tax increases. The only time the deficit comes down is when you refuse to raise taxes and you rein in spending."

Norquist is completely wrong for two reasons.

First, the premise on which Norquist's argument is based is patently false. Marginal tax rates have been raised twice in the post-Reagan era -- in 1990, when George H.W. Bush infamously broke his "read my lips" pledge, and in 1993-94, shortly after Bill Clinton and a Democratic Congress took power -- and the deficit either flatlined or decreased. Whether coincidental or not, the federal budget was not only balanced several years later, but began running a surplus in 1999.

Of course, George W. Bush and a largely Republican Congress cut marginal tax rates in 2001 -- the last year the federal budget was in the black -- leading to abrupt and immediate budget deficits.

Again, whether these fiscal happenings were coincidental or not, Norquist's argument that slashing tax rates is the only way to balance the budget finds absolutely no support from recent history.

Second, Norquist's "starve the beast" argument -- the idea that Congress will spend less if it has less money in its coffers -- also completely fails as a matter of recent historical precedent. Despite the tax increases passed in 1993, domestic discretionary spending rose an average of less than 3 percent per year during the Clinton presidency. Despite the tax cuts passed by George W. Bush in 2001, domestic discretionary spending rose an average of nearly 10 percent annually during the Bush years -- more than three times the rate under Clinton. And lest conservatives think, that the wars in Afghanistan and Iraq contributed to this spike in spending, (i) the above-referenced numbers do not take into account military spending, which is not considered "discretionary" and (ii) even the Pentagon's budget numbers did not reflect the cost of Afghanistan and Iraq, because those wars were infamously put "off-budget" by the Bush administration -- the United States has been funded solely by "emergency supplementals."

Therefore, Norquist's argument that "starve the beast" policies work is simply unsupported by the facts. If he bothers to pick up a newspaper and read -- which I assume he does -- I genuinely don't understand how he can still make "starve the beast" arguments with a straight face. If he has been asleep since 1988, perhaps I understand where he's coming from. As it were, Norquist has led the anti-tax charge for two decades.

Grover Norquist and like-minded anti-tax zealots do a fundamental disservice to their country when they ignore the approaching fiscal calamity in an effort to score quick political points and popular acclaim for what is an inherently destructive tax policy.

No comments: