Taking a long look at the Tea Party Math
Published 10:10 am Friday, July 9, 2010
The Tea Party Movement has, as its central issue, a desire to see taxes reduced. The acronym is often referred to as “Taxed Enough Already.”
An admirable goal that every American would like, and a cornerstone of Republican politics for the past few decades.
Already Republicans are preparing to fight Democratic efforts next year to eliminate the temporary tax cuts from the Bush years on the top 5 percent of earners in the U.S.
And Democrats are preparing for the fight by suggesting they may ignore President Obama’s direction to only allow the tax cuts to expire on incomes over $250,000.
Republicans and the Tea Party proponents argue that our taxes are too high already and if the tax cuts are not extended on all income earners the tax burden might slow down the already unsteady recovery.
Their arguments generally follow the theme that what needs to happen is spending cuts, not tax increases, and by this method our economic recovery will be truly stimulated and lasting.
The problem with the argument however is that is simply will not work if reducing the deficit and balancing the budget are also goals of good financial management at the federal level.
First, while the nation remains in deficit spending any tax cut is paid for by debt. Does it actually make sense to lower the taxes on the richest Americans and pay for it by future debt?
In the Great Recession the world’s richest individuals actually increased their wealth by 18% according to the most recent Merrill Lynch-Capgemini world wealth report.
And the largest percentage of the richest are Americans. Should the country take on further debt to increase their wealth?
Second, in the federal budget, discretionary spending accounts for only about 12 percent of the $3.8 trillion dollar budget.
This portion of the budget funds most federal agencies, like the EPA, National Forest Services, the Department of Agriculture and all federal regulatory functions.
If all federal agencies were closed, including the U.S. Treasury, the budget could still not be balanced by spending cuts alone.
So to cut spending enough, the country would have to reduce mandatory spending.
Medicare and Medicaid and other government health insurance programs, including the Veterans Administration Hospitals now insure over 50 percent of Americans.
Those programs would have to be reduced or eliminated to balance the federal budget with spending cuts alone.
Social Security, paid for by citizen funding, would have to be reduced to lower retirement levels of payment.
And of course, the new health insurance program passed in 2009, which has a projected start-up cost of $1 trillion would have to be eliminated.
If this all sounds attractive to you, then the Tea Party represents your interest.
If this is not reflective of your preferences for American life, then consider saving over $1 trillion dollars by ending the tax cuts for the richest Americans.
Consider ending $39 billion in future oil company tax breaks and consider the $90 billion dollars in new taxes on banking planned, and the $24 billion to come into the treasury by raising investment manager taxes from their current 10 percent.
Consider saving $61 billion from eliminating banks from managing student loans, and consider saving $19 billion by the proposed Cap and Trade program for environmental responsibility.
Finally, consider that our military spending is totally out of control, with the U.S. spending almost as much annually as the rest of the planet combined.
The debt and deficit cannot be eliminated by spending cuts alone, but only by spending cuts and selective tax increases.
Try to find a single Republican or Tea Party supporter who will acknowledge that inconvenient truth.
Jim Crawford is a contributing columnist for The Tribune and a former educator at Ohio University Southern.