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Looking Over the Fiscal Cliff

Tax Receipts 1952-2012

Congress returns to Washington DC today – but “fiscal cliff” negotiations aren’t expected to resume until next week.

The delay may allow Congressional GOP leaders to bring a different position to the bargaining table.

Immediately following Election Day, GOP leadership seemed stuck in their “no new taxes” campaign rhetoric.

Since then, several prominent Republicans have questioned the wisdom of sticking with Grover Norquist’s infamous “pledge”.

Over the decades, Norquist’s “pledge” has not been a fiscally-conservative position.  It works like a ratchet wrench: things can only go in one direction; taxes can only go down.  And taxes have gone down – considerably – since Norquist started agitating.

Right now, the federal tax burden – tax revenues as a percentage of the economy – is at one of the lowest points in modern history.

Much of the decline was caused by cuts to corporate taxes.

Next week’s “fiscal cliff” negotiations need to be framed by this reality.  Particularly in a down economy, Congress can’t just cut its way to a balanced federal budget.  (They have tried that in Europe; it’s not solving anything.)

America’s working families know that you can’t balance the budget if revenues keep declining.  We’ve tried to keep our own books balanced despite declining wages.  Too many families have ended up doing just what the federal government has done: borrow money to make ends meet.  And that doesn’t work out very well, over the long term.

As the “fiscal cliff” negotiations continue, keep an eye on your Social Security and Medicare benefits.  It’s just like what happened with the NH Retirement System: the politicians want to cut our benefits, after we spent decades paying into the system.

Right now, even the politicians who are forswearing Norquist’s “pledge” are insisting on “entitlement reforms” in exchange for “new revenue”.  But that’s a false choice.  They are simply trading one way of ratcheting-down taxes for another.

Returning tax revenues to their previous (pre-Norquist) levels would go a long, long way toward solving our country’s debt crisis.

 

[Tax revenues shown above do not include Social Security, Medicare or other retirement program revenues.  Data is from Table 2.3 of http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf.]

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