Politics & Policy

Republicans Still Haven’t Learned

No real tax cut, lots of deficit spending: You call that a deal?

‘If we’ve learned anything over the last two years, it’s that we cannot spend our way to prosperity.” That’s what Republican lawmakers proclaimed in their “Pledge to America,” the campaign document spelling out their agenda in the 2010 midterm election. They won a historic electoral victory, an endorsement from Americans who trusted them to act on the message: Stop spending money we don’t have, that we have to borrow from China, and that our children and their children will have to pay back. And before their new House majority has even been sworn in, Republicans have decided to give spending our way back to prosperity one more try.

In the process, they’ve increased the chance that the most free-spending, anti-prosperity president in American history will be reelected come 2012.

Had I taken the Republican pledge seriously (I didn’t), I’d be crushed. “Crushing,” by the way, is the word the pledge used to describe the national debt. That was before GOP lawmakers voted in overwhelming numbers (37 out of 42 in the Senate, 138 out of 174 in the House) to add about $858 billion to it on Thursday.

So much for the pledge’s inveighing against “trillion-dollar ‘stimulus’ spending.” Republicans have added hundreds of billions of dollars to the national debt — a debt that is already $14 trillion even by Washington math and closer to $130 trillion if we apply the math Washington imposes on everyone else.

Estimates of the exact amount of deficit spending in the tax deal vary: The Senate’s Joint Committee for Taxation officially put it at $858 billion, the figure reported by the Wall Street Journal. Charles Krauthammer contends that the combination of spending increases and tax cuts tops out at $990 billion. And (as Dr. Krauthammer notes) even Rep. Paul Ryan — the GOP’s reputed scourge of Big Government, except when voting for TARP, auto-company bailouts, and the confiscation of executive bonuses — concedes that the tax deal, which he strongly supported, includes a staggering $313 billion in spending add-ons beyond what was necessary to maintain the Bush tax rates.

Estimates all agree on one thing — the bill’s spending cuts to reduce the size and scope of government add up to zero, no matter who does the counting.

Even if you drink the Kool-Aid that says, “Don’t worry about the deficit effects of tax cuts because they invariably stimulate the economy and pay for themselves,” Republicans have just agreed to massive, unfunded spending, much of it unrelated to tax cuts. Not only do we have the familiar waste (ethanol, “renewable” energy, etc.), as Hugh Hewitt points out, “there is at least $75 billion in new spending in the plan, agreed to by the GOP less than five weeks after the country fairly screamed, ‘Stop Spending Our Children’s Money!’”

The GOP pledge blasted President Obama and Democratic leaders for breaking a solemn promise to “put the brakes on Washington’s spending habits,” and for instead “stepp[ing] on the accelerator and demonstrat[ing] unparalleled recklessness with taxpayer dollars.” Right.

The pledgers even patted themselves on the back for their underwhelming promise to roll back spending to 2008 levels and to save us “at least $100 billion in the first year alone.” Now, in a single bill just three months later, they have voted for spending that is more than eight times the amount of this (currently nonexistent) $100 billion in savings, and more than twice the size of the (nevertheless huge) 2008 budget deficit.

“But wait,” you say, “the GOP had to do this. There was no other way to save the Bush tax cuts, and that makes it okay, because tax cuts are stimulative. They actually raise revenue in the long run.” In this case, that is both wrong and irrelevant.

It is wrong because income taxes are not being cut — the deal stops Democrats from raising them — and because the lower rates are only kept in place for two years. After that, the increase that would have happened two weeks from now kicks in. Lower tax rates only spur economic growth in a meaningful way when they are permanent — meaning, when they will persist, absent an act of Congress that changes them. There has been no meaningful growth in the past two years because the specter of tax increases hovered over businesses and entrepreneurs, depressing investment and hiring. Why should the next two years be any different, with the same specter hovering — this time with even more trillions in debt to finance?

The “tax cuts raise more revenue” line is irrelevant, moreover, because even if revenue does increase, nothing in the bill stops our insatiable government from spending it. Debt gets reduced only if revenue is used to pay it down rather than fund new spending. And with Republicans now agreeing to add debt even though the government is already trillions in hock, and even though the voters have just finished demanding an end to this recklessness, why should anyone believe they are serious about retiring debt?

At most, lower taxes may spell a mild, temporary boost for the economy and a marginal, temporary decrease in unemployment. But with his media champions spinning every scintilla of good news as a full-blown, let-the-good-times-roll recovery, that could be just the bump President Obama needs for his reelection campaign.

Moreover, the president has set the GOP up for an annual whipping right around Christmas time. Next year, the temporary two-point cut in employee payroll taxes is scheduled to lapse, and he’ll be positioned to argue that it must either be extended or imposed on already overburdened employers. The following year, it will be time for another extension of unemployment payments. Does anyone really think the GOP will demand that these goodies be paid for with spending cuts? And while GOP dogma holds that tax cuts are the route to good government — at least if the beast is starved and revenue surpluses are used to pay down debt — Obama has ensured that actual tax cuts are a pipedream. All the oxygen will be spent on whether the Bush rates should be extended. It will be the last two years all over again.

The temporary nature of lower tax rates, besides suppressing any potential revenue windfall, is transparently designed to get Obama reelected. In that respect, it is just like the delay until after 2012 of the most onerous aspects of Obamacare. The deluge isn’t scheduled to hit until a second term has been safely won.

If that happens, there will be a big difference next time around. When we inch up to the midnight that rings in 2013, the most left-wing president in American history will no longer have a reelection to worry about. The next time the Bush tax rates are set to expire and corporate taxes are poised to soar, when accelerated business expensing is coming to an end and millions of Americans are suddenly “rich” enough to be shoved into the Alternative Minimum Tax, when the death tax is scheduled to climb to 55 percent and many more trillions of dollars are ready to be heaped onto the national debt, Barack Obama will have no incentive to clip his social-justice wings. He will be free to do what he came to do.

Democrats were more than happy to impose a sunset on the Bush tax cuts. That enabled them passively to let the cuts lapse (and blame Bush), rather than launch an accountable and deeply unpopular effort to raise rates. So, sure, the Democrats and the media would have tried to blame Republicans if the tax deal had been derailed, but they’ve been blaming Republicans for our increasingly dire straits for years now. No one is buying it. It’s gotten them nothing but plunging poll numbers and a midterm rout. The Republicans could have drawn from that the confidence to say no — no more plunging the nation deeper in debt. November proved that the GOP has a receptive audience for that message. Republicans could have made the case that the Obama Democrats owned the resulting tax increases and cratering economy. They could have squeezed Democrats for a better deal or stood content to set the table for 2012 by passing responsible laws and daring Obama to veto them.

Instead, Republicans have helped Obama take on the veneer of a centrist as he makes a big down payment on his reelection campaign, secure in the knowledge that his prospects have improved and that, if he wins, next time there will be no need to compromise. In the process, the new Republican leadership has harpooned the party’s fiscal-responsibility credentials before the reinforcements — who won by running on fiscal responsibility — could arrive and make their mark in the new Congress.

One more snippet from the pledge: “If our economy remains debt-driven, it will not be in a position to support a lasting economic recovery. Unfortunately, Washington Democrats refuse to listen to the American people and eliminate, restrain, or even budget for their out-of-control spending spree.”

It ain’t just Washington Democrats.

Andrew C. McCarthy, a senior fellow at the National Review Institute, is the author, most recently, of The Grand Jihad: How Islam and the Left Sabotage America.

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