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Entries Tagged as 'tax cuts'

The Republican Supercommittee Offer

David Frum November 18th, 2011 at 11:00 am 70 Comments

Question for the supercommittee:

Suppose the real purpose of this exercise is to frame the choice for 2012. Dems are offering the country a path to budget balance that relies heavily on tax increases. Republicans are offering a path that relies more heavily on spending cuts.

OK, got it.

If that’s the goal, shouldn’t the Republicans be seeking to make their version of the choice as appealing as possible to as many people as possible?

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The Alternative to Rick Perry: Trickle Up

October 26th, 2011 at 8:05 am 53 Comments

Perhaps the greatest single threat to both conservatism in American life and the nation’s economic vitality is not Ivy League professors or Hollywood elites or a sinister “progressive” conspiracy but the economic decline of the middle class. Take away hope in the churning of the free market, and you push many citizens considerably closer to the state as a provider.

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WSJ on Debt Crisis: Reject Reality

David Frum July 28th, 2011 at 10:37 am 115 Comments

I used to write editorials for the Wall Street Journal myself, 20 years ago now.

So I’m well aware of the challenge faced by those assigned to compose these documents. The strict demands of the paper’s ideology do not always lie smoothly over the rocky outcroppings of reality. It can take considerable skill to match the two together.

In that regard, this morning’s lead editorial about the debt-ceiling crisis is a true masterpiece.

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What to Watch in the Debt Negotiations

July 7th, 2011 at 1:06 pm 4 Comments

While we await the news from today’s debt ceiling negotiations between Republicans and Democratic leaders, help news outlets are already leaking and reporting on the possible contours of a deal. But which reporting is actually likely to be part of a deal and how much is smoke and mirrors? What developments would be unexpected if they become part of a final deal?


1. Medicare and Social Security are on the table.

Plausibility: Plausible, salve but what about Medicaid cuts?

Senate Majority Whip Dick Durbin has given reporters a broad outline of a deal: $1 trillion in revenue raising by closing tax loopholes, discount with the Democrats conceding cuts to Social Security and Medicare. This deal certainly looks like it could be a “Grand Bargain”.

But curiously, Durbin did not mention cuts to Medicaid. Earlier reporting had suggested that Medicaid cuts were a large part of the negotiations. Medicaid was always the more vulnerable program because the constituency that depends on it (the poor) carries less clout then the constituency that depends on Medicare (the elderly).

If Medicare cuts, and not just Medicaid cuts, are on the table, then it would be politically courageous for politicians to support them.


2. Republicans will accept revenue increase without tax cuts to offset new revenue.

Plausibility: Needs to happen if Republicans are serious about a deal, unknown how serious they are about a deal.

Several news stories are hinting that Republicans are buckling from their previous opposition to revenue increases that are not offset with tax cuts. This has been a key problem with Grover Norquists anti-tax pledge that many Republicans are committed to: it is hard to reduce government deficits over the long term if every time revenue is raised by removing a subsidy (for example, ethanol subsidies) that the revenue raised is off-set by a new tax cut.

Eric Cantor reportedly wants to “talk” about closing some of these tax loopholes which could increase revenue, but he still claims to want tax cuts to off-set them. Senator Kyl has also made comments about increasing “revenue” but its unclear from where the revenue would come.

Ultimately, if Republicans are serious, some sort of significant revenue increase that is not off-set by tax cuts will need to be part of final deal, both to get Democratic votes and to actually reduce the deficit within a reasonable time frame.

It might be that Republicans have no intention of supporting any sort of revenue increase which is what lead to David Brooks column from this week warning that the Republicans “may no longer be a normal party”.


3. Jim DeMint and Olympia Snowe will get a Balanced Budget Amendment as part of the deal.

Plausibility: No. Snowe is positioning to win reelection.

So far, the most out-of-left-field position is an op-ed by Senators Olympia Snowe and Jim DeMint arguing that any solution to the debt crisis must involve a balanced budget amendment being added to the Constitution.

You may recall that Bruce Bartlett referred to the balanced budget amendment as “quite possibly the stupidest constitutional amendment I think I have ever seen. It looks like it was drafted by a couple of interns on the back of a napkin.”

So is this meant to be a serious part of a debt deal? Probably not. What’s more plausible is that Snowe faces reelection next year and her support for the amendment coupled with an op-ed co-authored with DeMint seems designed to try and get her to run to the right of any potential primary challengers.

Low Tax States Don’t Equal High Job States

June 27th, 2011 at 7:14 pm 31 Comments

The Department of Labor has released its state-by-state labor numbers: joblessness had declined in 24 states, risen in 13 (and Washington DC) and remained largely unchanged in 13 compared to last month’s figures.

While good news that a number of states are improving, there is also much to take from those that are continuing to struggle. The disparity also provides an opportunity for those who believe in the central tenet of federalism – that states are laboratories of experiment to see what works and what doesn’t.

As one explores the common threads among improving states, current Republican rhetoric, with its particularly heavy emphasis on tax policy, may cloud the issue. The numbers suggest a much larger, more complex story.

A fundamental problem comes with trying to directly relate unemployment to tax policy alone.

For example, Nevada, leading the nation in unemployment, has the fourth best tax environment, according to the Tax Foundation. Of the states without an income tax (nine in total), six have lower unemployment than the national average (Alaska, New Hampshire, South Dakota, Texas, Wyoming), two are roughly keeping the national average (Tennessee and Washington) and two are above (Florida and Nevada). Of the seven states with a flat income tax, three are at the national average, three are below, and one (Michigan) is above.

Texas, which has produced 37 percent of all American jobs since the economy, is, according to CNBC’s 2010 numbers, the 30th most expensive state to do business, but still the best. The Wall Street Journal emphasizes the thorough nature of Texas’ appeal: “Capital—both human and investment—is highly mobile, and it migrates all the time to the places where the opportunities are larger and the burdens are lower. Texas has no state income tax. Its regulatory conditions are contained and flexible. It is fiscally responsible and government is small. Its right-to-work law doesn’t impose unions on businesses or employees.”

California, still plagued by double-digit unemployment, is a clear example for how this works the other way around. Despite, according to CNBC, being first in the nation in “Technology and Innovation” and “Access to Capital” it ranks 32nd in overall competitiveness. Rhode Island, ranked 49th overall due to high business costs (45th), poor transportation (48th) and hostility towards business (48th), is another case of poor state management. Overall, lack of competitiveness has culminated in an unemployment rate 1.8 percent above the national average.

This is not to say that tax policy is not an incredibly important variable. South Dakota, Wyoming, Montana and New Hampshire (ranked first, third, sixth and seventh1respectively by the Tax Foundation) all are below the national average. But, it’s imperative to emphasize the multitude of factors contributing to prosperity.

A pro-growth tax policy is a necessary but not sufficient element of success. Important aspects, like infrastructure, quality/education of workforce, quality of life, are as necessary to a well-functioning state. However, this common sense is often marginalized in current GOP rhetoric.

If Republicans continue to portray tax-cuts as “magic bullets”, the greater debate will be lost and the above issues will fall into the hands of the left’s public-based solutions. Republicans must cast aside the intellectual crutch of “cut taxes, cut regulation” if they hope to display the breadth of economic understanding necessary to win an election.

These economic realities provide good and bad news for the Republican Party. The good news is that the famous Coolidge expression, “What is good for business, is good for America,” holds true. The bad news is that what is good for business is much further reaching than the answers provided by the GOP so far.