For those who have read my earlier posts, you can glean a frustration of mine when people misrepresent information and do it so often it becomes their version of the facts. While I support the rights of people to organize and show their concerns, I would like for the group to have a better understanding of facts before they cite their displeasure. The Tea Party is one of those groups. I agree with their making the US deficit and debt issues of import. They are definitely that. Yet we must look at all levers to remedy the situation.
The Tea in Tea Party stands for “Taxed Enough Already” and they have sworn allegiance to the God of no tax increases – Grover Norquist. Mr. Norquist is so adamant in his belief of no tax increases he strong arms all GOP candidates and politicians to sign a pledge to not increase taxes or be the target of a full court press against their election or re-election hopes. My timing for writing this is the belief by Presdiential Candidate Romney to reduce taxes to solve our problems. This is absurd and would increase our deficits.
So let’s get back to those elusive facts and see if we are “taxed enough already.” The global organization the Organization for Economic Cooperation and Development (OECD) out of Paris has measured financials for 34 countries dating back to 1965. On their website you can find a graph and table that shows the Total Tax Revenue as a percentage of Gross Domestic Product (GDP) for each of these 34 countries every 10 years and during 2008 and 2009. Total Tax Revenue is federal, state and local taxes and would include things such as FICA, sales and property taxes.
In 2009, the US Total Tax Revenue as a percentage of GDP (Tax/ GDP Ratio) is 24.1% a decline from 26.3% in 2008 and 29.5% in 2000, the last time we had a balanced federal budget and before the two Bush tax cuts. What the Tea Party advocates may find of interest is the average of these 34 countries in 2009 is 33.8%. Comparing this average ratio to the US 2009 average of 24.1% shows a difference of 9.7%. What the Tea Party advocates may also find of interest is the US ranked 32nd out of the 34 countries in the Tax/ GDP Ratio. If we go back to 2000, the last time we had a balanced federal budget, the comparison of the US Tax/ GDP Ratio to the average is 29.5% versus 35.3%. So our Tax/ GDP ratio in 2000 (again the last time we had a balanced federal budget) to the average is not only less than the average of the OECD analysis in 2000, it is still 4.3% less when contrasted to the OECD average in 2009 of 33.8%. Saying this another way, our tax revenue in 2000 when we last had a balanced budget is 4.3% less than the average revenue in 2009, which is the year following the start of the recession.
So help me understand this concept of “taxed enough already” as this independent data would seem to indicate we are not taxed enough. To this old fart, we have to be prepared to step up and pay for something. Back in the early 2000’s when I was a Republican when the GOP actually strived for better stewardship, I was very much against the Bush tax cuts. When Bush’s senior tax advisor resigned and Warren Buffett cited we do not need these tax cuts, it confirmed my reservations. Mr. Norquist is fond of citing Ronald Reagan as the paragon, but President Reagan increased taxes five times after he had cut them too much with Tax Reform early in his presidency. Citing Thomas Friedman and Michael Mandelbaum in their book “That Used to be Us,” President Reagan hated deficits, so he realized he needed to increase taxes. However, he was smart enough to call them revenue enhancements.
I get frustrated when the Tea Party advocates beat on their chest and say we should lower taxes. Kowtowing to this position on taxes, GOP candidate Romney is truly at the height of irresponsibility. I get back to an earlier comment I posted – any idiot can get elected saying he or she will lower taxes. Yet that is not what we need to hear. We need someone to very clearly say we have a problem that we must address. We need to make some cuts in spending, but we also need to raise revenue. We have cut revenue to an unhealthy level and we need to adjust it. We cannot kick the can down the road and we certainly cannot reduce tax revenue. I am all for tax simplification, but at the end of the day we need to pull in more tax revenue not dissimilar to what we had before the Bush tax cuts. And, if we are going to pay down debt, we actually need more revenue than spending.
Some read this and say they don’t care what other countries do. I have two comments in rebuttal to that specious argument. First, the US tax rates are at their lowest in 50 years. The top end federal tax rate used to be 70%, became 50% and then was reduced to 39.6%. Today it is even lower and Mr. Romney wants to lower it more to create jobs. Since Mr. Norquist likes to cite President Reagan, it is interesting to note the comments of David Stockman, Reagan’s economic advisor. He says today “trickle down economics did not work.” In my mind, if the top tax rate is already so low, where are the jobs now?
Second, the other rebuttal I would make is to look at what is happening in Greece, Italy, Spain and other European countries. One of their challenges which does not get talked about enough is the aging population relative to the workforce. With systems that promoted earlier retirement, the relatively diminished workforce versus those retired will continue to have a hard time paying for obligations created by these earlier retirements. We have this problem staring at us as well. So we must address it today. Tax increases for everyone (and not just the wealthy President Obama) as well as spending cuts must be considered. And for our grandstanding GOP congressmen that means defense cuts as well.
I go back to my harping on the Bowles-Simpson Deficit Reduction proposal. It is not perfect, but it is well thought out and moves us down the path of responsible government. Please tell Mr. Romney when he shows the commercial on the three things he would do immediately when he becomes President he is zero for three in his recommendations. Yet the most offensive thing he mentions is cutting taxes immediately for his wealthy friends. So, Tea Party advocates, I don’t know what you have been drinking, but it seems to be a little stronger than tea. Keep after the deficit and debt – you are on the money there, but you need to stop listening to folks like Grover Norquist who have been less than forthcoming about the data. We have to increase revenue as well as cut spending. We simply cannot solve our deficit any other way. The math does not work.
Restating what I said earlier, at some point in time we need to step up and pay for something. The more we delay the worse it will become and then we will be like Greece is today. I don’t mind Speaker Boehner pushing this issue now, but he is doing it with empty commitment. If he said we need to cut defense more and raise taxes, he would show seriousness of purpose. Otherwise, he is just blowing political smoke and truth be told, I have little tolerance for gamesmanship right now. We need to get serious and put all cards on the table. Since we have this inane partisanship going on which will only get worse, the Bowles-Simpson plan would be a good draft to start from and will get the discussions moving in the right direction.
As my tea of choice is Constant Comment, it seems appropriate I should be constant in my advocacy for the Bowles-Simpson plan. Maybe if our Tea Party friends drank that instead of the Norquist Kool-Aid, their advocacy would be more informed and well-received.