Spending is Saving
by digby
Ok, now I’m really confused. Here’s Krugman:
I don’t want to step too much on the administration’s selling point, but progressives upset by the claim that there are three dollars of spending cuts for every dollar of tax increases should be aware that there’s a bit of creative labeling going on. As I understand it, they’re counting both interest savings and reductions in “tax expenditures” — subsidies through the tax code — as spending cuts. It’s a much more balanced plan if you look at the balance between revenue increases and non-interest outlays.
He says that the reduction in “tax expenditures” (closing loopholes, eliminating mortgage interest eduction etc.) count as spending cuts, which is why the ratio looks so tilted.
But from what I understood, the reduction in “tax expenditures” counted on the revenue side:
Obama proposes an overhaul of the tax system that would eliminate tax breaks and loopholes and even lower some tax rates, resulting in $1 trillion in additional revenue.
Obama also wants to allow Bush-era tax cuts to expire for individuals making $200,000 or more a year and couples making $250,000 or more. The revenue that would generate is not counted in his $4 trillion in deficit reduction because under existing law the cuts would expire on their own at the end of 2012.
I know that the Republican members of the gang of six are counting the reduction in “tax expenditures” as raising revenue not cutting spending
You’ve got to look at the revenue side also.
What we are looking at proposing is actually a reduction in corporate rates and personal individual income tax rates, which will put more money in people’s pockets and we’re going to do that with the reduction in tax expenditures. Every time we’ve done that in years past whether it was under President Reagan or President Bush we have seen revenues increase.
Here’s what the president said yesterday:
I believe reform should protect the middle class, promote economic growth and build on the Fiscal Commission’s model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit. And as I called for in the State of the Union, we should reform our corporate tax code as well, to make our businesses and our economy more competitive.
Here’s how the Christian Science Monitor described the Tax Policy Center’s analysis of Simpson Bowles:
Today Eric Toder and Daniel Baneman of the Tax Policy Center released a preliminary analysis of the tax proposal put forward by the fiscal commission’s co-chairs Erskine Bowles and Alan Simpson. The centerpiece of their proposal is to eliminate almost all tax expenditures* except the earned income tax credit and the child tax credit and use the resulting revenues for a mix of deficit reduction and tax rate cuts (they also consider other options that would retain more tax expenditures.
If the reduction in “tax expenditures” is being counted as cuts, then what on the revenue side? The Bush tax cuts alone? (I had understood they weren’t part of the revenue numbers under consideration, but perhaps that’s a mistake.) Even so, if the tax expenditures are counted a cuts and the only revenue is from the Bush tax cuts on the rich, I think the ratio is still skewed.
And I’m guessing he’s not counting on the Bush tax cuts being part of any bipartisan deal done before 2012. If anyone thinks the Republicans are going to pre-emptively vote for that before the election (if they ever do) raise your hand. I’d like to sell you some stock in TEPCO.
The Gang of Six and Obama seem to me to want to call these “revenue.” Grover Norquist is already calling them new taxes. Krugman says they fall under “spending cuts.” I’m very curious about which side of the equation these “tax expenditures” actually go. it will largely determine the political fight going forward.
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