The President's misleading deficit attack

The President's misleading deficit attack

Here’s the President, speaking yesterday in Richmond, Virginia:

THE PRESIDENT: Now, I’m not a math teacher. (Laughter.) But I know a little bit about math. They’re proposing about $4 trillion worth of tax cuts. About $700 billion of those tax cuts are for people who typically are millionaires and billionaires, and on average would get $100,000 in tax relief — $700 billion that we don’t have, we’d have to borrow in order to provide these tax cuts. And 98 percent of Americans wouldn’t see any benefit from it.

And keep in mind that because we don’t have it, it would actually end up costing more than $700 billion, because we’d end up having — since we’re borrowing it, we’d have to pay interest on it.

… So when you add it all up, essentially their proposal would drastically expand the deficit instead of shrinking it.

The President uses two aggregate numbers: “about $4 trillion worth of tax cuts” and “more than $700 billion.” In both cases these are 10-year totals.

What the President didn’t say is that he and Republicans basically agree on the other $3.1 trillion of “tax cuts,” which I think of as preventing tax increases.

If the President thinks that Republicans are irresponsible for proposing $700 B of “tax cuts” that he opposes because of the deficit effect, why is he OK with the other $3.1 trillion of deficit effect?

The President says “… $700 billion that we don’t have.” Presumably he thinks “we have” $3 trillion but not the additional $700 billion.

Did he make a judgment that, relative to current law, it’s OK to increase the deficit by $3.1 trillion, but not by $3.8 trillion?

If he did that’s actually a legitimate policy position to defend. But the way the President describes it, Congressional Republicans are the only ones whose policies would make the deficit higher than current law.

That’s not true, to the tune of $3.1 trillion over the next decade.

Here is what I think is a fair description of the two positions:

  • The President wants to change the law to prevent tax increases on individuals who earn up to $200K per year, and on families who earn up to $250K per year. In addition he wants to change the law to prevent other tax increases that I won’t describe here. If the President’s proposal were to become law, over the next decade the federal government would take in about $3.1 trillion less revenue than it would under current law, and deficits would be the same amount higher.
  • Congressional Republicans agree with the President’s proposals, but they insist that tax increases also be prevented on individuals and families (some of whom are small business owners) with incomes above the President’s thresholds. If the Congressional Republican proposal were to become law, over the next decade the federal government would take in about $3.8 trillion less revenue than it would under current law, and deficits would be the same amount higher.
  • The difference between the two positions is about $700 billion over the next decade.

Note also the President’s use of the phrase “$700 billion that we don’t have” to mean “the government has tax revenue that it shouldn’t give to people.”

As I wrote last month:

In this view of the world, revenues belong to the government and are allocated by policymakers as gifts to those who need or deserve them. When you hear that “we cannot afford to cut taxes” and “we should not give tax cuts to ______,” you are hearing this philosophy.

… You can learn a lot about how an elected official approaches spending, taxes, and deficits by listening to how he or she uses the pronoun “we” and whether he or she refers to “paying for government spending” or “paying for spending and tax cuts.”

(photo credit: White House)

9 responses

  1. Pingback: Tweets that mention The President’s misleading deficit attack | KeithHennessey.com -- Topsy.com

  2. Somehow it was ok to send favored interest groups $700B+ in stimulus dollars that we don't have and have to borrow and pay interest on, but it's not ok to let successful people keep $700B of their OWN dollars that for 10 years the government hasn't received as tax revenue but now feels it's owed ?

  3. Pingback: The President’s misleading deficit attack [Keith Hennessey] | DreamInn

  4. And there’s the rub – our government finds it convenient to assume all earnings = their revenue, and that avoiding a tax increase somehow costs them part of “their” money.

    Henceforth, I’ll be focused, as suggested, on pronoun use. Sadly, doing so will be likely to move forward the date of the aneurysm that’s sure to explode my head some time soon.

  5. How does one compute the data that leads to this argument: the republican-desired "tax cuts are for people who typically are millionaires and billionaires, and on average would get $100,000 in tax relief" ?

    • I've wondered the same thing. Closest I can come is that maybe the average tax cut (or foregone tax increase) for people with incomes above $1 million is $100,000. That would potentially make sense if the average income for people above $1 million was around $3 million, give or take.

      I also love how none of these discussions include the roughly $1 trillion over 10 years in taxes and fees that was passed with the ACA.

  6. "700 billion that we don't have"

    By which he means that the 700 billion does not belong to the people who earned it… it belongs to the government. Even BEFORE they earn it! And the government (we) does not have the 700 billion (of their own money) to give back to them.

    That is insane. It is not the governments money. It's their money – the people who earned it!

    He should have said that we are not going to give them 700 billion, but rather we will let them keep 700 billion of their own money.

    • Most normal people would react the same way. That statement is Insane. The fact that the Government could spend less of the people's money (whom he's trying to help) doesn't even occur to him.

  7. Hmmm. Is there a reason why you willfully misinterpret Goolsbee? We all know that the middle class squeeze he's talking about is the fact that real median family income didn't budge during President Bush's terms in office. The President didn't understand why people didn't love him for 46 months of
    (housing bubble induced) job expansion (gone, all gone) and it seems you don't want to get it either.

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