Picking the biggest and most pernicious conservative lie of our times is about as enviable a job as naming the most undeserved bonus at AIG. The same goes for picking the biggest conservative liar—though Tim Pawlenty has now arguably made himself the frontrunner (for that title at least). In the economic plan he announced this week, Pawlenty took my choice for No. 1 lie as his starting point. And it got worse from there.
The lie, which one hears from Republicans on cable television on a daily basis, is that “we spent our way into this crisis.” Yes, federal spending has gone up significantly in the last decade. But increased spending wasn’t as decisive as decreased revenue. The truth can’t be said often enough: We did not spend our way into this crisis; we de-taxed our way into it. Very few people want to believe this. Even many liberals get nervous when this is brought up, because the mere word “taxes” makes some people jumpy. But it’s the truth: The Bush tax cuts have had more to do with our parlous fiscal situation than any Obama spending you can name.
We de-regulated our way into it, too—for the obvious reason that the repeal of Glass-Steagall and associated moves by Congress, the Bush Securities and Exchange Commission, and other regulators told the derivatives traders that no one was watching. That caused the economic meltdown in the first place.
But we exacerbated it with tax cuts. One measure: Take the question of publicly held debt as a percentage of GDP. Most economists consider anything under 60 percent more or less stable. Ours is in the mid-70s. But without the Bush tax cuts, according to two experts from the Center for American Progress, the ratio would be... just a hair under 60 percent. The debt situation would be manageable. (And by the way: In 2001, after the Clinton surplus, the Congressional Budget Office forecast that we could be debt-free by 2009.)
Last month, the CBO released a little-noted document, which I first encountered via Bruce Bartlett, breaking down the debt this country has accumulated since 2001. The grand total of debt is $11.8 trillion. Of that, more than half, or $6.2 trillion, was added because of lost revenue, while $5.6 trillion was added because of spending. Now you may look at those numbers and say, well, spending is almost half. And yes, it is. But what’s interesting in this chart is that the lost revenue figure matches exactly the actual current deficit.
For those who reside in the world of fact, it’s beyond question that the decrease in tax revenue because of the Bush tax cuts and the economic meltdown that resulted from conservative deregulatory policies has done more than spending to create the crisis. Unfortunately, we don’t live in a world of fact. We live, instead, in a world of right-wing ideological lunacy. And so we get things like Tim Pawlenty’s jaw-dropping economic plan, which ignores completely our revenue reality.
The bilious idiocy of Pawlenty’s numbers shows just how far removed from economic reality this country is getting to be.
One hardly knows where to start with it. Probably with the assumption that we can reach 5 percent growth for 10 straight years—when from 1947 to 2010, the average has been 3.3 percent. This is a contemptible piece of nonsense, but at least it’s not really harmful. What would be harmful are Pawlenty’s tax proposals, which soak the poor and reduce the burden on the rich more nakedly than any Republican plan I have ever seen. He would eliminate—completely!—the capital gains tax and the estate tax. Of course he’d massively lower income-tax rates. Oh, and he’d get rid of loopholes. (Yeah, sure.) Of course the little schlubs would keep paying those payroll taxes, but I suppose he hopes they can be distracted with some Jesus talk.
The point is not that Pawlenty’s numbers don’t add up, which is stating the blindingly obvious. The point is that they are a marker of two things—first, of how radical the Republican Party has become in just these last two years. I can promise you, Bush and Karl Rove would never have contemplated coming out with an economic plan that eliminated the capital gains tax! It would have been far too nakedly plutocratic even for them. (Bush reduced the capital gains rate to 15 percent for most investors in 2003.)
Second, the bilious idiocy of Pawlenty’s numbers shows just how far removed from economic reality this country is getting to be. The Republicans have lost any connection to earth, and the Democrats are afraid (with a few noble exceptions) to tell the American public the truth. In such a context, erstwhile conservative Republican Ben Bernanke emerges as a courageous truth-teller for saying something as simply and obviously true as that enacting sharp spending cuts now will hurt the economy. Time was when Republicans listened to the Fed chairman. But these days I guess he’s a socialist, too.