The economic cost of ignorance

The GOP has generated a myth of desiring small government while generating most of the nation’s debt.

Since 1978, 81 percent (or $9.1 trillion) of the U.S. Public Debt has been created under Republican presidents.

Yet Republicans cling to their Reaganomics and supply-side economics, not phased by the reality of history.

In the age of Clinton — the age of tax increases for those with an income of more than $200,000 — conservatives were sure a recession was on the horizon. But instead, as Jonathan Chait noted for The New Republic, “the economy boomed and revenue skyrocketed. It is rare that events so utterly repudiate an economic theory.”

Kudos to the Republicans. In their “Pledge to America,” they not only decry Obama’s “job-killing” policies, but they also offer solutions, which are profound and original.

The Democrats’ prediction that unemployment would plunge to 7 percent by now turned out to be fearsomely incorrect. The state of the economy could have been worse with 1.4 to 3.3 million more Americans jobless, had the stimulus package not been implemented.

This is not to say that the Republicans are wrong on all accounts.

Reihan Salam of National Review makes an excellent point that the desire to curb taxes for the rich is more than the mentality of “they earned it, they should get to keep it.”

People understand the need for infrastructure, military, social welfare, etc. but
legitimately worry whether their tax dollars are being used effectively.

True too is the basic economic knowledge that tax hikes do create disincentives for working harder. But unfortunately for the GOP, the world is more complex.

Their proposed policies would have us in more debt than Obama’s ever would — and indeed, the stimulus package is expected to increase budget deficits by $814 billion during the next 10 years.

So as House Minority Leader John Boehner said, surely Obama is refusing to do anything “about bringing down the deficits that threaten our economy.”

But let’s take a look at the policies he and his fellows support: If Republicans were to truly have their way, Bush tax cuts for the wealthiest among us would add $700 billion more to the deficit.

The Congressional Budget Office estimated that repealed health care would lead to a deficit increase of about $455 billion (opposed to the $170 billion to be pruned if kept).

Along with other measures, Republican policies would make the deficit worse by about $1.1 trillion as opposed to the $640 billion increase Democratic policies caused.

The total amount of government workers have declined under Obama.

Aside from health care reform and rising unemployment insurance and Medicaid, the government has not been a wicked, cancerous growth metastasizing throughout the country, as Republican witch doctors have diagnosed.

But perhaps it should be.

As far as the Bush tax cuts are concerned, please note that Obama plans to extend them for the 95 percent of taxpayers making less than $250,000 a year (and those wealthier still receive the cuts on the first $250,000 of their income).

Is Obama really being unreasonable?

No. Our recovery drags along painfully, but it is simply not feasible to maintain such low tax rates.

As true fiscal conservative Andrew Sullivan blogs, repealing the cuts is an unfortunate necessity: “The Bush tax cuts became unaffordable as soon as we launched two wars. They were designed to end now. ...So let’s get on with it and stop this 1980s posturing.”

After all, wishful thinking is about as effective of a cure as Glenn Beck’s tears and fairy dust.


E-mail: celgrund@indiana.edu