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Social spending isn't the only spending that affects the deficit

David Leonhardt points out that the deficit-obsessed Peter G. Peterson Foundation is opposing the elimination of pricey tax cuts that help multinational corporations reduce their tax bills, and quotes Robert Choate saying that the public hopes the deficit "can be solved by increasing taxes that they don’t pay and cutting spending that they don’t benefit from," a principle that turns out to apply to the rich and the powerful, too.

You see this sort of thing all the time. Just yesterday, Ben Nelson and Joe Lieberman voted to filibuster a pared-down version of the jobs bill because it would add too much to the deficit, but on Tuesday, both of them were right there to vote against an amendment from Bernie Sanders that would have killed tens of billions in subsidies to oil producers and sent $25 billion of that money to deficit reduction. As Leonhardt says, it's too much to ask that every deficit hawk votes for every policy that might reduce the deficit, but when there seems to be a bias against voting for social policies because they would reduce the deficit but there's no corresponding skepticism of tax cuts and corporate giveaways that increase the deficit, it becomes a bit hard to credit the deficit as what's lying at the root of the problem.

By Ezra Klein  |  June 18, 2010; 9:15 AM ET
Categories:  Budget  
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Comments

". . . an amendment from Bernie Sanders that would have killed tens of billions in subsidies to oil producers and sent $25 billion of that money to deficit reduction"

Ack! I'm on the same page as Bernie Sanders, and to the left of Ben Nelson and Joe Leiberman? Something's wrong.

"skepticism of tax cuts and corporate giveaways that increase the deficit"

Just to note, corporate giveaways, or real corporate welfare, are not the same things as tax cuts.

The less an individual or a corporation pays in taxes, the more of the money that they earned (by providing an economic good or service) stays with them, and they can decide how to invest or spend that money. You may not like how the spend that money, or think that they have plenty to spend on nonsense like trying to start "a business" or send their kids "to college", and so that the government should take it from them, but in the end the government is reducing their economic liberty and flexibility, and their ability to interact and invest in the overall economy on their own, for "the greater good".

Corporate giveaways and subsidies, on the other hand, take money from other tax payers (companies that are efficient enough to operate at a profit without subsidies, and individual tax payers) and give it to companies that either don't need it but want it any way, or are so poorly run that they can't compete without government largesse, or exist solely for the purpose of gaming corporate welfare (such as farmers who bought farmland explicitly so they would get paid by the American tax payer not to farm it, mostly in order to protect billion dollar agribusinesses from local competition).

When I have two iPods, and I bought both of them with my own money, and I get to keep them, that's a tax cut. When you take one of my iPods because you don't think I need two iPods, and you give it to another guy so he can have an iPod, that's welfare.

If you give my iPod to a guy in a mansion with a gold-plated swimming pool who only didn't have an iPod because he was waiting for the government to take mine from me and give it to him, that's corporate welfare.

Posted by: Kevin_Willis | June 18, 2010 9:51 AM | Report abuse

Or, put another way, tax cuts represent a reduction in revenue. Corporate welfare and subsidies are, on the other hand, expenditures.

It's understandable that deficit hawks don't necessarily want to confiscate money from businesses and individuals, especially in a down economy, but rather want to focus on reducing expenditures. However, direct subsidies, where the US government gives resources to, or sends tax payer money direct to, certain businesses would come under "expenditures". And if politicians are looking for places to cut spending, that'd be a great place to start.

Posted by: Kevin_Willis | June 18, 2010 9:54 AM | Report abuse

Leonhart is clearly too dumb to understand that to have economic and job growth, we as a nation need a strong and thriving business sector.

This is stuff that Abraham Lincoln understood 150 years ago and Alexander Hamilton understood 220 years ago. We should understand that same principle today.

Posted by: lancediverson | June 18, 2010 9:59 AM | Report abuse

lancediverson is clearly too dumb to understand that you can't have a strong and thriving business sector when there is mass unemployment, wealth is increasingly concentrated in a few hands, and consequently few people are able to buy anything that businesses produce. In anything beyond the very short run the business class is cutting its own throat.

Posted by: labonnes | June 18, 2010 10:03 AM | Report abuse

Klein's constant contention that "being allowed to keep some of one's own money" equals "subsidy" is one more aspect of his rank dishonesty. Further, being drawn as it is from the dishonest rhetoric of conniving politicians of a leftist stripe, it is a further indication of the essence of Klein's propagandistic endeavor. He's lying for the sake of furthering a political agenda.

Any agenda that requires such lies is a disgrace and a danger to all free people.


Posted by: msoja | June 18, 2010 10:10 AM | Report abuse

msoja, rational people understand that a budget deficit results from spending exceeding revenues, and that it doesn't matter which side of the equation you attack. rational not being your forte, your 10:10 explains why the right-wing position on the deficit is incoherent.

as to the topic at hand, any senator who wants to convince me that he or she is serious about debt reduction has a simple way to do so: cut defense spending first. when i see ben nelson or joe lieberman favor that, i'll acknowledge their honesty.

since they don't, they remain the moronic cretins we've known them for, using the deficit cudgel to cover their true goal: defense spending or nothing....

Posted by: howard16 | June 18, 2010 10:22 AM | Report abuse

@msoja: "Klein's constant contention that 'being allowed to keep some of one's own money' equals 'subsidy'"

Notwithstanding the fact that there are, indeed, real subsidies to private businesses (usually suspicious correlating with large industries in certain states where pork-filled subsidies help secure certain senators and congresscritters desirable voting blocs), it's not just Ezra who conflates people getting to keep more of the money they earn with the government actually taking one person's (or company's) earned income and giving it somebody else based on arbitrary standards of fairness, or their own unshakable faith in their ability to command the economy to do as they will.

Almost everyone on the left will describe you getting a 5% reduction in the amount of taxes that you pay, thus allowing you to keep a little but of your own money, as a "cost" that the government is thus "paying".

Which is a little like Wal-Mart trying to characerize the change they give me when I give them a $10 bill for a $1 item as a $9 cost to them.

But it's not a cost. I'm just getting my money back.

I disagree, however, that Ezra is engaged in propaganda or lying in order to advance a political agenda. I don't know if you've noticed, but most liberals characterize people keeping more of their own money as an "expense" to government. It's the mental framework in which such issues are considered.

It's not a malevolent deception being crafted in order to help the One World Government take over, so we can then be ruled by the iron fist of our socialist overlords.

Posted by: Kevin_Willis | June 18, 2010 10:30 AM | Report abuse

kevin_willis, you're too intelligent for this kind of twaddle.

taxation is constitutional. it's the way we pay for the government purchases and services that people's representatives authorize. people who think they have the "right" to all the money they earn are welcome to find a country in which to live where there are no taxes.

and at any given moment, a reduction in taxes is going to "cost" money: this isn't some odd construct or some mental framework: it's a factual representation of reality.

Posted by: howard16 | June 18, 2010 10:40 AM | Report abuse

Kevin_Willis,

Imagine that six people are going to have a picnic, and the cost for the food that they will eat that day is $30. Initially they decide that each will contribute $5.

Then a decision is made that one of the six need not pay, and the remaining 5 will contribute $6 each, rather than $5.

The sixth person taking the free food is being subsidized by the other five, who are forced to take up the slack in the overall picnic expenditure. In that sense, the American people "subsidize" any corporation that receives a special incentive in the tax code.

Posted by: Patrick_M | June 18, 2010 10:44 AM | Report abuse

--" I don't know if you've noticed, but most liberals characterize people keeping more of their own money as an "expense" to government. It's the mental framework in which such issues are considered."--

It's propaganda, and people who talk that way are either proponents of propaganda, or are brainwashed.

The very idea that an allegedly sovereign people are a cost to the government that was instituted to be their servant is the height of ridiculousness, and yet that's the twisted notion that is being perpetrated here on a daily basis.

Posted by: msoja | June 18, 2010 10:50 AM | Report abuse

labonnes,

I was dumb this morning and that was my dumbest post ever. I apologize for my stupidity. I wrote in anger and frustration, which is always dangerous.

David Leonhardt is not dumb, although I disagree with the economic philosophy that animates his writing. If anyone appeared dumb this morning, it was me.

Posted by: lancediverson | June 18, 2010 10:53 AM | Report abuse

labonnes,

I will defend one point in my earlier post, the way our nation should avoid excessive concentration of wealth is with a progressive income tax. The United States should increase the top rate of the income tax to the 39.6% rate from the current 35%.

However, we need American companies to succeed and be competitive in an increasingly competitive world. We are in deep trouble as a nation if our business sector is not competitive.

Posted by: lancediverson | June 18, 2010 10:59 AM | Report abuse

@Patrick_M: "In that sense, the American people 'subsidize' any corporation that receives a special incentive in the tax code."

Agreed. Those would come under what I call "corporate give-aways".

That would be like me going to Wal-Mart to buy a $1 item, and when I hand them my $10, I get $8 back. "Where's my other $1?" I ask. Then they point to my neighbor, who is getting back $9 in change on a $2 item he paid $10 for. "We promised it to him, because we really wanted him to shop here."

...

Yeah, your explanation is better.

Posted by: Kevin_Willis | June 18, 2010 11:05 AM | Report abuse

"As Leonhardt says, it's too much to ask that every deficit hawk votes for every policy that might reduce the deficit, but when there seems to be a bias against voting for social policies because they would reduce the deficit but there's no corresponding skepticism of tax cuts and corporate giveaways that increase the deficit, it becomes a bit hard to credit the deficit as what's lying at the root of the problem."

Yes, yes, yes. It's hard to see how this point could be more obvious, but apparently, it needs to be said again and again.

And as for this silliness:
"But it's not a cost. I'm just getting my money back."

There is no fundamental principle determining the amount of money you earn. The economic system that we've created helps determine that, and taxes are inherently part of that system. Always have been. So, taxes are factored into your wages or profits from whatever product you might make. And if you're not getting paid enough for your liking, you can just as easily blame your employer or your customers as you can blame the government. But you, apparently, choose to blame the government. Because that's the only entity you really have any control over.

Posted by: slag | June 18, 2010 11:05 AM | Report abuse

Thanks lance. We're actually not that far from being on the same page. Though I think the top tax rate needs to be even a good bit higher than that (we prospered with a 90% top rate in the 1950s after all), to recapture some of the ill-gotten gains from the people who trashed the joint during a party to which we weren't invited, and now want to stick us with the cleanup bill.

Posted by: labonnes | June 18, 2010 11:09 AM | Report abuse

--"The sixth person taking the free food is being subsidized by the other five"--

But you're wrong, Patrick, as usual. The sixth person of your example is providing the other five people with cheap gas with which to get to the picnic. So, it's not a subsidy, it's a tradeoff that benefits everyone.

Posted by: msoja | June 18, 2010 11:13 AM | Report abuse

msoja, you are very, very confused about fundamentals: you might say the core reason the founders founded the company was to tax people.

they simply wanted to tax them with representation, because they knew the government had to spend.

so stop tossing around terms in ways that sound good on talk radio but really mean nothing: of course frickin' people are a "cost" on the government - that's what the government is doing, spending money on we the people.

and therefore, when a change is made in a given level of taxation without an offsetting cut in exepnditures, then yes, it costs the government money: of course it does. what kind of moron denies the obvious?

Posted by: howard16 | June 18, 2010 11:13 AM | Report abuse

@howard16: "kevin_willis, you're too intelligent for this kind of twaddle."

Apparently I'm not.

"taxation is constitutional"

I never suggested it wasn't, nor does that have a whit to do with the price of tea in china.

"it's the way we pay for the government purchases and services that people's representatives authorize. people who think they have the 'right' to all the money they earn are welcome to find a country in which to live where there are no taxes."

Why, this man smells just like straw.

"and at any given moment, a reduction in taxes is going to 'cost' money: this isn't some odd construct or some mental framework: it's a factual representation of reality."

No, it's not. It isn't an expense, it's a decrease in revenues. If my paycheck is cut, it's not an "expense" to me, it's a loss of revenue. Perhaps it's picking nits, but it certainly isn't twaddle.

Posted by: Kevin_Willis | June 18, 2010 11:14 AM | Report abuse

The anarchist msoja supports the taking of his money to be given to oil companies. Interesting.

But you are wrong. msoja, as usual.

Among the other five, each of them also brings their own extra benefits to the picnic. Kevin brings an iPod with powered speakers so that there will be music, someone else provides the funniest jokes, etc.

If the group decides to pay for one person's food, because it is his or her birthday, or because he or she is an agribusiness, or because he or she drills for oil, or for any other reason, the group is still subsidizing that person's food. The reasons behind the group's decision to subsidize may be good or bad, but it is a subsidy, either way.

Posted by: Patrick_M | June 18, 2010 11:22 AM | Report abuse

"If my paycheck is cut, it's not an "expense" to me, it's a loss of revenue."

And if all of your roommates then pay a little more than their share to cover the rent and groceries despite the fact that the revenue you contribute to the group is reduced, that is the subsidy.

When a member of a group contributes less than other members but receives equal benefits, that person's membership is subsidized by the others.

Posted by: Patrick_M | June 18, 2010 11:33 AM | Report abuse

@Patrick_M: "And if all of your roommates then pay a little more than their share to cover the rent and groceries despite the fact that the revenue you contribute to the group is reduced, that is the subsidy."

Just to be clear, I agree and I am not debating that unequal tax incentives constitute subsidies. If I have to pay $10 when my neighbor, who is better liked by the proprietor, only as to pay $8, then I'm either paying a penalty or subsidy. ;)

Posted by: Kevin_Willis | June 18, 2010 11:36 AM | Report abuse

@Kevin_Willis,

Thanks. Have a good weekend.

Posted by: Patrick_M | June 18, 2010 11:43 AM | Report abuse

--"each of them also brings their own extra benefits"--

You're sliding away from the argument, as usual.

Trading for benefits is not "subsidizing".

Since my entire argument was about language and meaning as used by propagandists, all you are doing is supporting my contention. But then, you side with dishonesty and propaganda, Patrick, on a regular basis. It's what you do.

Posted by: msoja | June 18, 2010 12:06 PM | Report abuse

Kevin_Willis - just wanted to go back to something you said earlier: that "tax cuts represent a reduction in revenue . . . corporate welfare and subsidies are, on the other hand, expenditures."

I think you're creating a false dichotomy here. You say that tax cuts are fine, because they leave money in the hands of private individuals for personal choice, but expenditures are bad, because they substitute government action for private choice.

But what is a budget if it's not revenue v. expenditures? I think the point that Ezra makes, that we've all made, isn't that we have a right to unlimited revenue through taxation, but that balancing the budget requires us to tax in appropriate balance with our spending.

Your argument would be perfect if you could show that a plurality of people opposed the way the government spends its money - but it's quite the opposite! The things that take up the most revenue, like Social Security, Medicare, and defense - are also the most wildly popular programs in the country. By 'choosing' these programs, people are implicitly 'choosing' an appropriate level of taxation.

Posted by: strawman | June 18, 2010 12:54 PM | Report abuse

@strawman : "I think you're creating a false dichotomy here. You say that tax cuts are fine, because they leave money in the hands of private individuals for personal choice, but expenditures are bad, because they substitute government action for private choice."

Where did I say they were "bad"? I said they were different. And I don't think it's accurate to conflate them.

I generally consider tax cuts, rather than corporate subsidies, a better and fairer way to put more money into the corporate economy, if that's the goal. For reasons detailed: corporations that require subsidies either are inefficient, uncompetetive, no longer providing a product considered a social good, or is conceived in a manner to exploit subsidies, and otherwise of no larger economic value.

"By 'choosing' these programs, people are implicitly 'choosing' an appropriate level of taxation."

Agreed. I don't think I was arguing against that. Just as I don't think you're arguing that a plurality of citizens want to pay cynical speculators tax payer money not to farm land, when they purchased that land specifically to leave in derelict, and collect a check from the government for doing so. Am arguably undesirable condition that would not be possible, btw, if moneys were provided to the corporate world via tax cuts, but not subsidies.

Posted by: Kevin_Willis | June 18, 2010 1:12 PM | Report abuse

Tax cuts don't cost the government anything in the abstract. Kevin's right that that's a revenue side of the equation; the government's not spending money. Tax cuts without a corresponding reduction in spending is a cost. If you have to "buy" the tax cut by borrowing a bunch of money to pay for the things those taxes were supposed to pay for, you have incurred loans against the country which we would not otherwise need.

If some Republican wants to propose an across the board tax cut with corresponding cuts to, say, defense spending or social security, then great. Let's have that debate and see if people want to spend less money on those things so that they can have a bit more money in their pocket. The problem is that often times people *like* a particular program or see it as a worthwhile expenditure, even if they hate paying taxes, so Republicans get by with a ridiculously absurd and irresponsible policy of cutting taxes without cutting any programs. Now, if this were some kind of temporary economic stimulus, then that's one thing, but the Republican solution is to cut taxes no matter what state the economy is in.

Like I said the other day, Kevin's plan to lower the corporate tax rate, close the loop holes that allow some corporations to escape paying taxes, and instituting a carbon tax that would not exceed the corporate tax is an idea with enough substance to warrant consideration. Simply saying, "Cut taxes! It's our money!" is not.

Posted by: MosBen | June 18, 2010 1:19 PM | Report abuse

--"The anarchist msoja supports the taking of his money to be given to oil companies."--

Do you wonder why I call you dishonest, Patrick?

If Congress ends the oil co. tax breaks, everyone will end up paying more for gas, but even then the money won't be going to the oil cos. It'll just be going to the government. And they'll spend it, plus some.

I'd rather the oil cos. keep their tax breaks, gas prices stay relatively low, and the government stops spending more than it has.

Playing stupid propaganda games with the word "subsidy" doesn't change the basic economics of the matter. All it does is confuse those not prone to thinking about such things, and it's done for the sake of giving more power and money to the government. It's propaganda, and it's Klein's job to be a government propagandist.

Posted by: msoja | June 18, 2010 1:49 PM | Report abuse

These are the words of billionaires trying to protect their own money. Problem is, our politicians are listening to them. It's just dumb politics. Check out Bob Kuttner's piece today, it's a great commentary of this problem: http://www.newdeal20.org/2010/06/18/the-stealth-attack-on-america%E2%80%99s-best-loved-program-12715/

Posted by: BryceCovert | June 18, 2010 2:32 PM | Report abuse

Obama Plans To Sneak Through Carbon Tax By Stealth
President Obama is planning to sneak through his job-killing, economy wrecking carbon tax by stealth according to the Washington Post, by passing a weakened bill and then adding in cap and trade provisions after the heat is off following the November elections.
Described as the “lame duck climate strategy,” Obama is planning to secure enough votes in the Senate to pass a weakened energy bill and then drag out the conference long enough to ensure the stronger provisions contained in the original House version are added “after lawmakers have faced voters in November, thereby cushioning the vote’s political impact.”
“Several sources familiar with the administration’s thinking confirmed it has started pressing Senate Majority Leader Harry Reid (D-Nev.) to bring up a slimmed-down energy and climate bill next month. Such a measure would pass more easily than a comprehensive climate bill, and could still be negotiated with the broader bill the House passed a year ago,” reports the Washington Post.
“The Senate is expected to try and push a watered down bill with the hope of moving towards a carbon tax later on,” we reported on June 10, which is exactly the approach now being adopted by Obama. The elite are still desperate to impose a consumption tax on Americans as part of the move towards a “post-industrial revolution” and the kind of nightmare “green economy” that has left Spain with a 20 per cent unemployment rate. In a so-called green economy, over 2.2 jobs are lost for every “green job” created.
The government has aggressively exploited the BP oil spill in the Gulf of Mexico to manufacture an artificial urgency in an effort to speed the passage of cap and trade, an agenda firmly supported by the transnational oil corporations Obama is claiming to be reigning in. British Petroleum is one of the founding members of the cap and trade lobby, and has consistently “lobbied for tax hikes, greenhouse gas restraints, the stimulus bill, the Wall Street bailout, and subsidies for oil pipelines, solar panels, natural gas and biofuels.”
Yesterday, White House spokesman Ben LaBolt invoked the oil spill disaster to justify passage of the carbon tax bill. Obama , even went to the extreme of comparing the oil spill to 9/11, proving that he is perfectly willing to exploit the horror of nearly 3,000 dead Americans in a completely unrelated event nine years ago to underhandedly push his political agenda. http://www.infowars.com/obama-plans-to-sneak-through-carbon-tax-by-stealth/ and

http://www.youtube.com/watch?v=veHhcxQjZ2w&feature=player_embedded

Posted by: PaulRevere4 | June 18, 2010 2:59 PM | Report abuse

I will not provide ONE RED CENT to ANY Democrat so long as Liebermann is allowed to caucus with the Dems or hold committee posts. His vote is useless.

Democrats are being led over the cliff by corporate ConservaDems like Obama, Liebermann, Nelson, and the Blue Dogs.

They are hypocrits of the first order who voted for massive Bush tax cuts, war funding, medicare part-D, the Iraq War, and so on.

The Democratic party had a supermajority in the first year of the Obama admin and waited until they lost it before pretending to want to pass any meaningful legislation.

A weak form of HCR reform, most of which is delayed until later years, perhaps to allow the USSC to strike it down, was passed ONLY because a major progressive rebellion was being fomented.

Posted by: Lomillialor | June 18, 2010 3:24 PM | Report abuse

Lomillialor,

I share your frustration with Lieberman. But please do take note of the fact that the problem this time was bigger: only 35 of the 59 Dems voted in favor. The list of nays includes Dodd, Kerry, and numerous others.

Anarchist msoja,

Again I completely understand that you favor tax breaks to the oil companies. As interesting as that may be, it has nothing to do with my point, which I shall again (and for the last time) politely attempt to explain to you.

Whether you reduce taxes to an oil company, or whether you reduce taxes to an individual who otherwise lacks the means to purchase mandatory private health insurance, you are increasing the tax burden of all other tax payers (unless you make cuts in spending to offset the tax breaks). So the other tax payers are subsidizing the the individual or entity that receives the break, by paying higher taxes than would otherwise be the case, in order to make up the difference due to the revenue that is conceded for the tax break.

You believe that there is some benefit returned in the form of lower gas prices at the pump from your favored break to big oil, and another person might argue that the subsidies for universal health coverage are more than repaid by containing health care costs system-wide. In either case, whether it is true or not that there there is an offsetting economic benefit when a tax break is extended to a limited class of beneficiaries, it is still a de facto subsidy coming from the rest of the taxpayers.

A good weekend to you both, and a Happy Father's Day, if applicable.

Posted by: Patrick_M | June 18, 2010 4:16 PM | Report abuse

kevin_willis, precisely because it is picking at nits, it's twaddle: it has no actual meaning. the government is entitled to assume that taxes do not lapse every year and have to be reinstituted from scratch, and it is a perfectly legitimate piece of phrasing to say that a tax cut without an offsetting spending cut "costs" the government, because what matters is the fiscal impact, which is a cost.

you are intelligent enough to know better; you just want to pick nits, is all....

Posted by: howard16 | June 19, 2010 12:47 AM | Report abuse

Patrick_M,

Once again, not stealing from someone does not equal subsidizing that person, even if that person is the only one not being stolen from. It's just one less theft, is all.

Collectivists have to twist and distort just such sorts of meanings, however, in order to perpetrate the lies underpinning their immoral, criminal agendas.

Posted by: msoja | June 20, 2010 3:25 PM | Report abuse

Anarchist masoja.

I see. Your anarchist argument relies upon the supposition that tax laws passed by representatives who have been duly elected by the people in accordance with the United States Constitution amount to immoral and criminal thievery.

And yet it is the "collectivists" (any persons who respect democracy and the US Constitution) who are the ones that must twist and distort in order to perpetrate lies.

Thanks for clearing that up.

Posted by: Patrick_M | June 21, 2010 2:02 PM | Report abuse

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