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Posted at 4:43 PM ET, 02/ 7/2011

The real budget solution

By E.J. Dionne

Nothing is more annoying to a columnist than another columnist who gets to an idea you had planned to write about before you do. And with that, I salute The New Republic's Jonathan Chait for his excellent column in the current issue of the magazine. (Subscription required).

The thrust of the column is that the best way to take a huge chunk out of the deficit and put the country on a sound fiscal cushion is to do nothing -- specifically, to do nothing at the end of 2012 when all the Bush tax cuts expire. If Congress doesn't act, the Bush tax cut is gone. The tax rates we had under Bill Clinton are restored. And everything about the deficit becomes easier.

As Chait notes, the expiration of the Bush tax cuts would be "a huge policy boon." He continues:

It would slice $3.9 trillion off the national debt by 2020. How much is that? It would reduce the budget deficit to about 2.5 percent of gross domestic product, which means it would be out of the danger zone where the debt is growing faster than the economy. And all without the Bowles-Simpson proposals to slash 200,000 federal workers, cut an already meager Medicaid budget, and the other unfortunate compromises required merely to get Republicans to consider a deficit-reduction plan.

The problem with the way we are discussing deficit reduction now is that we are beginning in the wrong place. That's the core problem with the Bowles-Simpson Commission's report. We got into a deep mess because of the Bush tax cuts, combined with decisions to start two wars and to create a new prescription drug benefit under Medicare without paying for it. Then came the recession. We cannot get the money back that was spent on the Afghanistan and Iraq wars, and the prescription drug benefit will not be repealed, nor should it be. The recession will gradually come to an end. That leaves the issue of revenues. Scrap the Bush tax cuts, and we start the discussion with a more sensible set of assumptions about the revenue government will need. I would note that many conservatives have fallen all over themselves to declare how "moderate" Bill Clinton was compared with President Obama. Great. So let's go back to the truly moderate level of taxation that Clinton established, a level of taxation under which the private economy boomed in the 1990s.

Is restoring Clinton Era tax rates a perfect solution to the deficit problem? No. There are, for example, reasons to want income tax rates for Americans at the lower end of earnings to stay down, given the stagnation of middle class incomes. There are parts of the budget that could stand careful scrutiny and some cuts. And higher taxes on the very, very rich, particularly on their financial transactions, should be on the table. So should a progressive consumption tax that we might need to finance our health-care programs. And, yes, we have to keep looking for ways to drive health-care inflation down.

But the Clinton tax rates should provide the baseline for all discussions of the debt and the deficit. And even though Jonathan got to this issue before I did, that won't stop me from coming back to it, because this is where the deficit debate needs to start. The real test of a deficit hawk's credentials should be: Are you willing to let the Bush tax cuts expire or not? If you won't contemplate scrapping them, you are not really serious about the deficit. You are just pretending to be as an excuse for slashing a great many programs.

By E.J. Dionne  | February 7, 2011; 4:43 PM ET
Categories:  Dionne  | Tags:  E.J. Dionne  
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Comments

Obama could have done this a couple of months ago, but chose not to.

Posted by: Benson | February 7, 2011 5:21 PM | Report abuse

We have no Congressmen/women with the guts to let the Bush tax cuts expire, like they should have. Only reducing the national budget without increasing income will not do much to lower the deficits or debt. The country was on the right track prior to 2000 when Clinton was still President. We need a fiscal policy to get us back there.

Posted by: lddoyle2002 | February 7, 2011 5:27 PM | Report abuse

Well EJ, were running a 1.5 trillion dollar deficit every year. So just allowing the Bush tax cuts to expire takes care of about 4 trillion over the next decade. How do take care of the other 11 trillion

Posted by: bjeagle784 | February 7, 2011 5:29 PM | Report abuse

Without a corresponding DEMONSTRATION of spending CUTS please don't suggest taking more of my hard earned money.

Posted by: steveotto | February 7, 2011 5:29 PM | Report abuse

Dear EJ,

Those jobs Clinton, Bush-43, Obama and our Congress of Eunuchs have allowed to be outsourced..? Well, the people in India who have them now will probably be paying taxes, but they won't be paying them to the U.S. government. (Let that sink in EJ...)

The Afghanistan and Iraq wars? Tell Obama to bring the troops home from both of these useless military (mis)adventures NOW. Whining about the lost billions indeed won't get them back and they are no longer Bush's wars. They're now the Bush-Obama wars.

Letting the tax cuts 'expire' is okay with me. And, while the fed gov does some important things, letting about 30% of the fed gov 'expire' would be okay with me too.

Posted by: srb2 | February 7, 2011 5:51 PM | Report abuse

Even as a conservative/libertian/tea party leaning individual...I was thoroughly disappointed to see them extend the tax cuts...thus adding almost another trillion dollars to the deficit. Not to mention the unnecessary orgy of pork and other spending in that end of year bill. Totally irresponsible!

But it is fatuous of the author of this article to imply that the sunsetting of the Bush tax cuts alone, without reasonable/responsible/necessary cuts to a bloated federal budget; will somehow bring us back from the brink of national bankruptcy.

Posted by: jrealty | February 7, 2011 5:55 PM | Report abuse

Allow taxes to go back to their former rates, except for families making less than $40K. Cut all subsidies to Corporate farming and other big businesses. I agree with the others - Congress needs to grow a spine.

They allowed the tax cuts (causing a ballooning deficit), they allowed the wars, they allow the Corporate welfare to continue. They need to show that they can make some decisions that will benefit America as a whole and not just the "vested interests" who are paying for their political campaigns!

Posted by: Whazzis | February 7, 2011 6:27 PM | Report abuse

Raise taxes... what a stupid idea that only a liberal could love.

2012 can't come soon enough so we can off load the rest of the know nothing tax and spend redisributive liberal from our lives.

Raise taxes... really, that is all you got? And then what?

Congress waist every dollar it gets... and then steal more.

Posted by: markandbeth92 | February 7, 2011 7:41 PM | Report abuse

When is everyone going to realize that the income tax rates don't matter until everyone actually pays the same rate on the same amount of income as everyone else. If we did away with all the special deals, special rates and special exemptions that permeate our income tax code then the effective tax rates could be lowered for the 99.9% of Americans that don't enjoy any of these tax breaks. If you believe, as I do, that everybody's basic needs should be tax exempted then we should simply raise the minimum taxable income from the ridiculously low $400/yr to somewhere around the poverty level and begin the progressive marginal tax rates from there.
Stop giving the financial services industry a free pass on most taxes. Earnings should be equal no matter what industry you work. A hedge fund manager should pay the same taxes and the tax rates on all their earnings. Capital market instruments should include embedded taxes like every other product and service sold in America, even if we have to pass a new financial transaction tax to level the playing field.
If everyone actually paid their fair share of taxes then revenues would increase while the vast majority of Americans would pay even less taxes than we do today. It's those that earn the most and pay little to nothing or receive corporate welfare that cause the real problem.

Posted by: RMForbes | February 7, 2011 7:46 PM | Report abuse

Yeah, yeah, just let the Bush tax cuts expire and every thing will be coming up roses. And the economy will just come roaring back. You just keep drinking the Kool-Aid, a couple more sips and you'll be done, along with King Obama, and the entire lib-dem party. There's not enough tax money, real or potential, to pay for a budget the size of this bloated mess.

One and one makes only two, and pretending that it makes three but spending like it's in fact four leads only in one direction. Just look at Greece, Spain, and Ireland to see the outcome of such unreasoned thinking. Cutting spending, period, is the only real solution. Companies are already fleeing high tax states, if you keep this up they'll soon be joining the exodus of the high-tax USA, and then where will you be when there are no jobs and there's nobody to help you out. Will you then turn to the Muslim Brotherhood for their benevolence?

I suggest you grow up quickly and start coming up with some adult reasoning, while you still have the chance.

Posted by: genocincy | February 7, 2011 7:48 PM | Report abuse

Sadly, by 2020 we will have bigger problems than our discretionary spending problems. Medicare and Social Security will be starting to crush us.
Any discussion that does not deal with that is ignorant and a dangerous distraction. I can only assume you already know that, E.J., but choose to ignore it as it is inconvenient to your desire to beg the government to raise taxes on the rich (what would be your ideal tax rate for the 'rich'?).
If you are willing to discuss how to reign in the unsustainable entitlements, then you earn the moral standing to also talk about raising taxes. Without that discussion, you are only blowing hot air while trying to score political points for an unrelated grudge.

Posted by: natecar | February 7, 2011 8:14 PM | Report abuse

Get rid of the Bush tax cuts, cut ten percent of every federal agency, bring our troops home from Iraq and Afghanistan, create a single payer, Medicare-like, health plan for everyone, and put term limits on Congress. By 2015 the federal government could be rolling in money

Posted by: phoss1 | February 7, 2011 8:48 PM | Report abuse

If you raise taxes on the most productive, it will be in their interest to work less, or stop working completely. Then where will you be?

Posted by: vinyl1 | February 8, 2011 7:53 AM | Report abuse

If we assume the problem is the deficit... then there are two ways to end it. One is to raise taxes, and the other to cut spending.

Cut spending? Where?

Go to where the money is: Social Security and Medicare. (Cutting money elsewhere is not going to dent the deficit.)

Cut Social Security? Cut Medicare? Throw grandma under the bus? What can you possibly be thinking?

That is why ending the tax cuts is so reasonable! NOTHING ELSE IS POSSIBLE!

Posted by: michael_chaplan | February 8, 2011 8:06 AM | Report abuse

Besides the two Bush wars that will ultimately cost who knows how may trillions,just one of the other most idiotic and disastrous Bush policies was the two tax cuts that squandered the huge Clinton surpluses.The country was on its way to paying down the entire national debt before the Bush crowd and the Republican congress destroyed the peace and prosperity of the nation.Let the Bush tax cuts for the rich expire and phase back in the Clinton era tax rates over a five year period as the nation returns to full employment.And get out of Afghanistan and Iraq ASAP and cut the obscene and bloated military budget by at least 50%over ten years and use those fnds to pay down the national debt and to rebuild the nation-a good first step would be for courageous congressional Republicans and Democrats to support the Ron Paul/Barney Frank bill to cut the Pentagon budget by at least a trillion dollars over the next decade.

Posted by: johnbird1 | February 8, 2011 9:40 AM | Report abuse

Simple way to balance the Budget. Eliminate 90% of all federal spending. Then lower taxes to meet the new expense level.

Problem solved.

Posted by: BradG | February 8, 2011 11:20 AM | Report abuse

I have to assume that congressional leaders, and most readers of the WP columns, have a basic understanding of arithmetic----not advanced math, just elementary school arithmetic. Wisconsin congressional Representative Paul Ryan, the Republican economic "guru", suggests that we cut the debt through deficit reduction of 60 to 100 billion dollars per year. To think that decreasing spending by 100 billion dollars for each coming year will make a dent in the debt is insane. Using figures for the 2010 budget, consider the following:
Revenue 2.381 Trillion
Spending 3.552Trillion
2010 Deficit 1.171 Trillion
If 100 billion had been trimmed from the 2010 budget, it would still have left A DEFICIT OF 1.11 TRILLION (eleven times the proposed 100 billion cut in spending), which would have to be ADDED TO THE DEBT. The same additions will be added each year until the budget is ACTUALLY BALANCED !! Consider the following arithmetic:

1. The current debt is reported as 14 trillion dollars.
2. If the annual deficit---now running in the trillion dollars + range---could be totally eliminated, we could use any "surplus" for each year to pay toward the debt. If the annual deficit were zero (balanced budget, but no surplus), nothing would be available to pay toward lowering the debt.
3. If we could have a surplus of 500 billion each year without fail-----this would require a change of 1.5 trillion, from one trillion dollar deficit to 500 billion surplus---we could pay off the debt in 28 years.
4. If we managed to eke out a surplus of only 100 billion each year (hasn't been done in past several decades except for one questionable year under Clinton) it would take 140 YEARS TO ELIMINATE THE DEBT.
If ALL expenditures, other than national defense and interest on the debt were eliminated-----that is NOTHING spent on any other item, zero, nada, zilch-----the debt could be paid off in 5 years and 2 months. Figures used are from the 2010 budget: Total expenditures 3.55 trillion, total defense spending 663.7 billion, interest on the debt 164 billion. Therefore 3.55 trillion minus (0.6637 trillion + 0.164 trillion) = 2.72 trillion. With national debt of 14 trillion, divide that figure by 2.72. and get 5.147 which is the number of years (approximately 5 years and 2 months) it would take to pay off the debt with NOTHING OTHER THAN DEFENSE AND INTEREST ON THE DEBT PAID.

In short, SPENDING CUTS WILL NEVER ELIMINATE THE DEBT. We have to grit our teeth and accept more taxes, or the alternative of "printing more money" with resultant, and unpredictable, INFLATION to pay off the debt. Take your choice. I would favor starting with a ten percent surtax on our IRS payments such as we had during the Vietnam fiasco. Let's see what that would do to the budget, with a ban on any increase in spending.

Posted by: merhoff | February 8, 2011 12:12 PM | Report abuse

I've never met a liberal who didn't want more of my money. Never.

It is important to understand the liberal mindset when it comes to federal spending. Liberals adore big government and a easy way to measure the size of the government is to look at spending. More government means more spending. Less spending means less government.

Since the liberals cannot imagine LESS government the only "solution" that occurs to their seriously deficient brains is take more money from the citizens.

No thanks EJ. the government already wastes too much of my money. If taxes go up, I predict a fight. And yes I mean fight. The second amendment exists for a reason and that reason is clearly outlined in MR Dionne's column.

Posted by: skipsailing28 | February 8, 2011 12:14 PM | Report abuse

BradG wrote:
"Simple way to balance the Budget. Eliminate 90% of all federal spending. Then lower taxes to meet the new expense level.
Problem solved."
_____________________________
Great satire, dude! Here's some more: The way to cure cancer is to kill the patient! Problem solved.

So, Brad, which 10% of the Federal government would you leave in place?

(This ought to be good . . .).

Posted by: post_reader_in_wv | February 8, 2011 12:55 PM | Report abuse

Typical Liberal--the solution to all our problems is to require the American people to surrender more of the money they worked for to the idiots in Washington.

No, the real budget solution is to STOP SPENDING MONEY WE DON'T HAVE!

Posted by: HenryMiller1 | February 8, 2011 3:30 PM | Report abuse

bjeagle784 wrote:
Well EJ, were running a 1.5 trillion dollar deficit every year. So just allowing the Bush tax cuts to expire takes care of about 4 trillion over the next decade. How do take care of the other 11 trillion

Fuzzy math bj. The 1.5t deficit is a high-water mark (look it up) and will not repeat annually. The tax cuts do.

Posted by: bodypolitic | February 8, 2011 3:36 PM | Report abuse

I'll be 58 years old in a couple of months, and not far from when Social Security and Medicare will kick in.

I'll make this offer to the feds: return all the money you ever taxed away from me for Social Security and Medicare and delete me from the list of people to whom you owe Social Security cheques and whose medical bills you'll be obligated to pay. You can lessen your future obligation by having one less old guy to worry about.

I expect there are a lot of people who'd take the same deal.

Posted by: HenryMiller1 | February 8, 2011 3:44 PM | Report abuse

post_reader_in_wv,;all

to "PRinWV": tell us "oh, great, mighty & wise oracle", WHICH 20% of the BLOATED/stupid/needLESS obama/"DIMocRAT leaders" federal "budget" would YOU cut, so that we can balance our "books"?
OR
do you counsel us to just keep spending money that we simply do NOT have?

to all: the more i learn about "progressives"/"liberals"/DIMocRAT extremists/leftists, the better i like poisonous snakes, slugs, venomous spiders & scorpions.

yours, TN46
coordinator, CCTPP

Posted by: texasnative46 | February 8, 2011 3:47 PM | Report abuse

Like all liberals Dionne thinks raising taxes X will bring in X revenue. It doesn't work that way. Raising taxes often results in much less revenue than expected or less revenue than what was received before the implementation of the tax cuts. People will find tax loopholes or simply not put in the extra time or investment if doing so results in more money going to the goverment. I think all of us would feel better about paying taxes if the government was not so stupid on how it was spent. Examples abound: Farm subsidies, support of NPR, Ethanol production, Dept. of Education, UN subsidies, excessive military spending, poorly managed entitlements, insane investments in trendy green technology, subsidies to Acorn and Planned Parenthood. Huge bloated federal bureacracy that chokes out innovation and makes it difficult ot grow jobs in the US. It goes on and on and on.

Posted by: jkk1943 | February 8, 2011 3:55 PM | Report abuse

I guess it is not surprising to read leftwing/liberal/progressive/socialist comments on the Washington Post. Deficits always come from excess spending. Isn't that way in every home in America? Government never cuts anything, just the opposite, they keep raising the spending as Obama and the liberal Congress has done for the last 4 years. It is the spending stupid. And the American people's money does not belong to the government to "redistribute," what is that called? Sociaslism!

Posted by: josedfarias | February 8, 2011 3:57 PM | Report abuse

I guess it is not surprising to read leftwing/liberal/progressive/socialist comments on the Washington Post. Deficits always come from excess spending. Isn't that way in every home in America? Government never cuts anything, just the opposite, they keep raising the spending as Obama and the liberal Congress has done for the last 4 years. It is the spending stupid. And the American people's money does not belong to the government to "redistribute," what is that called? Sociaslism!

Posted by: josedfarias | February 8, 2011 3:58 PM | Report abuse

I guess it is not surprising to read leftwing/liberal/progressive/socialist comments on the Washington Post. Deficits always come from excess spending. Isn't that way in every home in America? Government never cuts anything, just the opposite, they keep raising the spending as Obama and the liberal Congress has done for the last 4 years. It is the spending stupid. And the American people's money does not belong to the government to "redistribute," what is that called? Sociaslism!

Posted by: josedfarias | February 8, 2011 3:59 PM | Report abuse

EJ's peice can be neatly summed up:

1. Tax the rich.

2. Insult those with whom you disagree.


DisOppointing

Posted by: MtWest9 | February 8, 2011 4:02 PM | Report abuse

@HenryMiller1, I read your proposal. I am in a similar situation to yours, however, that means you and I would get more money than we ever will by continuing on the SS roles. The government will never do that. People don't realize that what they put in (of course, including what the employers put in for you - which we all know it is still you who have put in that money, it is computed on the employers cost) will never be returned to you. Consider the average age of the tax payers. And liberals think SS and Medicare are such great programs. They are not! In average people do not get back what they pay into SS and Medicare.

Posted by: josedfarias | February 8, 2011 4:42 PM | Report abuse

The thing is if you give the government more money it will simply spend more money. So if you let all the Bush tax cuts expire it won't result in smaller budget deficits it will just result in the politicians going on another orgy of government spending. How about if we make a deal: I'd accept the tax rates of the Clinton years in exchange for government spending and workforce of the Clinton years.

Posted by: RobT1 | February 8, 2011 4:42 PM | Report abuse

E.J. is advocating letting ALL the tax rates go up; not just for the "rich." The "rich" will only provide $0.7T over ten years. Even with E.J.'s tax hikes, another $10T will be added to the national debt over ten years. If Obamacare blows the budget up, then what? Oh wait, that will never happen. Federal entitlements always come in on budget.

Posted by: johneb | February 8, 2011 4:51 PM | Report abuse

I think it's high time to refudiate the hypocritical position of most Rethugs on this subject. If you're really concerned with the growing debt and deficit, would you be open to the idea of paying a little more in taxes that you currently are? or ending two as-for-yet unpaid for wars of mass delusion? or slashing the defense budget significantly?

Posted by: dc1020008 | February 8, 2011 5:00 PM | Report abuse

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned, this is the sum of good government - Thomas Jefferson.

The problem with Socialism is eventually you run out of other people's money - Margaret Thatcher.

Why are these simple concepts so hard to understand?

I am 51 years old, house is paid off, cars and boat are paid off, I served in the Army, worked my way through college, work 70 hours a week running 2 small businesses, put 4 kids through college, and I have no debt. If I can manage all that, why can't (1) president, (1) vice president, 535 congressmen (and women), and millions of overpaid government parasites get our national house in order?

Anyone can find fault with a political philosophy which does not fit their particular credo, but this is a national embarassment which affects everyone - liberal, conservative, and independent.

I will gladly pay my share of taxes as long as the folks in Washington quit wasting it.

Hey Washington - quit borrowing money, spend less than you expect to receive in taxes and fees, quit telling the rest of the world how to behave, secure our borders, and make the USA a place of integrity and high ideals - in other words, lead the world by example. That is all I ask, I will even leave the details to you. You guys are suppossed to be our brain trust, prove it!

Posted by: hbeckwith | February 8, 2011 5:03 PM | Report abuse

If you raise taxes on the most productive, it will be in their interest to work less, or stop working completely. Then where will you be?

Posted by: vinyl1 |

_________________________________________

You mean, raise taxes on the luckiest of Americans, many of whom are not really that productive?

Posted by: dc1020008 | February 8, 2011 5:03 PM | Report abuse

The first step for any bankrupt individual or nation is to cut up the credit cards. That doesn't mean going out & spending $58 billion on high speed rail that you'll borrow from china or create out of thin air with Uncle Ben's printing press. More taxes ain't the answer.

The bottom line is that our leaders are brain dead. Recommend EEG, calorics & apnea test.

Posted by: aicohn | February 8, 2011 5:04 PM | Report abuse

I'll go along with going back to tax levels under Clinton but only if we also go back to spending levels under Clinton.

Posted by: rvsicoli | February 8, 2011 5:06 PM | Report abuse

@dc1020008, as all liberals your implication that our deficits/debt are due to the fact that were not taxed enough is ridiculous. In your home, how do you handle your finances? Do you spend what you don't have? If you do that you are in trouble. And what we witness everyday with Obama's administration and the Democrats ruling? They are always proposing more and more spending regardless of the fact that they don't have the resources to pay them. It is the spending stupid. By the way, isn't it interesting that the liberal politicians and pundits are always asking "how do you pay for tax cuts?" And yet, they don't ask those implementing more spending the same question! First, tax is taking money away from people. That is done because of growth of government.

Posted by: josedfarias | February 8, 2011 5:10 PM | Report abuse

look republicans have to embrace tax increases, and letting the bush cuts disappear is fine. Liberal talking point: "fiscal conservatives" refuse raising taxes under any circumstances, proving they're disingenuous ideologues.

US debt is enormous, and tax increases are necessary and will be less painful as the economy recovers. There is room for compromise, which the GOP will benefit from greatly if it takes initiative. Cut defense spending also as a symbolic measure. Nothing bad, but Gates recommended 100Bn, fine. You have to think that the pentagon can't be an example of efficiency given the $700 billion budget it's given, that much is logical. No branch escapes the pitfalls innate to big government.

Then squash obamacare, means test Soc Sec, outlaw "stimulus" and we can all continue with our lives.

Posted by: batigol85 | February 8, 2011 5:10 PM | Report abuse

The falacy of the EJ's premise is that the tax rate increase will have as its consequence significant slowing of the economy and the projected new 3.9 trillion in revenue will never materialize.
Just ask the former New York state governor David Paterson and he will tell you that when the state of New York instituted an additional tax on "millionnaires", not only the state of New York did not get revenues expected from this hike, but got even less revenues from this class of tax payers then before this tax hike got into effect.
Go figure...

Posted by: IsaTen | February 8, 2011 5:25 PM | Report abuse

HenryMiller1 wrote:

"I'll make this offer to the feds: return all the money you ever taxed away from me for Social Security and Medicare and delete me from the list of people to whom you owe Social Security cheques and whose medical bills you'll be obligated to pay. You can lessen your future obligation by having one less old guy to worry about.

I expect there are a lot of people who'd take the same deal."

Maybe so, but everyone on of you that does this and doesn't die relatively young will be making a bad bet.

Posted by: cometboy | February 8, 2011 5:36 PM | Report abuse

When we talk about raising taxes, lets be specific as possible. Lets stop talking in terms of tax hikes or tax cuts, lets be specific and talk tax rates. By doing this, we can talk about a fair portion of taxes from profits being paid to the government. For example, a guy makes 2 million dollars. How much of that should go to taxes? For the sake of argument, lets limit our conversation to the 2nd million the guy earns. If the Bush tax cuts were to go away, his federal tax rate on the second million would be 44 percent. Add 9 percent for the average state tax and were up to 53 percent of the guys second million going to Uncle Sugar. No doubt, the guy won't go hungry, but it is fair that he pays more to the government for the work or money he earns then he gets to keep?

Posted by: Tom2cents | February 8, 2011 6:46 PM | Report abuse

you create more jobs and growth with lower taxes than by increasing them. Democrats increase regulation, injecting uncertainty of taxes, has lengthened the recovery because business doesn't know what is coming next. The government needs to live within the revenue it gets.

Posted by: jschmidt2 | February 8, 2011 6:55 PM | Report abuse

Both Hoover and FDR demonstrated that increasing taxes on investment do not bring in more revenue. This has been demonstrated time and again. Numerous studies including a recent one by Christine Romer have demonstrated and quantified this.
It is a centrepiece of progressive theory that taxes can be used to alter peoples behaviour. Why would you presume that this is true in all things except investment. When an excellent return on investment is barely over 10% a 10% increase in the tax rate makes that investment no longer viable. Money and effort will be directed where it can get the best return. If you keep taxes on investment low then more investment will occur, there will be more jobs and an improving standard of living. If you tax the bejeezus out of investment the money will find other places to go - under the bed or out of the country and you will lose not only the tax revenues you salivate over, but jobs and the better life investment brings.
This president talks alot about investing - but he seems to beleive that investment is something that only government does. In truth it is something that only government can not do.
The problem of the deficit will have to be solved. That solution will require higher taxes, reduced spending, and probably inflation - which is just another tax. Of those only reduced government spending will have a positive economic effect.
Regardless, magical thinking will not solve this problem. We are beyond passing the problem on to our children, the pain of our past profligacy will be inflicted on ourselves.
If you want to tax the hell out of the so called rich - fine, just consider the possibility that in the end it will be you rather than the rich who suffer.

Posted by: dhlii | February 8, 2011 7:02 PM | Report abuse

Wow, what a shock, EJ Dionne wants to raise taxes. What a creative idea.

EJ, the country is not creating jobs and you want to raise taxes. Brilliant. Herbert Hoover tried that and it didn't work too well. But then again, you are a Hoover Democrat.

EJ: a real budget solution would make the entitlements solvent. You have no idea how to create a real budget solution and so your headline is a complete joke.

Posted by: kinny_mcquade | February 8, 2011 7:49 PM | Report abuse

"We cannot get the money back that was spent on the Afghanistan and Iraq wars, and the prescription drug benefit will not be repealed, nor should it be. The recession will gradually come to an end. That leaves the issue of revenues."

I can't imagine a lazier way of reaching the conclusion that our deficit is a revenue problem more than a spending problem. I know you've got limited space to make your point EJ, but come on-- at least try.

Posted by: cryang | February 8, 2011 7:49 PM | Report abuse

Why is this still worth writing about, and reading? Have we not gone over these points ad nauseum the past few years?

Posted by: georgegleason70 | February 8, 2011 8:10 PM | Report abuse

Most of the Bush tax cuts went to the Middle and Lower classes. Neither party will do away with these cuts (although they should) and there is just not enough dollars if tax cuts are only taken away from the rich.

Posted by: dfox71 | February 8, 2011 8:24 PM | Report abuse

According to E.J. Dionne the problem is never the amount of federal spending. It's the stupid taxpayers who insist on keeping some of their money that's the problem!

The truth is that there is not enough tax money in the entire world to finance all the liberal programs that E.J. Dionne can dream up.

Here is a thought - let's start controlling our spending before the USA loses its credit rating and begins to default on its debt.

How 'bout that?

Posted by: johnrtorres | February 8, 2011 9:02 PM | Report abuse

This is about as dunb a column as I can imagine. It would only be true if the government were spending at the same level as it was when Clinton was in office. However, as we all know the government is much larger and more expensive then it was in the 90s. Not really rocket science here...

Posted by: johnmonk1 | February 8, 2011 9:22 PM | Report abuse

This is about as dunb a column as I can imagine. It would only be true if the government were spending at the same level as it was when Clinton was in office. However, as we all know the government is much larger and more expensive then it was in the 90s. Not really rocket science here...

Posted by: johnmonk1 | February 8, 2011 9:22 PM | Report abuse

This is about as dumb a column as I can imagine. It would only be true if the government were spending at the same level as it was when Clinton was in office. However, as we all know the government is much larger and more expensive then it was in the 90s. Not really rocket science here...

Posted by: johnmonk1 | February 8, 2011 9:23 PM | Report abuse

Obama's never been willing to raise taxes on everyone. Interferes with his wealth-spreading initiative.

Posted by: ttatum | February 8, 2011 9:28 PM | Report abuse

Cut taxes. Cut taxes. Cut taxes. Cut government spending. Cut the deficit. Cut the debt. Vote the people out who won't. Vote people in who will.

Posted by: jy151310 | February 8, 2011 9:28 PM | Report abuse

seriously, there is no bigger fool in the punditsphere than EJ Dionne. solution to everything: raise taxes on the rich. the fact that the WaPo keeps this idiot employed is doubly damning. he's not fit to wash the windows of a legitimate newspaper.

Posted by: subframer | February 8, 2011 9:35 PM | Report abuse

Another West had it right; Tax some folks and disparages those who disagree.

But it is worse. You just cannot tax your way out of this one EJ. No, No, No, No, No, No.

Spending is the problem. Spending is the problem. Spending is the problem. Spending is the problem.

Is it clear? Is it clear? Is it clear? Is it clear?

Duh!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Posted by: dickwest99 | February 8, 2011 9:59 PM | Report abuse

The government that robs Peter to pay Paul will always have the support of Paul.

Posted by: calcoolidge2012 | February 8, 2011 10:00 PM | Report abuse

EJ Dionne idea is to raise taxes and then some. So here is a question that EJ ignores.... when you look and the states, especially the high taxing liberal blue states, does it not impress you that they are running deficits in the good times? In other words, fine raise the taxes, generate a VAT too boot, but then what are you going to do the next time the government is breaking at the seams? Oh, and lets not additionally ignore the European case study in high taxes, VAT and economic growth. And stop with the clinton tax rates and surplus, they were entirely a function of tech capital gains and the projections illusionary.

Posted by: hughcity | February 8, 2011 10:00 PM | Report abuse

The government that robs Peter to pay Paul will always have the support of Paul.

Posted by: calcoolidge2012 | February 8, 2011 10:01 PM | Report abuse

The problem is NEVER that the federal government doesn't get enough tax money in. It is ALWAYS that it spends to much. Simple: cut spending to match the income! Except for defense, which could get a few cuts, and domestic security, everything else can get cut a lot.

Posted by: fraudbust2011 | February 8, 2011 11:12 PM | Report abuse

Righto ... running on the tax issue in 2012 will be about as successful for Barry as it was in November ... keep on creating that alternative reality ... you libs have a bad tendency to write as you wish things to be and not as they truly are ... you can't live life by academic theory Mr. Dionne because it's LIFE ... life is what happens when you are busy making other plans ... people need to keep more of their own hard eanrned income to use it as they see fit, not as a tool for social justice or some program dreamed up by the policy wonks in their ivory towers ... life is lived ON THE GROUND ... I suggest you quit flying around in your observation chopper and get down in the weeds a bit with the rest of us who work hard every day for a living ... it might change your perspective ... but I doubt ...

Posted by: cunn9305 | February 8, 2011 11:14 PM | Report abuse

sorry - spends TOO much, I meant to say

Posted by: fraudbust2011 | February 8, 2011 11:15 PM | Report abuse

It never occurs to these guys that the government spends too much, it's always that we're taxed too little.

Posted by: sectionsix | February 8, 2011 11:20 PM | Report abuse

So EJ Dionne and the rest of the liberal democrat party are simply lying or can't perform simple math. In 2008 there were 4,375,659 people who filed taxes that made over 200,000. The bulk of those 3,476,747 made between 200 - 500k. If we charged all of them an extra 20,000 in taxes, a number far higher than the Bush tax cuts it would amount to 87 billion. If we charged them an extra 40,000 it would obviously be 176 Billion a year. So what? The budget deficit for the year 2011 is project to be 1400 Billion. You would have to more than double the tax rate of the entire population of the US to meet that budget deficit. If you doubled every tax payers current tax rate, it would make up for the deficit. Total revenue from taxes went up every year with a slight decreast from 2007 to 2008 but still greater than 2006. So this bunk about the Bush tax cuts fixing the debt is just that. Spending increases more than revenue every year. That is the only problem. That is the only thing that needs to be cut and taken care of. No matter how much we raise taxes, if we don't cut the spending by almost 40% we will still be over spending.

Posted by: Quek | February 9, 2011 12:14 AM | Report abuse

"If your salary is reduced, keep spending. Any resulting economic problem will fix itself when your old salary is restated"
Sincerely,
E.J. Dionne,
Financial adviser Extraordinaire!

Posted by: mleonreview | February 9, 2011 12:14 AM | Report abuse

50% of US working population pay no ifederal or state ncome taxes. Guess which party they vote for? If only US businesses would "spread it around" our problems would disappear.

Posted by: calcoolidge2012 | February 9, 2011 12:26 AM | Report abuse

Once again Dionne tries to convince us that he knows something about the economy, when he is absolutely clueless.

While the deficit did rise during Bush's presidency, the amount of increase wasn't even a drop in the bucket compared to what Obama has done. In the two years Obama has been president he has spent more money than all of the previous US presidents combined. Just his totally ineffectual stimulus bill cost more than the Iran and Iraq wars combined and most of that money was wasted on pork and special interest groups. The easiest way to reduce the deficit is to reduce the federal budget to the 2008 level, and pass a balanced budget amendment.

Posted by: mike85 | February 9, 2011 1:16 AM | Report abuse

The budget is the government's problem. The people's problem is how to shut off the money supply to the government. Higher taxes will just mean more ruinous spending. We need tax cuts on the order of 90% for everybody who pays taxes. Hhat will get government down to the size it needs to be. The Bush tax cuts were a good start, but we need to go a lot further.

Posted by: doctorfixit | February 9, 2011 2:09 AM | Report abuse

Democrats can't even agree that "IT'S THE SPENDING STUPID" that's created the problem.
This is simple. Spending by the federal government has INCREASED 3 trillion dollars in the last two years going from less than 20% of GDP to almost 27%. The SPENDING has to be brought under control. WE CAN'T AFFORD IT.
As per usual, the Democrat's solution is to raise taxes which will destroy hundreds of thousands of jobs and plunge us into another Depression.
Democrats voted for the Bush Tax Cuts because they know the real losers will be the lower income tax brackets who will, again, pay more as a percent of the total.
RAISING TAXES DOES NOTHING TO REDUCE SPENDING AS A PERCENT OF GROSS DOMESTIC PRODUCT.

Posted by: backsds | February 14, 2011 12:45 PM | Report abuse

Democrats can't even agree that "IT'S THE SPENDING STUPID" that's created the problem.
This is simple. Spending by the federal government has INCREASED 3 trillion dollars in the last two years going from less than 20% of GDP to almost 27%. The SPENDING has to be brought under control. WE CAN'T AFFORD IT.
As per usual, the Democrat's solution is to raise taxes which will destroy hundreds of thousands of jobs and plunge us into another Depression.
Democrats voted for the Bush Tax Cuts because they know the real losers will be the lower income tax brackets who will, again, pay more as a percent of the total.
RAISING TAXES DOES NOTHING TO REDUCE SPENDING AS A PERCENT OF GROSS DOMESTIC PRODUCT.

Posted by: backsds | February 14, 2011 12:46 PM | Report abuse

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