Liberal economists aid Tea Party in cliff debate

January 3, 2013

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

If everyone agreed that outsized fiscal deficits present a clear and present danger, the American politicians who object to tax increases would be in serious trouble. But the anti-tax zealots are given intellectual cover by their ideological enemies, the deficit-loving liberals.

The anti-tax forces in the United States have just lost one battle. The budget law signed by President Barack Obama contained more tax increases than spending cuts. However, the agreement to make previously temporary tax cuts permanent is a concession to their thinking, and the Republicans who voted against the bill have lost none of their fervour.

In theory, their fervour is for less government, not simply for lower taxes. In practice, Tea Party-style politicians are either unrealistic or vague on just what spending should be reduced. They struggle to find programmes which are both unpopular and significant. There is a contradiction here, which enthusiasts for big government could exploit to discredit their opponents – if they were not themselves compromised by their own tolerance of large deficits.

Of course, anti-tax people are also anti-deficit, in principle. But when distinguished economists are calling for higher federal deficits for many years, sometimes adding extensive money-printing to their lists of recommendations, it looks positively conservative to say that money should not be printed and that lower taxes will eventually force down government spending.

In effect, deficit-tolerance has become common ground in U.S. politics. In a global context, that is reasonable. Even proponents of austerity usually expect deficits to fall only gradually; they recognise that unnecessary recessions follow sharp fiscal adjustments. In the United States, the consensus of ideological opposites may allow temporary budget fixes, but it also nurtures unrealistic expectations.

The Tea Party case against taxes looks much more attractive when it comes without harsh cuts in government services and entitlements. And the liberal case for big government looks more attractive when it comes without any promises of tax increases in the foreseeable future. It would be better for both sides to admit that citizens always have to pay for their governments.

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The so-called Tea Party began and remains a grass roots movement that demands our government stop giving away hard-earned dollars our citizens pay in taxes. Why should anyone be forced to throw hard-earned dollars down a sink-hole? The national budget is or should be a means of announcing agreed-upon priorities to tax payers. The fact we don’t have a budget tells our citizens we don’t know our priorities for beneficial use of tax dollars. Political smoke can’t cover the mirrors politicians use to castigate one another. Blow away the smoke by passing a budget that clearly documents the priorities of our representatives in congress. Oh, yes. Then stick to the budget or change it publicly. If we agree with your priorities, we’ll supply the tax revenues to fund them. If we don’t agree with your priorities, we won’t keep sending you to represent ours. At least that’s the way it should work.

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