By Walter Alarkon - 08/05/10 11:08 PM EDT
A number of old Republican hands warning of a deficit crisis have split with the GOP leadership over extending the George W. Bush-era tax cuts.
Sen. George Voinovich (R-Ohio), President Reagan’s budget chief David Stockman and former Federal Reserve Chairman Alan Greenspan have each argued that extending the tax cuts — set to expire at year’s end — would increase the nation’s $13 trillion debt.
“It’s like tax reductions, you don’t need to pay for them? To me, that’s nonsense,” Voinovich said.
Stockman, who once ushered Reagan’s tax-slashing budget through Congress, wrote this week in The New York Times that more tax cuts amid trillion-dollar deficits amounted to “vulgar Keynesianism.” And Greenspan, who famously backed tax cuts the last time the government ran a surplus nearly a decade ago, told NBC this week he’s in favor of them, “but not with borrowed money.”
For them, the $13 trillion debt and projections of trillion-dollar deficits in future years should be the top priority.
“It’s crisis time, and we’re ready to go over the cliff,” Voinovich said.
Their position is at odds with the official stance of GOP leaders. Minority Leader Mitch McConnellMitch McConnellOvernight Finance: House rejects financial adviser rule; Obama rebukes Sanders on big banks Senators roll out changes to criminal justice bill Sanders is most popular senator, according to constituent poll MORE (Ky.) and other top Republican senators have argued against any move that would allow the expiration of any of the tax cuts passed in 2001 and 2003 — including those for the top two tax brackets. Letting tax rates return to the previous, higher levels would hurt small businesses and the larger economy, most Republicans say.
“I don’t know anybody who believes that’s a safe or wise thing to do,” said Sen. Orrin HatchOrrin HatchIRS: Annual unpaid tax liability was 8B Hatch asks Treasury for memo that decreases transparency of tax rules Senators roll out changes to criminal justice bill MORE (R-Utah), a senior member of the Senate Finance Committee. “And whatever it takes, we should not increase taxes.”
President Obama and Senate Democratic leaders have called for extending only the tax breaks for individuals making less than $200,000 and families making less than $250,000.
One reason for the divide between folks like Voinovich, worried about the debt above all else, and party leaders is a fundamental difference in economic views.
While GOP leaders want the deficit reductions that Voinovich has called for, the Ohio senator and other deficit hawks are also open to raising new revenues through tax increases.
Voinovich noted that Stockman left the Reagan administration after arguing with colleagues who were pushing for more tax cuts on top of the ones Stockman helped craft in 1981.
“Supply-siders, it’s what George Bush, Papa Bush, said was voodoo economics,” Voinovich told The Hill. “There’s still a big debate about that [in the GOP].”
But conservatives who back an extension of the tax cuts point out that spending is the main driver of large deficits over the next decade and beyond. Extending all the tax cuts would cost more than $3 trillion over the next decade, which is still less than the cost of Medicaid, Medicare, Social Security or federal discretionary spending, said Brian Riedl, a budget expert at the Heritage Foundation.
“I would take these deficit hawks’ claims a lot more seriously if they applied even a fraction of scrutiny to spending increases as they do to the tax side,” Riedl said.
Another reason for the divide involves politics, Democrats say.
Joe Minarik, a former senior budget official in the Clinton administration, noted that major deals coupling unpopular spending cuts with even less popular tax increases — in 1982, 1984 and 1990 — used to pass on a bipartisan vote in Congress. Then, in 1992, President George H.W. Bush lost his reelection bid after breaking his “read my lips” pledge not to raise taxes, and Republicans have been wary of tax hikes since, said Minarik, now a senior vice president at the Committee for Economic Development.
“Many people would look back at that and say the guy was courageous enough to look at changing circumstances and decide he had to change position, even in a way he knew was not politically popular,” Minarik said. “But he clearly paid for it.”
Voinovich’s solution to the debt problem looks like past deficit-reduction deals — less spending and new taxes.
“They’re going to have to raise more money,” he said. “You’ve got to do both things: You’ve got to cut expenses, and you have to raise revenues.”
To strike that deal, Voinovich has pinned his hopes on the bipartisan fiscal commission that President Obama created.
“I’m leaving here, but I’m praying to the Holy Spirit that the people on the debt commission will be able to rise to the occasion and really think about the future of the country — and come back with some tough stuff that will get us back on keel,” he said.