Dems on Obama fiscal commission raise conservative hackles with talk of ‘pro-growth’ tax hikes

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Two immovable facts face Democrats on President Obama’s fiscal commission: They don’t see any way to alleviate the country’s debt without raising taxes, and they know most voters hate the thought of any tax increase.

Leading Democrats on the commission tried during the first week of meetings to finesse their way toward a discussion of what they consider inevitable — by arguing that any tax hikes would be “pro-growth.”

“If we can put forward some practical proposals that control the rate of spending in the future and that raise revenues in a pro-growth way, I think we’ll get a hearing in the Congress,” said Alice Rivlin, a former White House budget director for President Jimmy Carter, who is one of 18 commission members.

If you didn’t read the word “tax” in the previous sentence, that’s because most who favor raising taxes don’t like to use the word. Instead they use “revenue,” as in the money that comes to the government from taxpayers.

Commission co-chair Erskine Bowles made clear last week that any recommendations he puts forth or supports by the Dec. 1 due date will include higher taxes. The three working groups that he set up to meet weekly over the next several months are focused on mandatory spending, discretionary spending and revenue reform.

Any solution is “going to involve revenue, and we have to face up to that,” he said. Bowles, a former White House chief of staff to President Clinton, also followed Rivlin’s tack, arguing that any tax increase would have to be good for the economy, business, job creation, etc.

“I want to make sure that any time we discuss revenues that we don’t do anything that has a negative impact on economic growth,” Bowles said.

Rivlin went so far as to say, at a summit hosted by the Peterson Foundation, “one can make a case for being a little bit conservative, especially on spending.”

Even Senate Minority Whip Dick Durbin, Illinois Democrat, got into the act, telling “bleeding heart liberals” that they should expect cuts to spending on things they value most.

However, conservative tax and budget experts were not overwhelmed

“I have no idea what they’re talking about,” said Doug Holtz-Eakin, a former director of the Congressional Budget Office who was a top economic adviser to Sen. John McCain during his presidential run.

Holtz-Eakin said the rhetorical nods to conservatives – in particular the talk of “pro-growth” tax hikes – are just words until someone takes a policy position.

“I want to see them write it down. Anyone can say that,” he said.

Ryan Ellis, policy director at Americans for Tax Reform, one of the most vigorous anti-tax groups in Washington, said “pro-growth” tax hikes don’t exist.

“They’re all anti-growth, any additional taxes on top of our existing tax burden, by definition,” said Ryan Ellis, policy director at Americans for Tax Reform, a group that is against most tax increases.

“Any time you take tax dollars out of the private economy, you’re taking away the seed corn of economic growth. You’re crowding out the private sector. It’s like taking oxygen away from a fire,” Ellis said. “To talk about doing it in a pro-growth way strikes me as absurd. You’re talking about doing the least amount of damage, not helping anything.”

Roberton Williams, a senior fellow at the Tax Policy Center, has a much different philosophical orientation on taxes than Ellis, but agreed that tax increases would not be “pro-growth.”

A value-added tax (VAT), he said, is the most likely recommendation to come out of the fiscal commission’s liberal wing, at least, because “while it may not be pro-growth at least it’s not anti-growth.”

“It raises a lot of money without affecting what people do and that’s a good thing,” Williams said.

The VAT taxes goods at every stage of production, functioning as a consumption tax that is driven by how much people buy.

Some conservatives like the egalitarian nature of the VAT and are open to replacing the income tax with a VAT. But most believe the Obama White House would only tack it on top of the existing tax structure, creating a large new source of revenue and doing nothing to encourage government belt-tightening.

The White House has offered a dizzying array of explanations about whether or not it plans to consider a VAT. Press secretary Robert Gibbs has denied it is even an option under consideration, while other advisers have openly said it has to be on the table.

As for where the fiscal commission ends up, Rivlin acknowledged last week that “we are not agreed and probably in the end won’t all agree on an exact solution.”

The commission will need 14 of the panel’s 18 members to vote in favor of final recommendations for them to be passed to Congress, where the report would be only advisory and Congress would not be required to vote on it.

Experts agreed that even if the commission ends up deadlocked, it will still have served a purpose.

“Discussions are good,” Williams said. “The more the public understands what the issues are and how big the problem is, the better off we’ll be.”

Holtz-Eakin said he expects the commission to be so divided between those on the left and those on the right that “there’s a chance you’ll get two clearly articulated different plans.”

“And that’s a good start. You’ve got to have a debate about how to solve this problem and specific solutions is way better than general rhetoric,” he said.

Still, many conservatives see the commission as a stalking horse for taxes.

“It’s about finding ways to trick people into thinking about spending, but in reality the only outcome is to increase taxes,” said Ellis.

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