Debt-ceiling demagoguery: How the GOP can win the war of words

David Cohen Former Deputy Assistant Sec. of the Interior
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The debt-ceiling negotiations have predictably deteriorated into a game of partisan chicken. President Obama is setting up Republicans to take the blame if a fiscal and economic catastrophe results from the failure to reach a deal to raise the debt ceiling. Even worse, Obama is threatening to saddle the GOP with co-ownership of his stinking economy. Democrats are charging Republicans with courting economic disaster to protect their wealthy patrons from tax hikes. The GOP is responding with its “go-to” move for whenever Democrats try to raise taxes: accusing them of waging class warfare.

Now that “class warfare” charge might cause dyed-in-the-wool Republicans to burn with righteous indignation, but it really doesn’t move the dial for people outside the base. As a Republican, I of course weep bitter tears of pity for billionaires who might have to put off buying that second corporate jet if Obama’s cruel tax increases go through. I have learned, though, that there are hard-hearted people out there incapable of feeling the empathy for the super-rich that I feel intuitively as a Republican. And many of those people are the Independents who will ultimately determine the electoral winners and losers of this showdown, and hence the course of our country’s history. It therefore behooves us to explain our opposition to tax hikes in ways that will resonate with Independents — even those not wealthy enough to feel victimized by class warfare.

I offer, then, this guide to refuting the partisan demagoguery that is being employed to support tax hikes. I have tried to make this user-friendly by using the format of standard Q&A, or perhaps of “Snappy Answers to Stupid Questions”:

Can’t millionaires and billionaires afford to pay higher taxes? Of course they can. We don’t care if raising taxes would cramp the Lifestyles of the Rich and Famous — they can choke on their caviar for all we care. What we care about is that the rich, who have the ability to make the investments that allow businesses to create jobs, will have less money to invest. That doesn’t mean that all rich people will invest less because of higher taxes, but overall, less money available for investment will result in less investment. Investments lead to profits and wages, as well as to purchases that also lead to profits and wages, all of which leads to more government revenue. The harmful effect of raising taxes can be more than offset by strong economic conditions — which are conspicuously absent at the moment. A wise man once said: “The last thing you want to do is raise taxes in the middle of a recession.” That wise man was President Obama. If the government resists taking more money from those who can invest, then more investments will occur that will potentially make the rest of us richer (and ultimately generate more government revenue to boot). Most of us would call this a win-win, but there are people who would rather stay poor than allow others to be rich. They’re called Europeans.

If millionaires and billionaires have less money to invest, can’t government investment make up for it? There are very few things that government does efficiently, and creating jobs isn’t one of them. It was recently estimated that the stimulus cost us $278,000 per job created, and that we could have saved $427 billion by simply giving each of these people a check for $100,000. And the stimulus has added $666 billion (so far) to the debt burden on our children and grandchildren. Sure, the government could suck more money out of our struggling economy and pump some of that money back into the economy in government’s disastrously inefficient manner, but here’s a better idea: just leave the money in the economy in the first place. The private sector, unlike government, creates jobs without adding to the tax or debt burdens that we all have to bear.

Why do corporate jet owners need tax breaks when we have a large deficit? We don’t care about the corporate jet owners; they’ll be just fine. We do, however, care about the people whose jobs depend on them — people who build the planes, maintain them, fly them, staff them and supply them. Obama’s fixation with corporate jet owners recalls another misguided effort to raise tax revenues from the “super rich” two decades ago: the luxury tax on yachts. The tax caused thousands of workers in the boat-building industry to lose their jobs. Having said that, it would ultimately be better to do away with these special tax breaks for favored industries. Rather than having the geniuses in government micromanage the economy by picking who gets tax breaks — usually based on who has the best lobbyists — it would be better to allow all industries to enjoy lower tax rates so they’ll have more money available to hire and expand. However, if we just close the special loopholes without lowering tax rates, we’ll lose the benefit to our economy of the targeted tax breaks without making up for it with more broadly based incentives for investment, hiring and expansion.

But don’t we need revenues to reduce the deficit? Yes we do. But “revenues” should not be used as a synonym for higher taxes. Tax revenues increased after the major tax cuts by Bush and Reagan, because the cuts spurred economic growth that generated more taxable profits and wages. Economic growth is the most effective way to increase government revenues, and raising taxes would undermine that.

What’s wrong with “Shared Sacrifice”? Aren’t we all in this together? Shared sacrifice is fine, but increasing taxes in this fragile economy wouldn’t result so much in shared sacrifice as more sacrifice — for all of us. Again, by increasing taxes on those who make the investments that create jobs, we will leave less money available for them to invest and hence fewer jobs will be created. That’s not shared sacrifice; that’s cutting off our nose to spite our face.

President Obama is proposing a “balanced approach” to reducing the deficit with both spending cuts and tax increases. Who could possibly be against balance? President Obama also says we have to “eat our peas,” meaning that it’s time to do what we need to do to reach a deal. Spending cuts are necessary to restore our fiscal health and prevent us from going the way of Greece. They’re like peas in that way: They don’t “taste good” but they’re good for us. But even Obama has acknowledged that raising taxes in a weak economy would be bad for us — like, say, poison is bad for us. If Obama’s idea of a balanced approach is to eat poison with our peas, then maybe this “balance” thing isn’t such a good idea after all.

But can we afford to keep borrowing money from China to pay for tax breaks for the rich? When we earn money, it’s ours — and the government can take some of it as necessary to promote the common good. When the government reduces our taxes, it’s not giving us anything; it’s letting us keep more of our own money. The notion of government having to “pay for” tax breaks suggests a scenario where the government is giving us its money, rather than simply resisting the temptation to take more of our money. That scenario is accurate. In North Korea.

Then what was Nancy Pelosi talking about when she said we shouldn’t consider Social Security a “piggy bank” for giving tax cuts to the wealthy?

Oh, who the hell even knows?

David B. Cohen served in the administration of President George W. Bush as U.S. Representative to the Pacific Community, as Deputy Assistant Secretary of the Interior, and as a member of the President’s Advisory Commission on Asian Americans and Pacific Islanders. He hosts the debate show “Beer Summit” for PBS Guam.