Myths on Spending, Debt, and Taxes Fuel Ryan Vision

April 5, 2012 at 11:19 am

In my latest post for US News & World Report, I identify three myths about spending, debt, and taxes that conservative politicians use to justify the plan of House Budget Committee Chairman Paul Ryan — one that would set the nation on a path to end most of government other than Social Security, health care, and defense by 2050.  I ask:

Are those who advance these myths interested in fixing the deficit and debt problem, as most Americans would hope, or are they conducting a bait-and-switch in pursuit of anti-tax advocate Grover Norquist’s quest to “reduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub?”

I draw on CBPP analyses to rebut the following three myths:

Myth #1: Spending Is Out of Control, and Only Draconian Cuts Will Rein It In

As CBPP analysis has shown, non-interest spending outside Social Security and Medicare spiked in the Great Recession but is scheduled to fall substantially as a share of Gross Domestic Product (GDP) over the next 10 years as the economy recovers.  Moreover, the aging of the population and rising health care costs economy-wide are responsible for the growth in government spending in subsequent decades, not uncontrolled growth in government spending generally.

Myth #2: The Country Faces a Looming Debt Crisis Due to the Debt Incurred In the Past Few Years

That myth fueled irresponsible brinksmanship over legislation to raise the nation’s debt limit last year, and it stands in the way of meaningful deficit reduction.  But the weak economy and the legacy of policies enacted under President Bush (especially his tax cuts) play a far larger role in explaining deficits and debt going forward than recent temporary measures that were designed to combat the financial crisis and recession.

Myth #3: Americans’ Tax Burden Is High and Rising

As this CBPP analysis shows, the most recent “Tax Freedom Day” report that the Tax Foundation released earlier this week gives a misleading impression of the tax burden that the average American faces.  And as this CBPP analysis shows, average federal income rates are at historic lows for typical taxpayers.  When total taxes, including federal and state and local taxes, are taken into account, the United States has one of the lowest average tax rates among all industrialized countries.

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More About Chad Stone

Chad Stone

Chad Stone is Chief Economist at the Center on Budget and Policy Priorities, where he specializes in the economic analysis of budget and policy issues. You can follow him on Twitter @ChadCBPP.

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3 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. matt #

    Myth #1 – you exclude health care spending as if, somehow, that is not spending. That would be like me not including my vodka intake when considering if I am an alcoholic…since I have only had 3 beers in the last month I must be okay.

    Myth #2 – Debt is not caused by under-taxation. Debt is caused by spending more than you take in. I cannot claim that my household debt is due to my employer not making my check large enough, I cannot rightly claim that a portion of his net worth should be mine even though he has not given me a raise. Secondly, even if I feel that I am owed that money, the debt is caused by me spending money before I have it.

    Myth #3 – the Tax burden is high and rising…The govt has incurred debt, the govt has no source of income other than taxation as they make no goods and offer no services for sale so the debt they have incurred must be paid via taxation. Simply not having the will to levy the tax necessary to offset their spending does not remove that tax burden. Tax freedom day does not equate to the day my “obligation” has been met, it just signifies when I move from a cash customer to a credit customer.

    I appreciate the analysis but it must be based in fact or it is of little value.

    Matt Johansen

    • 2

      Thanks for your comment. With respect to your first point, the US News post has a slightly longer discussion, including this quote from the CBPP analysis of spending that I cite:

      When Americans hear talk of the government exploding in size and reach, they don’t usually think this means that more people will receive Social Security and Medicare because the population is growing older or that Medicare will cost more because of factors like the aging of the baby boomers and advances in medical technology that improve health and prolong life but at significant cost. Outside of those demographic and health cost factors, the portrait of a rapidly growing federal behemoth is simply at odds with reality, since costs are shrinking to levels well below their historical averages.

      The point is that the United States is not spending like a drunken sailor on things that are wasteful or harmful, and those who act like all we need to do is sober up show little understanding of the true situation.

      With respect to the second point, analogies to households are always treacherous when talking about U.S. government debt; most of us have limited power to get a wage increase, but the U.S. government has the power to tax to pay for things its citizens want. It is just as true to say that deficits are caused by not collecting enough revenue to pay for the things we want government to provide. As the Congressional Budget Office says in its latest Economic and Budget Outlook,

      To prevent [debt from rising to unsupportable levels] policymakers will have to substantially restrain the growth of spending …, raise revenues above their historical share of GDP, or pursue some combination of those two approaches.

      With respect to your third point, I appreciate your recognition that our failure to pay for the things we want government to provide reflects a failure of political will. My point in writing this post is that this failure of political will is aided and abetted by politicians peddling these myths about spending, debt, and taxes.

    • 3

      Awesome, awesome reply!! You hit the nail on the head. With comebacks like these, you need to be in the talkshow industry.

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