In ‘Budget’ Deal, Republicans Just Raised Your Taxes Through The Roof

In ‘Budget’ Deal, Republicans Just Raised Your Taxes Through The Roof

Republicans voted to add the very type of spending that allegedly concerns them most, and dramatically increased the burden of government on taxpayers.
Ryan Fazio
By

The true measure of the government’s fiscal burden on the people is spending, not taxes. Every dollar spent by the government must be raised somehow — by taxes present or future. There is no such thing as a free lunch after all. So if the government spends more than it raises in revenue one year, it must take from workers and investors the difference in later years. The can is kicked down the road, but the overall cost imposed on the people is the same.

In that sense, the Republican Congress and president increased taxes on the American people by more than $500 billion in a spending deal Friday. The law lifts discretionary budget caps by nearly $300 billion in 2018 and 2019 and adds over $200 billion of other spending on top. The magnitude is significant. It equates to over 6 percent of the federal budget and over 1 percent of economic output. It costs significantly more than Obamacare annually. And the bill pushes the budget deficit above $1 trillion in 2019. Worst of all, the deal sets a higher baseline from which all future spending will be negotiated. The total cost could be fivefold or tenfold or more.

It’s hard to imagine congressional Republicans being so happy to spend money with a Democrat in the White House. In fact, they were not in 2011 when they insisted upon and achieved over $1 trillion of spending cuts over ten years in exchange for lifting the debt ceiling, although they didn’t control the Senate or the White House. The Budget Control Act was one of the major conservative achievements this century, because it curbed spending in an era of big government. Its largest spending cuts, in 2014 and 2015, coincided with the strongest US economic growth since the recession and casted doubt on Keynesian criticisms.

Last week, Republican leaders began eviscerating that accomplishment and squandering their credibility on fiscal matters. The three arguments they make in defense of their newfound profligacy should not appease conservatives.

First, some Republicans argue the country so badly needs to increase military spending that we should tolerate a six percent tax hike. There is good reason to spend more on certain defense capabilities after eight years of declining expenditures. However, defense spending was still higher in 2017 in real terms than it was in 2007 during the troop surge in Iraq. It was already slated to increase in 2018 without the budget deal even as America reduces its long commitments in Iraq and Afghanistan.

Moreover, the new law actually appropriated $26 billion more in defense spending than the Trump administration requested in 2018 and $40 billion more than House Republicans initially did. It also failed to incorporate the findings from the-first ever audit of the Department of Defense commissioned by the administration, like its total inability to account for $800 million spent on construction projects.

The U.S. is blessed with the greatest military any country could ask for. Separate and aside, the Department of Defense writ large is a government agency not immune to the same excesses of other bureaucracies and should be held accountable. Prioritizing good spending over bad spending makes our military and country stronger.

Second, Republicans say additional discretionary spending is not problematic because entitlements are the driver of future deficits. The latter is true, but also no justification for exacerbating the overall burden on taxpayers. In fact, that is a completely inverted justification given by the very Republican leaders who insisted on discretionary spending cuts seven years ago to address future fiscal concerns. Reducing entitlement spending, which takes money from one person to give to another, in favor of lesser increases in discretionary spending, including infrastructure and military spending that sit closer to government’s central purpose, would be reasonable.

But the deal did nothing of the sort. In fact, it appropriated tens of billions more for Medicare and other healthcare programs as Christopher Jacobs catalogued in The Federalist. Thus, Republicans voted to add the very type of spending that allegedly concerns them most.

Third, Republican leaders contend they were compelled to yield to Democrats’ wishes in order to get 60 votes required for passage in the Senate. It’s true that gives any nine Senate Democrats some leverage, but it does not give them control. Budget negotiations start from a baseline, so Republicans should realistically have been able to maintain similar overall spending levels if they were determined to. The deviation indicates they did not make the taxpayer a priority.

Instead they gave into almost every Democrat budgetary demand, and everyone in Washington quietly recognizes it. The top Democrat on the House Budget Committee, John Yarmouth, said the deal “meets nearly every one of our priorities.” Senate Minority Leader Chuck Schumer could hardly contain his glee last week. In 2011, Republicans were able to negotiate major spending cuts without the presidency or the Senate because they had conviction.  In 2018, with control of every elected body of the federal government, they satisfied every progressive fiscal desire.

Republicans apparently got “tired of winning” after 12 months of governing successes. Ironically, one of those was a tax reform law that Republicans brag constitutes a “cut” for most Americans. The Tax Cuts and Jobs Act was, in fact, a major positive accomplishment, but mainly because it made the tax code more efficient and fair by cutting marginal tax rates across the board while reducing special deductions for politically privileged economic activities.

But the Tax Cuts and Jobs Act did not reduce the burden of government as much as advertised, because the burden is constituted by the quantity spent. It is deeply hypocritical for Republican leaders to campaign on cutting statutory taxes after they increased spending by six percent. The tax law, for all its virtues, shifts the real tax bill from present to future. The new budget increases taxes overall.

Not every Republican in Congress was complicit, however. Sixteen Republicans in the Senate and 67 in the House voted against it. Reps. Kevin Yoder (KS-3), Jason Lewis (MN-2), Lloyd Smucker (PA-16), and Rod Blum (IA-2) were among those who did not vote in favor and are running in competitive races for re-election this year. They recognize that good government requires making difficult tradeoffs, rather than passing the buck to taxpayers. Republican voters would be better served if conservatives who opposed this tax increase replaced their current party leadership.

Ryan works in commodities markets and lives in Connecticut. He is a graduate of Northwestern University, where he studied economics and politics. Ryan is passionate about school choice and tutors at charter schools. He tweets @ryanfazio.

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