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If Republicans Were Serious About Spending, They’d Look To Cut Tax Expenditures

By Guest Contributor on July 30, 2010 at 1:20 pm

"If Republicans Were Serious About Spending, They’d Look To Cut Tax Expenditures"

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Our guest blogger is Roneal Desai, Economic Policy Intern at the Center for American Progress Action Fund.

Republicans have recently spent a lot of time complaining about the budget deficit. But rather than make any attempt to address the causes of the structural deficit, they have chosen to obstruct short-term spending aimed at helping those still feeling the effects of the Great Recession.

For instance, leaders of the GOP wanted to cut the TANF Emergency Assistance Fund (which is on pace to create 240,000 jobs by September), repeatedly stalled an extension of unemployment benefits to help millions of jobless Americans, and filibustered a bill that provided tax credits to small businesses. At the same time, Republicans have been unwilling to allow the expiration Bush tax cuts for the rich, giving the wealthiest two percent of Americans, those most unlikely to be out of a job, an easy break.

And despite all the concern Republicans have voiced over the deficit, they have failed to even mention a section of spending which will make up nearly 25 percent of the federal budget this year: tax expenditures. Martin Feldstein, former chairman of the Council of Economic Advisers and professor of economics at Harvard, has noted that tax expenditures impact the government’s bottom line in the same way as spending, and as a result are “equivalent to direct government expenditures.”

The Office of Management and Budget (OMB) estimates that tax expenditures will increase the federal budget by $1.2 trillion this year. And tax expenditures have been increasing at an exponential rate for decades now.

The amount the government spends on tax expenditures in real dollars has grown from $294 billion in 1977 to $981 billion in 2009 — an increase of more than 230 percent since 1977. And even though tax expenditures are double the amount of non-military discretionary spending, they face far less scrutiny.

Conservatives can’t even say that they didn’t see this coming, as the most radical changes have been during the years 1980 and 1985, when the country was led by conservative leader Ronald Reagan, and between 1996 and 2001, an era which began with the Senate and House both being led by Republicans for the first time since the 1950’s.

President Obama has proposed scaling back tax expenditures given to oil and gas companies, which would save $45 billion over ten years. If Republicans are serious about lowering the deficit, they’d be wise to follow his lead, and start targeting an area of spending they won’t be able to ignore for much longer.

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