Republicans in Congress have been bending over backwards to avoid increasing marginal tax rates as part of a deal to avoid the so-called “fiscal cliff,” the automatic tax increases and spending cuts scheduled for the end of the year. Their argument is that raising taxes on even the richest Americans will be bad for the economy (despite economic growth, historically, being stronger when taxes on the rich were substantially higher.)
On MSNBC’s Up with Chris Hayes on Sunday, conservative economist Veronique de Rugy attempted to make the same argument. However, Bruce Bartlett, a former economic official in both the Reagan and the George H.W. Bush administrations, blasted her and other conservatives as “goddamn dogmatic” on taxes, adding that they believe the deficit will be reduced solely through “abolishing Medicare and other ludicrous ideas”:
We need higher revenues, both to restrain spending and to change the dynamics of the fiscal process…Your idea is so goddamn dogmatic. You’re living in a fantasy world where we’re going to balance the budget by abolishing Medicare and other ludicrous ideas. [...]
Let me point out something very important. Federal revenues today, right now, are about 15.8 percent of the GDP. That is way, way below the historical average. If we can just get up to the post-war average, we cut $500 billion a year off the deficit.
Bartlett made several points relevant to the debate over whether the government needs to raise taxes to deal with its budgetary imbalances. Revenue is indeed far below the historical average, and spending on the debt — which higher revenue can combat — does explode the federal budget in the coming decades.
In fact, according to the Congressional Budget Office, the long-term threat of deficits does far more damage to the economy than simply increasing revenue to bring the deficit down: “By CBO’s estimates, the policy changes scheduled to occur under current law would, on balance, have a positive medium- and long-term effect on the economy. Conversely, if lawmakers decided to maintain current policies and extend the expiring tax provisions, output and income would be lower in the medium and long term than they would be under current law, CBO estimates.”