As Ronald Reagan might say, there they go again. As attractive as it sounds to some politicians and citizens, the right-wing argument that tax hikes don't reduce the deficit is at best misleading and at worst plain false.
Take the misleading version first. As many put it, "you don't raise taxes in the middle of a recession." A tax hike, taking money out of people's pockets, might only worsen the slump.This risk is real. Yet those making the argument rarely admit it goes for spending cuts as well. If the government lays off workers, or cuts purchases or weapons, or cuts benefit checks to retirees, the economy will contract just as surely as if it raises taxes on those people.
Another version restates the "supply-side economics" claim that lower rates would lead to so much economic growth that they would pay for themselves. President Reagan lectured David Stockman that "there has not been one tax increase in history that actually raised revenue, and every tax cut, from the 1920s to Kennedy's to ours, has produced more."
Of course, governments have been raising taxes to increase their revenues for thousands of years. It has never been popular, so if it didn't work then, after a few centuries, governments would have stopped trying it.
Sen. William V. Roth, R-Del., and many others instead argue that higher revenues won't cut the deficit anyway, because our Congress will spend every penny it can get its grubby hands on. After all, they say, taxes were about the same proportion of gross national product (GNP) in 1989 as in 1980: 19.2 percent vs. 19.4 percent. The trouble is, spending nearly doubled, from $591 billion to $1.143 billion.
These figures are deceptive and the conclusion dead wrong.
Except for in defense, none of the growth stems from Congress voting to increase either its payments to individuals or government activity. Congress has, mostly after Reagan administration requests, increased some categories, like law enforcement and scientific research. But it has more than compensated with cuts in other areas, like Medicare and community development.
Spending grew anyway in part because of general inflation. A dollar in 1989 was not the same as a dollar in 1980, for the government or anyone else.
It also grew because Medicare, Social Security and interest payments grow even if Congress does nothing. As more people retire and we provide health care to keep them alive, the costs of Social Security and Medicare rise.
As we ran deficits due to the 1981-82 recession, and as interest rates shot up, our interest costs rose and then compounded on themselves. Over the past decade, defense, Social Security, Medicare and interest account for all of the real growth in spending. Relative to inflation, the rest of the government shrank.
Roth's colleagues have not cut spending as much, or as enthusiastically, as he would like. Yet every dollar raised by extra taxes since Congress began doing so in 1982 has gone to reduce the deficit.
The real question is, what, specifically, will be done about the deficit? Who will pay, how much? Attacking taxes in general either begs, or hides the answer to, the question.