Washington Matters

Breaking Obama's Vow on Tax Hikes

Democrats move ever so slightly toward the card no one wants to play.

By Mark Willen, Senior Political Editor, The Kiplinger Letter

June 28, 2010

It didn’t get the notice it deserved last week, what with the hubbub over Gen. McChrystal’s sacking, the agreement on financial regulatory reform and the continuing environmental disaster in the Gulf. But a speech by House Majority Leader Steny Hoyer should have been received like a thunderbolt.

Hoyer, a Maryland congressman often overshadowed by his boss, House Speaker Nancy Pelosi, is a pragmatic politician, more prone to counting votes and cajoling reluctant Democrats than getting out in front of an issue and making big speeches. That’s exactly what he did, however, when he delivered an address entitled “We’re Lying to Ourselves and Our Children” before a centrist Democratic think tank.

Hoyer is acutely aware of the budget-cutting mood that has swept the ranks of Congress, scaring Democrats up for reelection this fall into a desperate search for ways to prove their fiscal hawk credentials. So far, that mainly means voting against higher spending, a popular stand in an era when government is a dirty word and countries in Europe have borrowed themselves into big crises.

No doubt, the U.S. government will have to spend a lot less in future years, and that’s certain to be one of the recommendations of the bipartisan debt commission that reports to Congress in December. But no amount of spending cuts -- and especially not the symbolic gestures favored by so many (e.g., ending earmarks or eliminating government pay raises) -- is going to lead to a manageable debt. The U.S. is also going to have to make changes in the big entitlement programs, Social Security and Medicare, by raising retirement ages, limiting benefits or charging more payroll taxes. Probably all three.

So, too, will there be a need for higher taxes. President Obama is already on record as favoring hikes for those making over $250,000 a year, but he has vowed not to raise taxes on those making less. Hoyer admitted that may have to be reconsidered. He said Congress has no choice but to look seriously at the middle class tax cuts enacted in 2001, which are due to expire next year. Hoyer believes sustaining the economic recovery must come first -- meaning an extension of the lower tax rates now, but not one that lasts forever.

Hoyer was painfully honest in telling his audience that to bring down the debt to a sustainable level, Congress has to do it all: Cut spending, reform entitlements and raise taxes. “We’re lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending and taxation without bankrupting our country.”

If you doubt that, try to bring down the debt yourself. The Committee for a Responsible Federal Budget has an excellent Web tool that lets you try. You get to pick your method for saving money. Play around with it for any length of time and you see the truth in what Hoyer says. It’s impossible to reach the goal though spending cuts alone; you must also scale back entitlements and raise more revenue.

Nobody wanted to hear what Hoyer insisted on saying, which is maybe why it didn’t get much attention. And Hoyer isn’t saying now is the time to raise taxes. But he was spot-on when he complained about those who give lip service to reining in the deficit and in the next breath insist taxes or entitlements can’t be cut.

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