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<DIV class=left><A href="http://www.nytimes.com/"><IMG border=0 hspace=0
alt="The New York Times" align=left
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<DIV class=timestamp>April 12, 2011</DIV>
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<H1><NYT_HEADLINE type=" " version="1.0">Budget Battles: Tax and Spending Myths
and Realities</NYT_HEADLINE></H1><NYT_BYLINE></NYT_BYLINE><NYT_TEXT>
<DIV id=articleBody><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>
<P>Here are two numbers to keep in mind when thinking about the House
Republicans’ budget plan: They want to cut spending on government programs over
the next decade by $4.3 trillion. And they want to cut tax revenues over the
same period by $4.2 trillion. </P>
<P>Government spending needs to be brought under control. But slashing vital
services just to pay for more tax cuts is bad public policy and bad economics.
</P>
<P>It won’t fix the deficit, no matter what the Republicans claim. </P>
<P>We’ve seen this play before. President Ronald Reagan promised that tax cuts
would spur more economic growth and pay for themselves. During his tenure, the
deficit hit what was then a peacetime high of 6 percent of gross domestic
product, and he eventually decided that he had no other alternative but to raise
taxes to try to close the gap. </P>
<P>The Clinton years disproved the notion that higher taxes would inevitably
stifle economic growth, or cost politicians their jobs. Taxes were raised in
1993, including higher income tax rates on the wealthiest. The economy was
strong, and the stock market surged. Taxes were then cut in 1997 in a deal with
the Republican-controlled Congress, but by then the combination of higher tax
rates on the wealthy, a strong economy and a rising stock market was boosting
revenues significantly. </P>
<P>By the end of President Bill Clinton’s term, the federal budget had been in
surplus for four straight years. </P>
<P>President George W. Bush and Congress undid that progress with $1.65 trillion
in tax cuts, heavily skewed to high earners. The economic recovery of the Bush
years was extraordinarily weak by historical standards. By early 2009, shortly
before Mr. Obama took office, the Congressional Budget Office projected a budget
deficit for that year of more than $1 trillion. </P>
<P>These are the economic facts, which Americans need to hear. The Republicans
certainly won’t tell anyone. And, so far, the Democrats haven’t had the
political courage to challenge them head-on. </P>
<P>President Obama’s proposed budget for fiscal-year 2012 does call for a mix of
tax increases and tax cuts, but he hasn’t made a serious effort to explain the
need for substantially more revenue. </P>
<P>The bigger test will come on Wednesday, when Mr. Obama presents a long-term
deficit reduction alternative to the Republican proposal. It must include
significant sources of revenue, as well as defense cuts and a long-term plan for
bringing spending on health care and other entitlements in line with revenues.
</P>
<P>As a matter of fairness, raising income taxes must start with requiring the
richest Americans — who have been the biggest beneficiaries of Bush-era tax cuts
— to pay more. But even that won’t dig the country out of its hole. The middle
class is also going to have to pay higher taxes. That is the only way to pay for
needed services, tackle the deficit and slow the borrowing and the rise in
interest payments. </P>
<P>That means higher income taxes further down the income scale than Mr. Obama
has previously called for, and new sources of tax revenue, like energy taxes or
a financial-transactions tax or a value-added tax. </P>
<P>Those details are the easy part. More than anything, Mr. Obama must change
the political debate, by rebutting, once and for all, the tax-cuts-above-all
ideology that has gotten this country into this deep mess. </P>
<P>Here are a few more numbers to consider: Stimulus spending since Mr. Obama
took office — including tax cuts — accounts for about $600 billion of the
current $14.2 trillion in accumulated debt. The Bush-era tax cuts coupled with
major new spending for two wars and a Medicare drug benefit, have added $3.2
trillion to the debt. </P>
<P>Mr. Obama must make the case for tax increases, based on reality, not
ideology. Then, and only then, can a serious debate on the deficit begin.
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