Republicans rule out taxes and complain about tax and spending imbalances
WASHINGTON – Republicans say the national debt is one of the biggest threats facing the United States, but they are only half prepared to fight it.
The US government has borrowed $31 trillion to cover annual budget deficits resulting from a near-permanent mismatch between spending and tax revenues. Congress could slow debt growth by cutting spending and increasing revenue, but Republicans have ruled out the latter.
“We will not raise taxes,” said House Speaker Kevin McCarthy (Republican of California) on Monday. “We’ve had more revenue flowing into the state on average over the past 50 years than at any time in history, only twice have we had a higher percentage.”
Republicans have declined to back a debt-ceiling-raising bill that would allow the government to continue borrowing to fund basic operations unless President Joe Biden agrees to spending cuts. The White House has privately proposed closing tax loopholes, such as preferential income treatment for mutual fund managers, as part of a broader deal, according to a source familiar with the negotiations.
It’s a high-risk hostage situation: the government could default in less than two weeks, potentially destabilizing the financial system and straining the economy.
McCarthy’s claim of record earnings is a bit outdated. The historical average of tax revenue as a percentage of total economic activity – a common metric used to measure the size of the tax burden – is around 17.4%. according to the Committee on Responsible Federal Budgetinga bipartisan think tank that hates budget deficits.
The tax receipts were received at approx 20% of gross domestic product in 2022, but are on a downward trend, amounting to 17.7% of GDP over the past 12 months, according to recent budget data analyzed by CRFB. Revenue has thus increased at the historically average pace.
“2022 was a fabulous revenue year, but it showed no sign of a trend,” CRFB’s Marc Goldwein said in an interview, adding that inflation and many stock sales helped boost tax revenues last year.
McCarthy hinted that higher revenue than historical trend means the government has more than enough, but historical trend was a key ingredient in the recipe for a $31 trillion federal debt after all. McCarthy called debt “the greatest threat to our future”.
When it comes to spending, McCarthy is on firmer ground.
“We’re spending more than ever before,” he said Monday. “We now spend more than 24% of GDP compared to the 50-year average of 21%.”
Thanks to the largely bipartisan response to the coronavirus pandemic, total federal spending rose to 30% of GDP in 2020. Since then the trend has been down Increases in food benefits and Medicaid insurance are phasing out. But spending has settled at above-average levels, according to the Congressional Budget Office has projected that spending will remain high over the next decade as more older Americans receive Social Security and Medicare benefits — programs McCarthy said Congress will not touch.
So expenses have gone up. But even if it weren’t, fluctuations in revenue and spending are unlikely to make a difference to Republicans, who always advocate tax cuts and spending cuts whenever a Democrat takes the White House.
“We have a spending problem. “It’s not that the American people are undertaxed,” Senator John Cornyn (R-Texas) told HuffPost last week. “I understand that our friends on the left’s impulse is to increase government and increase taxes, but I think the exact opposite is true. It’s the difference between Republicans and Democrats, in case you haven’t noticed.”
The White House earlier this year proposed a budget that would significantly reduce deficits through higher taxes on businesses and the wealthy, but Democrats have not made higher taxes a prominent public demand in response to Republican push for spending cuts associated with associated with an increase in the debt ceiling. Instead, President Biden merely insisted that Congress pass a “clean” debt ceiling bill without strings attached, and tax policy demands were made in private negotiations.
In those talks, the White House has offered to freeze voluntary spending at current levels, but Republicans want spending to go back to a lower amount and they want “work requirements” that limit eligibility for federal food and health benefits .
“The fundamental issue here is spending,” Rep. Patrick McHenry (RN.C.) told reporters on Tuesday. “We have to spend less money next year.”