Thursday, July 28, 2011

Tea Party Nation's Judson Phillips is Off Base

Judson Phillips, founder of Tea Party Nation, has an op-ed in The Washington Post this morning explaining why the tea party has been so recalcitrant about raising the debt ceiling.  He basically says this is about shrinking the size of government, because the government spends too much.  

The only citation he provides is a GAO report that he says indicates "billions of tax dollars" being spent on duplicating efforts, but scope matters here and a quick look at the report it doesn't give a easily cited number..  The Federal Government spent $3.4 trillion dollars in FY2010.  If they GAO report outlines $10 billion in overlap, that represents 0.3% of total government expenditures.  At $50 billion it's 1.5% and at $200 billion it's 5.8%.  All that calculation is to say "billions" is a squishy term, but we likely aren't talking about a lot of redundancy.

Mr. Phillips is also intent on propping up the Greek boogeyman.  In 2010, the estimated U.S. debt to GDP ratio was 58.9%, while in Greece the ratio was 144%.  The comparison is flawed when you look at even this single factor, but when you consider that Greece, as part of the Euro-zone, can't print more money and then factor in the historical failure of the Greek government to collect tax revenue, any suggestion that the United States is the next Greece is ludicrous at this stage.

Mr. Phillips also makes the claim that "[t]here is only one way you get to a debt crisis - you spend too much money."  This is quite simply false.  You can get into a debt crisis when you don't earn enough money.  For the federal government, those earnings come in the form of taxes.  We are at a historic trough when it comes to tax receipts, in large part because the economy is beaten and battered.  Now is the time we need borrowing authority more then ever.  We're on hard times, but times will improve.  Taking on debt is part of our modern financial system whether you're a government or a household, so let's drop the pretense that taking on debt is always some reckless endeavor.

Finally, Mr. Phillips clearly can't do math.  In his op-ed he declares, "the Tea Party movement understands that if we allow Congress to borrow more money or raise taxes, all we are doing is funding an endless expansion of government."  He says this after he explains that the tea party had to say no to the deal that was in the works between President Obama and Speaker Boehner.  If the tea party goal is truly to shrink the size of government, then they missed a golden opportunity.  The broad strokes of the $4 trillion deal discussed was 83% cuts to 17% revenue increases.  That is to say we would have cut $3.3 trillion worth of government spending and raised about $700 billion more in revenue over the next decade.  Seems clear to me that that deal would have shrunk the size of government, by quite a lot.  But Mr. Phillips derided this plan because it included a revenue increases, even though the revenue increases would have come from eliminating market distorting tax expenditures that libertarians have long opposed.

I think this debate has revealed the lack of ideological coherence of the tea party.  What is it they are really trying to achieve?  They passed on the opportunity to dramatically shrink the size of the government.  They passed on the opportunity to eliminate countless distortionary tax policies.  They have, thus far, passed on the opportunity to own the responsibility of their electoral victory, which is to govern.  Beyond the anger, I see vacuous opportunism from the tea party members in Congress.  As eager as the tea party is to remind Republicans they delivered them the house, I wonder if the tea party faithful will see through this charade perpetrated by Mr. Phillips and his consorts in Congress.

5 comments:

Colin said...

We are at a historic trough when it comes to tax receipts

How do you figure? In 1950 the federal government collected $1,615 from each citizen in income tax revenue (in 2008 dollars). In 1960 it was $2,641. 1970 it was $3,686. In 1980 $4,134. In 1990 $4,498. In 2000 -- at the top of the stock market bubble and with unemployment under 4% it was $6,423 and last year was $4,418. We are currently collecting more income tax revenue per capita than every single year before 1987. And this doesn't even include other sources of revenue such as the gas tax that has been increased 4 times in the last 30 years or payroll taxes that have also been increased. We are in a historic trough only if you think that history began 20 years ago.

The fact that such fantastic sums are insufficient to even come remotely close to a balanced budget just shows how out of control the growth of the federal government has been. To place this in perspective, the amount of money collected just in per capita income tax last year exceeded what the federal government spent per capita in 1965 ($4,418 vs. $4,183). In other words, we collected enough money last year per person to fund the 1965 federal government -- at a slight surplus -- with income tax revenue alone! And yet based on the rhetoric we hear you'd think federal revenue was on some kind of starvation diet.

Colin said...

You then go on to accuse Phillips of being unable to do math, but this is in no way proven. $3.8 trillion in cuts -- what are these composed of? Does this, like other plans that have been floated, assume $1 trillion in savings from withdrawals in Iraq and Afghanistan that were going to happen anyway? How many years is this over? What is the baseline at the beginning of the time period and what is the baseline at the end? While this may be $3.8 trillion less than what was scheduled to be spent -- generously assuming there are no gimmicks here -- it does NOT follow that the size of government will be reduced in an absolute sense, only relative to what it otherwise would have been.

You also say that the 17% in revenue increases would have been solely composed of the elimination of tax expenditures. Is this true? I have never read that. Do you have a source? That's a serious question.

Your statement, meanwhile, that the Tea Party passed on a golden opportunity to dramatically shrink government. Really? What aspects of government would have been eliminated? What are the departments that would have been ended or functions that would cease to exist? I have yet to see one proposal offered yet, perhaps save the one from Tom Coburn, that would dramatically shrink government.

Jason said...

As you can see here federal tax receipts as a percentage of GDP haven't been this low since the 1970s and only three times since 1940 have they dipped so low. I would consider that a historic trough.

As to what the $3.8 trillion in cuts would have been composed of, I don't know. Neither did Judson Phillips, but the caucus he is aligned with rejected the plan out of turn because it would have raised revenue at all. As to a source on the tax expenditures piece, this is what I have, but it certainly was something that was discussed. Again, we don't know the specifics because it included revenues.

The deal was reported as reducing government expenditures by $3.8 trillion from the current baseline. That would have resulted in a smaller government, as compared to doing nothing (the baseline).

What is this obsession with having to cut a full department to actually shrink government? Do Americans really want that? Or is this a tyranny of a minority that will drive the economy off the cliff because they don't like the Department of Education?

Again, this was a plan that the caucus that aligns itself with Mr. Phillips blew up before we got to the details. Purity leading to chaos is folly.

Colin said...

As you can see here federal tax receipts as a percentage of GDP haven't been this low since the 1970s and only three times since 1940 have they dipped so low. I would consider that a historic trough.

This is a silly metric given the large real increases in GDP that have taken place over the years and the fact that I already demonstrated that the federal government actually is taking in historically large amounts of revenue on a per-person, inflation-adjusted basis. You don't seem willing to engage with this crucial fact because it doesn't fit with your narrative. Using percentage of GDP is akin to arguing that your food intake is being reduced because you are being offered 15% of a wedding cake instead of 20% of a cupcake.

As to what the $3.8 trillion in cuts would have been composed of, I don't know. Neither did Judson Phillips, but the caucus he is aligned with rejected the plan out of turn because it would have raised revenue at all. As to a source on the tax expenditures piece, this is what I have, but it certainly was something that was discussed. Again, we don't know the specifics because it included revenues.

Your link does not work and you admit that you don't know what was on the table. Meanwhile you have changed your story from stating that the revenue increases would have been composed of eliminating tax expenditures that libertarians dislike to them merely being "something that was discussed."

Colin said...

The deal was reported as reducing government expenditures by $3.8 trillion from the current baseline. That would have resulted in a smaller government, as compared to doing nothing (the baseline).

Right, which is NOT the same as reducing government. This is like someone who gains 5 pounds a month announcing that they lost weight because they only added 2 pounds one month. You accused Phillips of not being capable of doing math but it now appears he fully knew what he was talking about.

What is this obsession with having to cut a full department to actually shrink government?

Well, when you talk about something shrinking it usually means you will have less of it. Now, you said that the Tea Party had a golden chance to "dramatically" shrink government. OK, then name all of the functions/departments that will be eliminated. If you can't then you admit there is nothing dramatic on the table and that, at best, we are merely reducing the rate of the governement's increase.