I am going to ever so slightly step out of my comfort zone to relay what I think is a brilliant policy frame for progressives in 2010 and beyond.
Fiscal hawks, like your hosts here at the PPI, have been clear about the stark choices future generations of Americans face. It’s simply not possible to have one of the lowest marginal tax rates in the world along with massive government spending on entitlements programs and defense. If the country is to emerge from the current economic crisis with its financial house in order, something has to give.
Will Marshall took a scalpel to the problem in a post a few weeks ago:
Here’s the blunt truth: the federal government faces a huge revenue hole – too big to be closed by spending cuts alone. Spending last year reached an astonishing 26 percent of national output, while revenues fell to 15 percent. Full economic recovery is expected to cut that yawning tax gap of 11 percent roughly in half.
Getting federal deficits down to a sustainable level – say three percent a year – will require both spending cuts and tax hikes. The president’s deficit-reduction commission will have to look hard at entitlement spending, but we will also need a sweeping overhaul of our tax system to solve our fiscal crisis.
Extending all the Bush tax cuts, of course, will only dig us in deeper. The Congressional Budget Office estimates that extending them through 2017 would cost $1.9 trillion. That doesn’t include the costs of servicing a bigger national debt, or the cost of adjusting the alternative minimum tax so it doesn’t offset the cuts.
So where does the national security guy get off talking about fiscal responsibility? Allow me to explain. There I was last Saturday night, sitting in a bar in Stockholm talking to two Swedes. One was my long-time buddy Eric Sundstrom, political junkie, ex-PPI fellow and current editor of the Social Democrats’ party newspaper. The other was Eric’s pal Torbjorn, who serves as a policy adviser to the Social Dems’ financial team and whose last name was erased from my memory by the time Scotch #3 rolled around.
I was complaining about America’s fiscal imbalance and national allergy to taxes, when Eric piped up and said, “It’s not just an American problem. Torbjorn concocted a brilliant message on it for Sweden, too.”
Smiling, Torbjorn looked up an uttered what could be the defining policy frame on taxes and spending for progressives this year — or any year:
“We can’t keep borrowing money to cut taxes.”
In that form, it’s brilliant in the American context. It puts Tea Partiers on notice that their tunnel vision for lower taxes is costing America dearly. But I’d make one modification to show exactly what’s at stake and where the money comes from:
“We can’t keep borrowing from China to cut taxes.”
Bill Clinton would probably agree. At the Peterson Institute last week, the former president said, “I think this is a national sovereignty issue,” noting that foreign creditors hold 48 percent of America’s debt. China alone holds more than $877 billion of U.S. debt.
So there you go, progressives — a talking point straight from Stockholm on why the right-wing obsession with cutting taxes is so irresponsible.