CNN host and Newsweek International editor Fareed Zakaria blasted the Bush tax cuts across his media platforms as unaffordable and irresponsible. He opened his CNN show Sunday with it, and published an editorial Monday in The Washington Post [1] and on the Newsweek website. The Newsweek headline was "Raise My Taxes, Mr. President!" [2]
He demanded they be allowed to expire in full at year's end: "In front of us is a simple, easy way to bring America's fiscal house in order, reduce our dependence on foreign borrowing, restore U.S. credibility and power, and provide a stable revenue base from which to make key investments for future growth. All we need is for Congress to do what it does so well: nothing."
Zakaria vigorously opposed conservatives:
Conservative economists and pundits warn of a Greece-like crisis in which America will be able to borrow only at exorbitant interest rates. So when an opportunity presents itself to cut those deficits by about a quarter - more than $300 billion! - permanently and relatively easily, you would think that these people would be leading the way. Far from it.
The "Bush tax cuts," passed in 2001 and 2003, remain the single largest cause of America's structural deficit - that is, the deficit not caused by the collapse in tax revenue when the economy goes into recession. The Bush administration inherited budget surpluses from the Clinton administration. What turned these into deficits, even before the recession? There were three fundamental new costs: the tax cuts, the Medicare prescription-drug bill and post-9/11 security spending (including the wars in Iraq and Afghanistan). Of these the tax cuts were by far the largest, adding up to $2.3 trillion over 10 years. According to the Congressional Budget Office, nearly half the cost of all legislation enacted from 2001 to 2007 can be attributed to the tax cuts.
That's not what Brian Riedl of the Heritage Foundation [3]found:
Both recent and future budget deficits have been blamed largely on the 2001 and 2003 tax cuts, and to a lesser extent on the war on terrorism, but the data contradict these myths. In reality, spending is almost exclusively the problem:
The 2001 and 2003 tax cuts were responsible for just 14 percent of the swing from the projected cumulative $5.6 trillion surplus for 2002-2011 to an actual $6.1 trillion deficit. The vast majority of the shift was due to higher spending and slower-than-projected economic growth.
Zakaria found it preposterous to assert that the country is overtaxed, and cited the liberal Center for Budget and Policy Priorities as his source:
The idea that the average American is overtaxed is a nice piece of populist pandering. In fact, federal taxes as a percentage of the economy are at their lowest level since the Truman administration. Chuck Marr and Gillian Brunet of the Center on Budget and Policy Priorities have calculated that a family of four at the exact middle of the income spectrum will pay only 4.6 percent of its income in taxes. Remember, almost half of the country pays no income taxes at all. The top 2 percent of Americans contribute almost 50 percent of federal income taxes.
There is no doubt that many Americans pay no income taxes, and that the rich pay the lion's share. But that doesn't mean the country isn't "overtaxed." Zakaria simply hated the idea of Bush's tax cuts:
The simple facts are these: All of the Bush tax cuts were unaffordable. They were an irresponsible act of hubris enacted during an economic boom. Conservatives thought they would force us to shrink the government. But with Republicans controlling the White House and both houses of Congress, did reduced taxes cause reduced spending? No. They led to ever-increasing borrowing and a ballooning deficit.
No one knows why Zakaria would claim there was a "boom" when the 2001 tax cuts were passed. In fact, the middle two quarters of the year saw economic contraction [4], before and after 9/11. In his opening commentary on CNN, Zakaria claimed unemployment benefits are more stimulative than tax cuts:
Let's let the entire slew of Bush tax cuts retire. That would take us back to Clinton-era rates, when the American economy had its strongest growth years in three decades and the budget was balanced for the first time in four decades.
If the economy still needs a bit more stimulus, fine, extend unemployment benefits for another year. Give some aid to the states. Those are temporary measures, and the money will get spent. Unemployment benefits work because they go to people who are living from paycheck to paycheck. They spend the money.
By contrast, we have had three tax cuts since this economy went into a slump, two under George Bush, one under Obama, and in all three cases people saved the money rather than spent it.
- Tim Graham is the MRC's Director of Media Analysis.