The Money Isn't Ours We've Spent It Already

January 22, 1995|By BOB SOMERBY

Here's the bad news -- brace yourselves, tax rebels: Taking a tax cut while we're running a deficit simply makes no sense at all. Running a deficit means we aren't being taxed enough to pay our government's bills as it is. Taking a tax cut in that situation means we're willing to pay even less of our tab.

But being an American in the post-Reagan era means never having to say we're sorry. And so here's a quick guide to the specious arguments in the Great Tax Cut Debate:

We won't offer a tax cut unless it's been paid for. There will not be a tax cut that we can't afford.

This line came from President Clinton last month to distinguish his tax cut proposal from the Republicans'. Both parties now state, as a point of dogma, that all tax cuts are going to be "paid for."

The claim seeks to ease feelings of principled guilt. Revenue losses from the tax cuts will be offset through spending cuts of equal size. Don't worry (be happy) -- the tax cuts are "paid for." If only it worked out like that!

The problem is, nothing new can be "paid for" in any meaningful sense as long as the country is running a deficit. Until we pay for the things we're already doing, we can't meaningfully claim to "pay" for something else.

Example drawn from everyday life: A young man is $25,000 in debt. He comes into $5,000 from Grandma. He uses the money for a trip to Hawaii. The trip has been paid for -- but nothing else has.

If we use spending cuts now to pay for a tax cut, the tax cut has been paid for -- but nothing else has. Every dollar we "take back" is replaced with a borrowed dollar. We continue to pile debt on our kids.

Whose money is it, after all? We just want the taxpayer to keep a little more of his money!

These high-octane bell-ringers are most commonly used by proponents of GOP tax-cutting plans. They appeal to the taxpayer's sense of victimization. The government is "taking our money away"; the Republicans want to "give it back."

Now, how could you possibly argue with that?

The problem is, in the real world, it isn't "your money" any more once you've spent it. You don't get to pay half your bill when you go out to eat because you "want to keep a little more of your money."

Similarly, in a representative government, it isn't "our money" once Congress has spent it! Once Congress has spent "our money," it isn't "our money" any more to "take back."

Every dollar we "take back" while we're running a deficit is a dollar the Congress has already spent. A dollar has to be borrowed by Congress to make up the loss; it's passed on as a dollar in debt to our children.

No wonder we love Family Values so much. We get to dump all our debt on our children. We're just trying to help out folks with middle incomes. It's the middle class that's been taking a hit.

These arguments appeal to the remarkable sense that at a time when we aren't coming close to paying our bills as it is, someone is supposed to get tax money back. Try working that out on your chalkboards.

If the middle class is paying an unfair percentage of our tax revenues now, they should not be the ones to put more money in. But the fact remains: Someone has to put more money in, if we're going to pay for what we're using. (Or: We must have spending cuts without a tax cut, until we're paying for what we're using.)

But our standard of living isn't going up as fast as it used to do; we're trying to make it in very tough times; I have to work harder for the things I want; I'm not doing as well as or better than my parents.

The tax cutters all appeal to feelings like these, which express a wide sense of economic disease. As a middle-income person myself, I too am sympathetic to these concerns, although many are not based on objective fact. (Per capita income is going up, though not as rapidly as it did in the '60s.)

But even if we accept these perceptions as gospel, respect for reality requires that something be said. There is no law that says we have a right to do better economically than our parents once did. There is a law, in the moral code, which says you have to pay for what you use -- and you don't pile up debt on your children.

I do not believe that people would be willing to sacrifice their children's well-being if they understood that's what they were actually doing -- if they understood that every dollar they "took back" in a tax cut would be passed on as a dollar in debt to their kids. But macro-economic transactions are notoriously opaque for most people -- notoriously hard to picture in everyday terms. And these arguments from the Great Tax Cut Debate all obscure the nature of the tax cut transaction and keep us from seeing what is in fact being done. The arguments help us stay in denial about the past 20 years -- and about the things we continue to do if we take a tax cut while we're running a deficit.

The basic facts are simple, and cannot be challenged. We currently pay far less in taxes than our government is spending; the balance is passed on in debt to our kids. Only a nation in massive denial would think this is the time to pay less in taxes.

There's an old-fashioned term to describe our last 20 years -- what we've done is traditionally called "freeloading." We don't feel like freeloaders -- worse, freeloaders on kids -- because the transactions involved are hard to picture, and because we've heeded 20 years' worth of arguments like those listed above. Sad but true, until the day they decide to stop, freeloaders will continue to come up with creative arguments and excuses in the Great Tax Cut Debate.

Bob Somerby is a Baltimore writer and professional comedian.

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