Is Republican Speaker of the House John Boehner really serious about going along with raising taxes in the vain hope that the new revenues will go towards reducing the deficit?
Boehner’s comments are likely only the first wave of a coming avalanche of establishment pressure to raise taxes; all of which will be accompanied by promises that this time Obama really wants to balance the budget and Congress really will stop spending.
Don’t believe it.
Back in the late 1980s, Richard Vedder and Lowell Gallaway of Ohio University co-authored a study for Congress’ Joint Economic Committee that found that every dollar of new taxes imposed led to more than one dollar of new spending. Over the ensuing years, that study has been updated and the results are always the same.
In November 2010, Vedder and The Wall Street Journal’s Stephen Moore released an updated and more sophisticated version of the study, showing that “over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in – and a little bit more.”
What Moore and Vedder found was that no matter how you controlled for the economic variables, spending always went up faster than revenue. The alternative models produce different estimates of the tax-spend relationship – between $1.05 and $1.81. But no matter how they configured the data and no matter what variables they examined, higher tax collections never resulted in less spending.
As Vedder and Moore noted, “The only era in modern times that the budget has been in balance was in the late 1990s, when Republicans were in control of Congress. Taxes were not raised, and the capital gains tax rate was cut in 1997. The growth rate of federal spending was dramatically reduced from 1995-99, and the economy roared.”
The problem we have today is that all too many Republicans refuse to hold to the conservative principles that were proven to work back in the late 1990s. They don’t seem to understand that liberals and the Democratic Party exist solely to divide-up the spoils extorted from taxpayers by the welfare state and that cutting federal spending undermines their very reason for being. Or perhaps deep down inside, these establishment Republicans are all too ready to enter into “grand bargains” to raise taxes because they share those same impulses.