Among other things, Columnist Charles Krauthammer calls this week’s deal to extend the Bush tax cuts, continue unemployment benefits, set a new estate tax rate, and enact a payroll tax holiday--all while adding to $900 billion to the budget deficit--“the biggest stimulus in American history.”
Rep. Paul Ryan, incoming House Budget Committee chair, gave the best response I’ve seen yet to people like me who are worried about the fact that the White House deal is just fiscally irresponsible. In an interview with Jerry Seib of the Wall Street Journal, Ryan says that first and foremost, “You can’t get the deficit down, get the debt in the right direction, without economic growth, without job creation. You will stifle job creation--make no two ways about it--if you raise tax rates in January ... We need growth ... and then we need spending cuts and spending controls. For my money, pro-growth tax policy, combined with spending cuts and entitlement reforms, are the necessary conditions to get this thing going in the right direction” and create certainty for businesses.
On the subject of whether this is Stimulus II, Ryan explained that a payroll tax holiday and unemployment benefits are “Keynesian demand side ideas”--new spending that is not off-set by spending cuts elsewhere. Both are just pure deficit spending, and he, like most of us on the right, have a problem with them. But he’s so worried about raising taxes and the job-killing effect it will have on the economy, that he’s still willing to support the package in spite of its deficit spending.
Ryan points out the crucial difference between the tax cuts and the unpaid-for unemployment benefits: “Keeping tax rates where they are and preventing them from going up is not spending because that is people’s money in the first place.” That’s the difference between Democrats and Republicans in a nutshell: it is the government’s money, or is it our money?
No matter where you fall on that one, I bet you’d agree that the new spending should have been paid for. If that had been part of the agreement--if the Congress had abided by its own pay-as-you-go rules--I think support for it would be nearly unanimous (with the exception of the far left.) But if spending controls and entitlement reforms don’t follow soon, I think the taxpayer outrage will be unanimous too.