Senatorial Minority Leader Mitch McConnell, R-Ky., Isn’t the only politician who likes the term ‘Russian roulette’, although he deserves credit for using it consistently: always in opposition increasing taxes on the rich.
In 2012, for example, McConnell accused the Obama administration of “playing Russian roulette with the economy” by allowing Bush-era tax cuts to expire for households earning more than $ 250,000.
He returned to the theme in recent weeks. “I don’t know how many times I have to repeat this: We are playing Russian roulette with the American economy,” he said in an appearance in Kentucky on Monday.
McConnell’s remark was specifically aimed at a proposal by the Biden administration for free community college tuition, but his broader focus was Biden’s plan to pay for infrastructure and other expenses by increasing rates of income and highest capital gains of the rich.
What is happening here is the resumption of an old partisan economic debate. This is the recurring debate about raising the federal debt ceiling. The debate has been postponed for two years in 2019 with a bipartisan agreement expiring on July 31, that is, in about a month.
This is the backdrop to the brawl in Washington over Biden’s infrastructure and spending plans.
The GOP pushback has some familiar characteristics: They say the spending is too high, although they identify spending that ordinary Americans will certainly appreciate. The national debt is also too high. And the only remedy is to cut expenses, not increase income.
Here’s how McConnell put it in a May 28 statement: “President Biden’s proposal would drown American families in debt, deficits, and inflation … Democrats want to borrow and spend on a scale America does. hasn’t seen since we had to fight and win WWII. Our debt burden would break all records, even eclipsing the 1940s. ”
McConnell scorned projects on Biden’s wishlist like “a million mediocre socialist musings, from electric car subsidies to work-discouraging welfare programs to Washington-led child care plans.” (Let’s bet that a few hundred thousand middle-class and working-class households would welcome government assistance for childcare so they can earn more money at work.)
He reserved special chuckles for the physical infrastructure. “Generation of new public works?” he stated. “No, there is no 21st century equivalent of the Hoover Dam or the Interstate Highway System to make Americans proud.” (Let’s bet Americans would be more proud of the existing physical infrastructure if that didn’t mean bridges and overpasses collapsing in front of motorists.)
The underlying theme of this kind of commentary is no secret. As McConnell and his GOP colleagues wring their hands over the national debt, they carefully ignore the fact that their own policies bear the major responsibility for it.
During the Trump years, the national debt increased by about $ 6.8 trillion, or over 48%. (Figures refer to debt held by the public, excluding intra-government borrowing.)
Some of that debt reflects spending on relief and response to the pandemic, but a significant portion is the result of tax cuts in 2017, most of which went to businesses and the wealthy. According to a 2018 analysis by the Congressional Budget Office, the tax cuts will increase the federal deficit by about $ 1.9 trillion over the 10 years ending in 2027.
Surprisingly, as we have reported in the past, McConnell consistently insists that the cause of the federal budget deficit is not the destruction of government revenues resulting from tax cuts, but spending on Social Security, d Medicare and Medicaid – programs that are obviously essential for middle and working class Americans.
“Duties are the long-term drivers of debt,” McConnell told Reuters in October 2018, nearly a year after the tax cuts were enacted.
Implicit in McConnell’s warnings about Biden’s spending proposals is the idea that federal debt is approaching a point of crisis. “Our national debt is now greater than the size of our entire economy for the first time since World War II,” he said in February.
However, there is no evidence of such a crisis campaign. If the level of debt was really a concern, it would be reflected in the credit markets. But “high yield, investment grade market players have so far shown no fear of national debt,” wrote Jack Hersch of S&P Global Market Intelligence at the time of McConnell’s warning. The size of the federal debt has not triggered inflation either.
One reason may be that debt is cheaper to carry now than at any time in memory. As Hersch reported, from 2010 to 2020, the US national public debt more than doubled from $ 9 trillion to $ 21 trillion. However, the cost of interest on this debt only increased by 26%, thanks to “historically low interest rates”.
Relative to gross domestic product, Hersch observed, “the cost of the national debt today is half its cost 10 years ago, and no worse than almost half a century ago.”
The Republican obsession with cutting taxes and paying for this policy by cutting social spending will play out over the next few weeks in the debate over Biden’s proposals. Already, the GOP has drawn a line in the sand and made it clear that Biden’s tax proposals cross it.
These proposals include a significant increase in the federal capital gains tax, effectively eliminating the preferential tax rate enjoyed by capital gains and thus making the tax rate on those gains equivalent to what is charged on the capital gains. ordinary wage income. Biden also proposed eliminating the “increase” in capital gains on death.
It is a common loophole used by wealthy households to permanently extinguish capital gains tax. Under current federal law, a capital gain is only taxable when the asset is sold, with tax being levied on the difference between the purchase price of the asset – its “base price” and its selling price.
If the asset is held until the owner’s death, however, the cost base is updated to the value of the asset at the time of death, and the owner’s heirs are only responsible for the difference between that value. and the price when the asset is finally sold. Biden would allow a $ 1 million exemption for these changes.
So buckle up your seat belts for a month-long round on federal spending and the national debt. You will hear stories of ordinary families crushed by their tax burden, of family farms and businesses ruined by property taxes, and grim murmurs about the cost of Social Security and Medicare and the need to reduce these. benefits.
The truth is, however, that America’s richest taxpayers pay a smaller share of their wealth and income in taxes than at any time in more than half a century, and the rest of between us is poorer for that.