FRI MAY 13, 2011 AT 02:45 PM PDT
How Republicans learned to repeal math
The single biggest obstacle to getting anything done on long-term fiscal policy is that when it comes to balancing budgets, Republicans don't believe that there are two parts to the equation: revenue and spending. They think what goes out the door is the only thing that matters—not what comes in the door.
Put another way, the GOP simply doesn't believe in math.
It wasn't always this way, and Salon's Steve Kornacki highlights what he believes are the two seminal moments in defining the GOP's flawed budget arithmetic. The first was the 1980 primary between Ronald Reagan and George H. W. Bush:
In this wing of the GOP, a new economic theory offered by Arthur Laffer was taking hold: that slashing income tax rates would actually lead to higher government revenues, with lower taxes spurring economic growth and increasing Americans' taxable income. ... On the other side of the GOP ideological spectrum was Bush, representative of the "town father" wing of the GOP -- pragmatists who saw a meaningful role for government in Americans' daily lives but who were wary of bureaucracy and who saw evil in red ink. ... To Bush and his ilk, Laffer's theories were utter nonsense and a recipe for fiscal disaster. ... Bush declared: "It is impossible for Gov. Reagan to balance the budget -- an essential component of bringing down inflation -- if he is to reduce taxes by more than $220 billion over the next three years."
Flash forward to 1990 and President Bush signed into law a tax increase that conservatives—incorrectly—believed touched off a recession. It set off a rebellion inside his party and ever since then, virtually no Republicans have been willing to do anything about taxes other than lower them, and there is no sign that everything is different today.
All hope is not lost, however. If Republicans won't let revenue become a part of the discussion, then at the end of 2012, all Bush-era tax cuts will expire and we'll return to Clinton-era tax rates. After that, even without changing tax rates, tax revenue as a share of GDP will continue to rise, thanks to inflation. That might not be an ideal scenario, but it would be fiscally responsible. And short of another Democratic cave, unless Republicans agree to come to the table, it's exactl