Democrats Just Don’t Understand – There is a Right and a Wrong Way to Deal With Deficits

Money must have a different meaning to Democrats. To hear them listlessly brush off billions of dollars in spending as mere pocket change astounds me. Reminds me a little of Scrooge McDuck from Ducktails, who often swam through his enormous pile of money, followed by a rinse in a shower of gold coins.

But our nation has no pile of money. We have a hole of debt. Our nation can’t just turn on the tap and expect gold coins to rain down. Unfortunately, all too many Democrats seem to live in this cartoon world, where conjuring up a pile of dough is only as difficult as drawing a picture. The problem is that it’s all to easy to think that money is no object when it’s not your cash on the line.

There is no other way to explain a recent article by Kevin Drum on the liberal blog Mother Jones (who labels themselves as “home of smart, fearless journalism”) that decries Republican opposition to the $18 billion bank tax. He writes,

“On the scale of the federal budget, $18 billion is a rounding error. Literally. It’s about one-half of one percent of the budget, which rounds down to zero. But a small group of moderate Republicans are threatening to vote no on financial reform because an $18 billion fee is included in the bill.”

Really? $18 billion is nothing more than a “rounding error.” Merely because it represents less than .5% of the entire federal budget they want to chalk it up as insignificant? Let me tell you how much $18 billion is enough to:

  • Give every man, woman, and child in the United States $60
  • Pay 1 year’s worth of college tuition to more than 2.5 million students
  • Pay the average start up cost for 1.5 million small businesses

This is the kind of thinking that got us into this fiscal mess we now find ourselves immersed in. The fact is that the federal budget, which Drum uses to show how small $18 billion is, grew so large because of reckless spending. It is circular logic that shouldn’t fly in today’s economy. Nevertheless, the author uses Republican’s refusal to consider a new $18 billion tax in a feeble attempt to paint them as unconcerned over the deficit.

Drum quotes an article written by Ryan Avent in the Economist that reads:

“And yet the most moderate Republicans in the Senate are balking at the charge. Not because they disagree in any real sense with the economics of the fee. They simply won’t vote for anything that looks like a tax. . . And the most moderate Republicans won’t vote for tax increases, even when the increase in question is a relatively small, one-off charge on big banks.”

Looking beyond the fact that Avent joins the liberal chorus attempting to sing me into believing $18 billion is “relatively small,” his logic is simply off base. Republicans are not against the fee because it looks like a tax, they’re against it because they do disagree with the economics.

Take Scott Brown, the most visible Republican fighting against the inclusion of the bank tax. Brown wrote a letter to Senate Banking Committee Chairman Chris Dodd and Financial Resources Chairman Barney Frank to express his opposition, arguing that,

“This new provision takes real money away from the economy, making it unavailable for lending on Main Street, and gives it to Washington . . . I have always strongly opposed a bank tax because, as the non-partisan CBO has said, costs would be passed onto the millions of American consumers and small businesses who rely on [financial institutions for credit.]”

In fact, the CBO went further than Brown, writing that the proposed bank fee “would probably lower the total supply of credit in the financial system to a slight degree.” Adding that “the cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors…”

In other words, more than just a “one-off charge on banks” the fee would restrict the flow of credit and increase consumer fees at a time when the economy can least afford it.  Moreover, Republicans have put forward an alternative to the Democrats’ new tax, that would also allow the bill to be scored as deficit neutral – use “unspent federal funds” on “long-dead initiatives.”

Contrary to Drum’s assertion in his post, Republicans are deficit hawks. We merely understand that there are more options than simply higher taxes to achieve a reduction in the deficit. Of course, asking liberals, who chalk $18 billion up to a rounding error, to understand any sort of nuance may be a study in frustration.

by Brandon Greife, Political Director of the College Republican National Committee