Republicans and Democrats Agree: Keep Taxes Low and Downsize Government

What's all the fuss down there in Washington? Reading the news, you might think there's a huge ideological divide between Democrats and Republicans over taxes and the size of government. 

Unfortunately, that's not the case. Mainstream congressional leaders in both parties agree that taxes should be kept near historic lows while government is steadily downsized. 

Consider the new budget plan just released by Senator Patty Murray -- the supposed great Democratic alternative to Paul Ryan's plan. 

Under the Murray budget, nondefense domestic discretionary spending -- which includes everything from NASA funding to housing vouchers to the SEC's budget -- would fall from 3.7 percent of GDP this year to 2.5 percent in 2023, an unrelenting downsizing in real terms of nearly every function of government. Inevitably, low-income Americans would take a painful hit as funding for key programs for the poor fails to keep up with inflation and population growth. Regulators would struggle to protect workers, consumers, investors, and the environment as their budgets flatten out even as the economy continues to expand. 

Why does Murray's budget require such significant cuts to domestic spending? Because it makes permanent -- as the fiscal cliff deal did -- the bulk of the Bush tax cuts enacted in 2001. As we've written here repeatedly, lettting those cuts stand will cost the U.S. Treasury some $4 trillion in lost revenue in the next decade. 

Now, Murray's budget does recapture a quarter of those losses by closing various loopholes for the wealthy and corporations, to raise $975 billion. But this shouldn't obscure the fact that Murray -- like most congressional Democrats -- favors keeping taxes near a historic low on middle class and upper middle class Americans even if means imposing significant pain on low-income families. 

In fact, Murray and Paul Ryan don't disagree all that much on how much revenue government should raise. Under Ryan's budget, taxes as a percentage of GDP would stand at 18.7 percent of GDP in 2022. Under Murray plan, revenue would be at 19.6 percent of GDP. 

That's right: these supposedly polar opposite fiscal visions differ on the all-important issue of taxes by less than a percentage point. 

To be sure, the Murray and Ryan budgets differ in any number of other ways, with Ryan calling for much deeper spending cuts. As Bob Greenstein of CBPP has noted, the Ryan budget is "extreme" and the Murray budget is a far better alternative. 

Still, it's depressing to see just how much congressional Democrats have embraced the basic conservative argument that taxes should remain low on most Americans -- even as the Boomers retire, China rises, our infrastructure crumbles, and the U.S. faces huge deficits. 

Murray's domestic spending cuts might be palatable if they significantly reduced long-term budget deficits. But that's not the case. Under Murray's plan, the U.S. still packs on another $7 trillion in new debt over the next decade. Yes, deficits and debt as a percentage of GDP would fall under the plan, but U.S. interest payments on the debt will still triple in dollar terms: from $224 billion this year to $791 billion in 2023, and double as a percentage of GDP.

Under Murray's plan, the U.S. will be spending far more on interest payments in 2023 than all domestic discretionary spending. That's disturbing. And the only reason for both such big domestic spending cuts and giant new debts is because we're making permanent those Bush tax cuts -- cuts which many Democrats argued for years were unafforable. This is deeply irresponsible. 

All I can say is that I'm looking forward to the Congressional Progressive Caucus budget plan, which comes out next week.