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John McCain
The Associated Press

Deficit hawk John McCain is making the case for the stimulating effect of tax cuts.

Featured Topic | Posted 30 weeks 4 days ago

What's more important: Cutting taxes or balancing the budget?

Republican John McCain said Sunday that cutting taxes and stimulating the economy are more important than balancing the budget, and accused both Hillary Clinton and Barack Obama of supporting tax hikes that would worsen the impact of a recession.

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Ben likes: The coming tax bomb

John F. Cogan and R. Glenn Hubbard/Wall Street Journal

The proper way to prepare to meet the entitlement challenge consists of three essential elements: Change entitlements to slow their cost growth; eliminate all nonessential spending in the remainder of the budget; and, most important but often overlooked, adopt policies that promote economic growth. The greater the economic growth, the larger the economic pie, and the greater the public and private resources available to finance entitlement obligations and other national priorities.

Last year's federal budget illustrates the importance of economic growth to the federal budget's overall health. The federal budget deficit was recorded as 1.2% of GDP, half its average level over the past four decades. This modest deficit occurred despite the fact that Congress has been on a decade-long spending binge; despite the fact that not a single entitlement program has been significantly reduced since the late 1990s and two entitlements, Medicare and farm support payments, have been significantly increased; and despite the fact that we are in the midst of costly but necessary wars in Iraq and Afghanistan.

The consensus that tax increases are needed for fiscal balance is wrong. The next president can fund our defense priorities, maintain tax cuts, and balance the budget. A tax-increase consensus blurs the basic debates over our budget priorities in 2008 -- and severely limits our choices in 2028. 

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Joel likes: It's our fault, too

Andrew Yarrow/Washington Post

The federal deficit halfway through this budget year is at an all-time high, the Treasury Department announced Thursday, and the national debt is growing as well. But before we blame Washington politicians for their irresponsibility, stupidity and cowardice -- and we should -- we may want to look at another culprit: the American people. We, too, bear some responsibility for our $9 trillion federal debt and $50 trillion in governmental promises of future benefits.

Yes, cutting taxes and increasing spending is irresponsible, as is allowing Medicare and Medicaid costs to rise so quickly, as is failing to achieve a long-term fix for Social Security and retirement security, as is developing (and protecting) a Byzantine tax code and dysfunctional budget process, as is pork. Yada yada yada. Washington deserves a lot of blame for the growing national debt, despite some genuinely thoughtful and courageous leaders, and must take the lead in solving the nation's fiscal problems.

But we share the blame. We want lower taxes but more government services. We go to great and morally questionable lengths to avoid paying the taxes that we now owe. We want to stop working as early as possible and draw retirement benefits for as long as possible. 

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The Associated Press

The tax cuts of Bush's first term will expire by 2010.

Featured Topic | Posted 35 weeks 6 days ago

Is a big tax increase coming?

Congress is intent on letting the Bush tax cuts expire, a move that opponents say would lead to the largest tax increase in U.S. history.

The House and the Senate this week both passed non-binding, $3 trillion budget resolutions. Although the plans differ, both would provide generous increases to domestic programs but bring the government's ledger back into the black by letting most or all of President Bush's tax cuts expire at the end of 2010.

Should Congress let the tax cuts expire? Would higher taxes help or hurt the American economy? How will tax increases affect Americans' lives?

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Ben likes: A $3,000-per-household tax increase

Brian M. Riedl/Heritage Foundation

Despite healthy tax revenues and federal spending that tops $25,000 per household, the House Democratic majority has proposed a fiscal year (FY) 2009 federal budget that raises taxes by $1.265 trillion over five years and $3.911 trillion over 10 years, or more than $3,135 per household annually.

The White House has responsibly pledged to veto legislation with tax and spending increases that would follow from these proposals. Congress should start over and write a budget that does not raise taxes on American families or businesses, is in line with the President's spending proposals, and addresses the coming entitlement tsunami. Anything less would likely worsen the economic downturn, make it more difficult for families to make ends meet, and kick serious budget challenges further down the road.

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Joel likes: Tax the rich

Nathan Newman/TPM Cafe

New data from the IRS indicate how much cash the extremely wealthy are making-- and how little they are paying in taxes compared to middle class families. Progressives need to consistently emphasize this reality and the fact that all the priorities we care about-- health care, transit, jobs, energy independence -- can be funded just by making the very wealthy pay their fair share.

With working families paying income taxes, social security taxes, sales taxes, property taxes and other daily taxes, most would be outraged if they focus on the low tax rates paid by those wealthiest taxpayers. The Bush years have been bad for working families in many ways, but the flip side is that the inequality that has been fostered means that there are now easy opportunities to raise revenue in politically painless ways.

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The Associated Press

A big book, with big numbers

Featured Topic | Posted 41 weeks 3 days ago

The $3 trillion budget: Is the era of big government still with us?

President Bush, who offered up the first $2 trillion federal budget in 2002, today presented the first $3 trillion budget. There's more money for the Defense Department -- although the costs of the wars in Iraq and Afghanistan aren't included -- and a project deficit of $400 billion.

Why is the budget so big? What are Americans getting for their money? And what will the near-record deficit mean for the country's future?

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Ben likes: Will budget deficits crowd out tax cuts?

Larry Kudlow/National Review Online

What will McCain and Romney do? They both want to expand the defense budget and the size of the military, as they should, to strengthen our national security in the War on Terror. But this, of course, costs money. Big money. President Reagan argued successfully in the 1980s that low tax rates reignite economic growth — growth that was absolutely essential to generate the resources necessary for a strong national-security posture.

Will McCain and Romney adopt the Reagan approach, or will they see higher tax rates as a tradeoff to a stronger military à la Eisenhower?

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Joel likes: Economic disaster looms behind federal spending

Mike Lillis/The Washington Independent

Some of the nation’s top economists warned that America’s long-term spending trends present a far larger financial crisis. Much of the reluctance to act is political, for few lawmakers want to be remembered for raising taxes or cutting benefits for constituents. This is especially true in a contentious election year.

Richard Kogan, a senior fellow at the left-leaning Center on Budget and Policy Priorities, said there would be no sweeping changes to federal spending patterns until the crisis grows more tangible—- and voters are willing to sacrifice in response. "You can’t do the right thing," Kogan said, "until you’ve got candidates who can win by doing the right thing. I think you have to wait for a new electorate."

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