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Whoever wins the 2024 election will soon face a critical decision about extending four trillion dollars in tax cuts expiring next year. Whether taxes will be raised, or cut is in question, against the backdrop of 34.1 trillion dollars in federal debt. For the past few decades, the Republican Party has embraced the belief that lower tax rates and less government spending boost the U.S. economy. However, there is disagreement among conservative thought leaders about the way forward on taxes for the Republican Party. Specifically, some argue that preferences for tax cuts ignore the looming deficit and that refusing to raise taxes further imbalances the federal budget. However, others continue to argue that our debt is caused by government overspending and will actually be helped by tax cuts and that these same cuts also help promote a flourishing economy.
With this background, we debate the question: Is the Republican Party’s Refusal to Raise Taxes Fiscally Irresponsible?
John Donovan
This is Open to Debate. I’m John Donovan. Hi, everybody. Today our guests include two influential thought leaders who are both conservatives, yet they are on opposite sides of a policy choice that has seemed almost fundamental to the Republican agenda in recent years, cutting taxes. What follows is a really interesting conversation and I’m really delighted to pass the torch of moderating on this one to Nayeema Raza. She is a journalist with New York Magazine and with Fox Media and she is also an excellent moderator. Now on to the show. Here’s Nayeema.
Nayeema Raza
It is often said that there are only two guarantees in this life, death and taxes. But if we were to add a third in the 21st century, it might be that the Republican party will almost always refuse to raise those taxes. Indeed, we saw major tax cuts under President George W. Bush and we saw more yet under President Donald Trump, many of which are set to expire next year. The 2024 elections will determine what happens to those expiring tax credits. With Republicans overwhelmingly seeking to continue them and Democrats proposing to only keep tax cuts for less wealthy Americans, while adding new taxes for wealthy individuals and for corporations.
Arguing yes to the question is Oren Cass. Oren is the executive director of the think tank, American Compass. New York Magazine also dubbed him the nerd trying to turn the GOP populist. He’s a former senior fellow of the Manhattan Institute, and a political advisor who has advised Senator Mark Rubio on economic policy, and served as Domestic Policy Director in Mitt Romeny’s 2012 presidential campaign. Welcome Oren, thanks for being here.
And arguing no to the question of, is the Republican party’s refusal to raise taxes fiscally irresponsible, is former US Congressman from Indiana, David McIntosh. David is a co-founder of the Federalist Society of Law and Public Policy, and he is president of the Club for Growth, a conservative organization that advocates aggressively for free markets and against taxes. The New York Times calls it an anti-tax organization. And the Club for Growth’s political arm has backed the state races of influential Republicans like Texas Senator Ted Cruz, and Florida Governor Ron DeSantis. Welcome, David.
Nayeema Raza
Yes, all right. Before we jump in I just have two rapid fire questions for you. Why do you think the discussion is urgent now, and which politician, who do you look at, could be a Republican or a Democrat, that’s the best exemplar of what Republicans should be doing tax-wise? So, Oren, I’ll start with you.
Oren Cass
We are in our, at this point, a fiscal crisis. We are paying interest on the debt approaching what we spend on Medicare or social security or, or defense. Uh, and so either something has to give or something is going to break. You know, I think, frankly, everyone (laughs), everyone on both sides has a long way to go in, in thinking about the compromise that are gonna be necessary, um-
Oren Cass
I wanna start by thanking David for joining this conversation. I think it’s, it’s a critical one that is going on within the party, more so behind the scenes right now, but, uh, I think we have to make progress on. And, so I actually wanted to start with some of the places where I, I assume we agree. I think, you know, I agree entirely with David’s point that, that spending is, at the end of the day, the heart of the problem we have right now. The spending post pandemic is totally out of control and it’s gonna have to be brought back into control. I think we agree that we should want government to be limited. We should want to only burden tax payers with the taxes necessary to provide the services we are committed to providing. Uh, I think we agree that fiscal responsibility entails raising that necessary revenue, meaning balancing the budget at the end of the day. Uh, and I think as you heard in th- in our initial comments, we agree that we are in a, a totally unsustainable situation right now.
I think where we, where we disagree, and the resolution does a good job of, of highlighting this is how do Republican address that? Um, my position is that at the end of the day, both in terms of what conservatism demands in principal and what our political realities require, some amount of new revenue, which means a tax increase in some way, is going to have to be part of any way out of this. And so if we are going to be fiscally responsible, that means being willing to consider tax increases.
I would highlight three reasons for that argument. One, as I said, is a matter of principle. The idea that sort of conservatism means cutting taxes isn’t true. Um, if you go all the way back to Edmund Burke, he has a wonderful quote about how everything is a matter of circumstance. That at the end of the day, statesmanship and policy making means responding to specific circumstances, not holding to an abstract principle. And to that end, you know, Ronald Reagan raised taxes repeatedly (laughs).
Oren Cass
Ab- absolutely. He also cut taxes. But when he cut the taxes and they realized they didn’t have enough revenue, his response was to raise taxes. At least five major legislative increases, some people tell you as many as 11 times. George W.- H. W. Bush raised taxes. The idea that you cannot raise taxes is a very new found principal. The second point I would make, and this goes just sort of conservative practice and how we actually get to where we both want to go is that at the end of the day, it’s not taxes that determine how big government is. It’s the spending. Whether to not you raise the money for what government is doing, it is what government spends, the role it is playing in the economy that dictates the, the size of government and whether or not it’s limited.
And if anything, the deficit spending is worse, because you’re distorting markets further and adding more debt. And so what concerns me is that the idea that, well if we cut taxes enough, spending will have to come down doesn’t actually make sense. What you’re doing is essentially telling people they can have the big government and not even have to pay for it. Whereas it seems to me, the conservative approach should be to say, guys, you’re gonna have to pay for the amount of government we have, which means if you want lower taxes, you’re gonna have to sign up for the lower spending to, and so that’s why we can be for both together. But it, the more that you allow them to diverge, it seems to me the more you lose the argument.
[NEW_PARAGRAPH]And, and that’s the third piece in my mind is just the empirical case. Since the early 1990s, Republicans have tried this, we are just gonna deprive the government of revenue and the spending will come down. It has failed miserably. It simply does not work. And, you know, the quintessential image stuck in my mind is that 2012 Republican debate when the candidates were asked, would you take $10 of spending cuts for $1 of spending increases? They said no. I assume David would say no, and my view is you cannot be fiscally responsible unless you are willing to say yes to that.
David McIntosh
Um, my answer is emphatically no. Uh, raising taxes would hurt the economy, hurt the American people, send us in the wrong direction. And to say we’ve got a big spending problem and therefore we should raise taxes seems to me the exact wrong direction. Because it deflects from needing to gather the political force to actually get Washington to reduce spending. Since the 1990s, politicians in both parties have ignored any sense of responsibility about spending because they could borrow. And the new economic theory says don’t worry about that, and deficits, it’s all gonna be fine, and they don’t tell you this, but the reason they think that is so we can shuffle the consequences off to the rest of the world because our currency is the reserve currency. That’s coming to an end. You see China and Russia and India, Brazil, starting to form a coalition to challenge us as that reserve currency. And when that happens, then all of the inflation that comes from our debt comes back to us. Uh, even worse and more dire consequences than we’re seeing now with inflation.
So the answer isn’t to say, okay, let’s belly up to the bar and raise everybody’s taxes, because what we’ve seen in the past is lower taxes actually increase the economy and that lets the government collect more revenue. Kennedy did it in the 1960s and economic growth went from two and a half to four and half percent. Reagan on the whole cut taxes, flattened taxes, and you saw tremendous economic growth. Clinton and- cut taxes when Republican congress came in with the contract with America, and his capital gains tax cut led to 1% higher GDP. That extra growth, particularly in the tech sector brought in so much more revenue that by holding the line on spending, which was the last time congress held the line on spending, we actually had a surplus for the first time in about 40 years. Um, again, the Bush tax cuts helped g- generate economy. The Trump tax cuts did too. They increased economic growth from two and a half to four and a half in greater investment.
Conversely, with the Biden tax increase recently where the, Congress did go along with the, about a less than half a trillion dollars of tax increases, they coupled that with multiple trillion dollars of deficit spending. Um, so increasing taxes in the past has not been accompanied with ta- with spending cuts. It’s been accompanied with more spending.
Uh, Reagan found that out. He thought he had a deal with the Democrat congress where he would raise one of those tax increases Oren mentioned, and in exchange they would reduce spending by two or three times the amount. Well, they took the tax increase, but the liberals in congress want ahead and actually kept the spending. So it’s not a recipe for dealing with the key problem which is we have runaway spending, we have no political control on that, we’ve got leaders in the Republican part like Mitch McConnel saying it’s always good politics to spend more money. Um, so there isn’t that type of leadership in our party to actually do something about the spending. It’s hard.
Um, but if we raise taxes, typically that puts the burden of paying for all that spending in an ever-increasing amount, on working families. The middle class has to carry the greater burden of tax increases. You can say tax the rich, you can say tax corporations, but inevitably, they pass it on down to the consumers and so it’s the, the little guy. The working man, his family, who end up paying the bill when we raise taxes.
Welcome back to Open to Debate. I’m your guest moderator, Nayeema Raza, and we’re debating the question, is the Republican party’s refusal to raise taxes fiscally irresponsible? We’ve just heard opening statements from our two debaters, American Compass executive director, Oren Cass, and Club for Growth president, David McIntosh.
I wanna try and summarize your arguments briefly before we dive into them. So, I think Oren, you started articulating what the two of you agree on, which is a lot. You’re both conservative Republicans, you both agree that spending needs to come down. Uh, you both agree that federal deficit is a problem and it’s a problem that you’d like to fix, ideally with more revenue. And you both agree in the role of limited government.
I’d add to that a fourth thing, which David, you brought up, which is that spending isn’t coming down. Empirically I think you both have argued this. Uh, Oren, you’re saying even when taxes are cut, spending isn’t coming down. And David, you’re saying even when taxes are increased, spending isn’t coming down.
In terms of your arguments of why, uh, what’s happening, and what needs to be done, Oren, you kind of laid out three ideas. First is the, you challenged the principal. This principal that the Republican party needs to be against raising taxes. They said this is a relatively new principal. It isn’t born out by the history of the Republican party and it’s kind of a fundamentalism that might get in the way of effective policy to solve that urgent crisis of the, of the federal deficit. You’ve argued, again, spending will not come down. Spending hasn’t come down. And, and you actually said that this is a challenge because you wanna align, uh, the public’s understanding. You want to show the incremental cost of government, basically, and show people that they have to pay for that in the form of taxes versus just continuing to pay less for more government. And then thirdly, you pointed to the empirical evidence.
Now, David actually challenged that empirical evidence. He pointed to a time in history, the 1990s where there was a balanced budget. Uh, at that time he was a congressman for Indiana in the House of Representatives. Um, and he also pointed out this idea that it would be irresponsible to raise taxes because it would distract from the broader question of spending. Because spending hasn’t come down with any tax increases, it would be irresponsible to suggest that it might. And you finally, I think, brought up this idea that it’s unsustainable. That right now where we are is unsustainable, but there is a model in the past. There’s a model that we’ve seen, not just under Republican tax cuts but under Democratic tax cuts that we can actually get to more effective government, bring down, balance the budget. And we need to do so because of the challenge of real and rising federal deficit, real rising interest rates.
So I wanna, I wanna start with this empirical fact, ’cause I feel like we have to close this argument. Oren, you’re saying effectively, never have we seen these tax cuts deliver a reduction in, in government spending. Um, David is pointing to a particular point in time, the 1990s, and was arguing this idea of lowering taxes will grow the overall pie, and therefore grow revenue. And he points to the 1990s as an example of that. Oren, how do you look at that? Was that an aberration? Was that proof of the policy? What- what do you think?
Oren Cass
Well I- I guess I would, I would challenge the na- the narrative that David presented in, in a couple of ways. One is, uh, I think it’s fair to say that Reagan cut taxes more than he then reraised them. It’s also very important to know that Clinton raised taxes more than he then cut them. David mentioned a particular capital gains cut that did happen. But, in fact the, the overall picture is that Reagan lowered taxes in the ’80s. H.W. Bush and then Clinton raised taxes in the ’90s. So all that wonderful boom that David is describing came in the context of a higher tax environment than what, certainly Republicans were advocating for. Bush then cuts taxes 2001 and 2003 and we shift to a, a lower growth environment again.
I don’t know anyone who argues that actually the economy performed better after the Bush tax cuts than they were perfor- than it’s performing before them. If you actually look at what happened and, and what was going on with spending, and I usually use as a share of gross domestic product, I assume that’s typically how you guys will look at it as well. It’s a good way to understand how much are we collecting in taxes relative to the size of the economy, how much are we spending. Um, I just, I jotted this down going in, so tax increases in 1990 and 1993 in the subsequent years, spending comes down significantly as a share of GDP after the tax increases. Then we cut taxes in 2001 and 2003, spending goes up as a share of GDP during the George W. Bush administration. Obama raises taxes in 2012, subsequently spending goes down as a share of GDP. Donald Trump cuts taxes end of 2017, spending starts going back up as a share of GDP.
So, in fact, empirically, in the wake of tax increases, spending has also come down. In the wake of tax cuts, spending has gone up faster. And I think this is particularly a problem for Republicans who simply cannot make a claim to having any sense of their own fiscal responsibility on the spending side or any plausible path, even if they controlled the entire government and could do whatever they want, there is no evidence to believe Republicans would actually bring spending down as much as they would need to sustain the level of taxes they keep insisting on.
David McIntosh
Yeah, I think it’s a false analogy to link tax cuts with spending decisions. Particularly since 2000, after Bush, H. or W. is elected. Um, the spending decisions were separately made from the tax decisions and there was no sense that we had to reconcile them in balancing the budget. The decision was balanced budgets didn’t matter, we, it’s important that we spend the money. And what we’ve tried various ways of getting to a balanced budget requirement, almost passed the balanced budget amendment in the ’90s, made a mistake of not accepting Gebhart’s proposal, which woulda been fine to include at social security into that formula. Uh, and then we tried automatic cuts, sequesters and other ways of forcing Congress to reduce the spending. And the political will has not been there to keep those. In fact, you’re right Oren, Republicans have joined up with Democrats to break those type of balanced budget limits.
And so the only real solution is to gain a political mandate to actually control spending. You look at the core of what Newt Gingrich put together in Contract with America. He and John Kasich, the budget chairman were determined to get into a, a balanced budget. Um, they had a lot of other programs within that. Some defense spending increase, welfare reform, tax cuts. But the political determination was if we were going to reduce or hold even spending so we can get to a balanced budget. I haven’t seen that momentum, certainly the Democrats don’t ever believe that. They think more spending, larger government is the right policy. And now we’re seeing, as you pointed out, $34 trillion in debt. But a third of the Republicans join in with them.
Oren Cass
‘Cause I think I, I think there were two important points there in my mind that, that I entirely agree with, but haven’t, but leads me to a very different conclusion. One is, as you, as you said, w- there is no link between the tax policy decision and the spending policy decision. That, that I think is exactly what I’m trying to say that it is not the case that if you increase taxes, well then spending’s gonna run away, or if you cut taxes, well that’s how we get spending down. These, these are separate conversations in a sense.
Um, and then secondly, to your point, if we are going to make any progress on this, we are going to need a political mandate. We need to actually construct a political coalition that can make progress. And so, in my mind, the, the key question is where is that political mandate going to come from. And this is where the, the $10 of spending cuts, $1 of spend increases, I think is such a useful construct. Which is more likely, as an agreement that could actually make progress politically? $10 of spending cuts with a $1 of sp- tax increases? Or $10 of spending cuts with $0 of tax increases. Which one do you think has a better chance of actually building momentum in the American political system?
David McIntosh
So, uh, if those tax, $1 of tax increases are honest tax increases that the middle class is going to pay, I, I don’t think that builds the political coalition. Older guys like me that served with president Reagan view the policies that he had, I, I think correctly, as the right vision for a good, good economy, good country, strong country. Oren’s, d- um, part of their criticisms I hear is you guys just keep saying we need to do Reagan.
David McIntosh
And I think Oren challenging conservative leaders to do that and to reach out to a broader coalition that Donald Trump brought in to the Republican party, um, which in cludes a lot of middle class working families that grew up voting Democrat, felt the party left them, and now will vote Republican. And so let me turn to why I think the tax increase part of it is a mistake.
Nayeema Raza
Which is, I, I, I just wanna point out that Oren, when he was stating back your two positions, I think the first one was a, was a bit different to what I heard David say. So I wanna get to that, which is I don’t think da- David, if I understand your argument correctly, you don’t think that cutting taxes is necessarily going to get us decreased spending, but you think that a discussion around cutting taxes could distract us from the more urgent question-
David McIntosh
Yeah, I don’t think his trust that we could put together a package of some tax increases and a lot of spending cuts will actually work poitically. The, the ability to actually enact those spending cuts will, will be in- there’ll be incredible pressure against it. I, I think we’ve gotta figure out a mechanism and a message that directly focuses on the spending part and forces people, politically, to do that because of, uh, the voters being so upset at what’s happening.
David McIntosh
And I, and I think politically it’s not wise to start with that as you’re focused on cutting spending. Um, one of the things that, that is little known is that about a third of, of programs we call entitlements are not social security, they’re not Medicare, they’re farm subsidies. They’re other programs that didn’t wanna go through the political process so they convince Congress to make them a permanent spending plan. I think we should look at those and see, are we getting our value our of that type of spending.
And then I think a up and down review of what the government spends money on, um, and getting rid of the spending that we don’t need that frankly, the private sector should provide for. You know, along with the ec- concern about the economy is a growing concern about institutions like colleges and corporate America pushing a social agenda that many voters don’t want. And that’s part of the coalition-
David McIntosh
Those are not ec- pure, to say, economic issues, but I think, actually, the solution to those, some people have said, okay, well regulate and tell them they can’t just have liberal social arguments, they’ve gotta have conservative ones. I think that’s a mistake. I do think we should look at all the spending and say, where have we subsidized social programs that we think are bad for the country, and let’s stop that spending?
Oren Cass
Well, I appreciate the way you sort of, David, has run through those priorities because they, when we talk about how Republicans have failed to get spending under control, this is how. The, the list of things you just described, if, if we cut all of those, if we wiped all the woke related spending entirely, if we wiped out farm subsidies, if, if we did that stuff, there is no way we would get spending as a share of GDP below 20%. It has not been below 20%, by the way, average over the last 40 years. It has not been below 20% average of the last 20 years. There’s no way that that sort of budget is going to get spending as a share of GDP under 20%.
Now, I think the things that you described are good, we should do them, but this underscores the fact that, while, we have a major spending problem, it is not only a spending problem. That the GOP tax agenda, if we look at what the Trump policies were raising as a share of GDP, it was about 17%. And what you’ve just described I have, I have not seen any plausible budget that gets our spending down to 20 per- 17%. And what you’ve just gone through explains why. Because as politically unwise as you say it may be to raise taxes, the spending cuts that you would need to get to 17% of GDP is far, far, far more politically unwise.
And so what we have is a situation where yes, spending has to come down a lot. Let’s say, not only 20, let’s get to 19. You still need more tax revenue. And that’s where this ten for one piece becomes so important. And where, by the way, if, if you’re actually trying to craft a plan, you can do it responsibly.
Oren Cass
The most helpful way to think about it is what share of our GDP is collected as taxes and what share is spent. And so that 20% number happens to be going all the way back to 1980, roughly what the federal government spends every year. Right now we’re way above that. To David’s point about the spending the I agree with [inaudible
David McIntosh
Whi- which should assist us in growing the economy. You’ve got other policy questions, like, over regulation and government competition with the spending that are a problem. Um, what I’m worried about is something Oren mentioned, the automatic tax increase that’s coming up in 2025. And-
Nayeema Raza
So you’re saying that lower tax is, just so I can understand, a consistently low tax environment, which we currently have because of, uh, Donald Trump’s 2017 tax cuts, actually acts as a stimulus for private investment, for the economy to grow, and that government could tax that economy at a lower rate to bring in more revenue. The challenge has been the uncertainty that’s created by the fact that these tax cuts are not permanent.
Nayeema Raza
Although you both want, it sounded like there was some, uh, interest in reducing woke spending. I don’t know, I don’t know exactly what that is, but [inaudible
Oren Cass
[inaudible
David McIntosh
[inaudible
Oren Cass
So what you see happening now, and this goes exactly to this question of is it fiscally irresponsible, there’s no actual plan here to balance the budget. Instead there’s a claim that if we keep taxes low enough, we’re gonna get enough growth that the budget sort of will magically balance over time. And so I just think, I wanna emphasize-
David McIntosh
No, no, I, I, I haven’t agreed with that as a goal. I think we need to have a tax policy that contributes to economic growth and that when we hold… cut the spending back to the way it was, uh, pre-COVID and hold it level, that growth will get us to a point where we can balance the budget.
Oren Cass
This idea that, well if we cut taxes we’ll get more growth, it is just not true. It something people say. I, I just wanna read, let’s look at the Bush tax cuts as an example. I brought, great paper written by Andy Samwick, chief economist in the George W. Bush administration, so there is no first order evidence in the aggregate data that these tax cuts generated growth. Careful micro eco- economic analyses gives similar conclusions. More generally, tax cuts that are financed by debt for an experienced period of time, which is what you are proposing, will have little positive impact on long-term growth could reduce growth.
Okay? The actual economic literature on deficit financed tax cuts, especially when taxes are as low as they are already, right, this is not Reagan days, 70% marginal rates. We already picked that for… there is virtually no evidence that at current levels, tax cuts generate growth. It is, its simply something we say to justify the lower taxes, which if that’s your priority is fine, but it is not fiscally responsible.
Welcome back to Open to Debate. I’m your guess moderator, Nayeema Raza, and I’m joined here by debaters Oren Cass and David McIntosh, two influential Republicans associated with American Compass and the Club for Growth respectively. They have been vehemently but civilly, I would say, disagreeing over this question. Is the Republican party’s refusal to raise taxes fiscally irresponsible?
We were just in the middle of a heated exchange where, uh, Oren you were, you were quoting, um, economist Andy Samwick, and, and challenging a core part of David’s argument that tax cuts will grow the economy. They will stimulate private sector investment, they will make the economy more productive. Um, David, what do you say to this argument?
David McIntosh
Yeah, I, I vehemently disagree with that analysis because, I mean, the fact is, after the Bush tax cuts, we saw the economy grow faster than inflation, which it hadn’t been doing before. After the Trump tax cuts, we had 3% GDP growth and investment grew from two and a half percent to four and a half percent. So I, I, you can be very selective in these economic studies to, to get to a result. I- my thesis on this is that both for Bush at the beginning of our deficit spending run, more for Obama and even more for Trump, the overhang of the debt and refusal to deal with the spending question is what has caused the negative effects in the economy.
And to have a solution that says we’re gonna make it harder for our economy to grow, harder for people to invest, harder for workers to earn more money by raising all their taxes and assume that that’s gonna take care of our debt problem, I think is a fallacy. The Democrats believe it, idnt think Republicans should.
Nayeema Raza
So I wanna really go back to the principals. Um, one of the principals that I think is really interesting is that spending and taxes don’t seem to be related in, in many ways. We’ve seen two crises, a pandemic and a recession in 2008 and, um, and 2020 obviously with the pandemic where we’ve needed massive stimulus bills. There’s also been wars. Like, we’ve been a nation that’s been at war for the last, you know, 20 years until, uh, the withdraw from Gaza, and now is supporting quite expensive foreign policy in Ukraine and in the Middle East. And so these have been, um, drivers of spending in addition to entitlements that are growing. Another drive for spending, of course, is rising inflation. Uh, the government, you know, when there is a $2 trillion dollar deficit last year and $600 billion plus of that was driven by the fact that in 2022 that was, that was use to pay down the debt because interest rates are rising.
So I, I just wanna ask this question. Is any of this realistic? We are talking about a $34 trillion dollar deficit. Is it, is it realistic to actually make a dent? Because that, you know, that deficit has just gone up year after year. It’s a, it’s an up into the right curve, uh, so yeah, Oren, is this even possible what you’re laying out? I mean is it a pipe dream? Is it possible? Tell us.
Oren Cass
I well, I’m very optimistic. For the first two centuries of the American Republic, we had no problem running a relatively balanced budget raising taxes commensurate with what we spent. Um, you know, the 1980s and Reagans policies were very interesting in a lot of ways. I think on net they did a lot of good. There is obviously the foreign policy dimension of it as well. Then coming to the 1990s and again balanced the budget. And, and, and again, let’s just keep in mind, Clinton tax environment much higher than today’s tax environment. If we went back to the Clinton tax environment we would, we would cover the revenue raise side of any sort of deal easily. Now David would say that would destroy-
Oren Cass
But my point is that, well, you know, somehow this is bad for the economy and growth will slow, investment won’t happen, wages, bl- et cetera, et cetera, if we had the Clinton tax environment is refuted by the Clinton tax environment. And so I- the reason I’m going through this is to say, what changed, and we agreed on this at the beginning, I think, is one of the two political parties decided we will never again accept raising taxes, we will just keep cutting them. And also, by the way, not be very responsible on spending.
Nayeema Raza
So I wanna ask, uh, you know, David you identified yourself as an old guard Republican who’s worked in the Reagan administration, et cetera, so what, this is when the policy changed. I mean there were times in, you know, uh, when President Kennedy wanted to, uh, wanted to cut taxes, or Republicans advised him against, or fought him to keep taxes high and you did-
David McIntosh
A- again it, it’s the point you emphasized that I made earlier is, um, a tax increase is a deflection from the real problems we have. Um, I, I do to, remain an optimist. I, I think it’s gonna take leadership that looks beyond the question of taxes and says what is, uh, responsible spending here. We shouldn’t, as politicians, just try to buy our reelection by adding more spending. But that, that’s just one of the other questions. Another one is to take a deep look at the role of government in the economy and in our lives. We’ve used the regulatory systems from securities regulation, approval of health care products, labor regulation, to impose an enormous burden, particularly on the manufacturing, producting side of the economy. The financial side’s relatively less regulated.
But on the, the production side, there’s a huge economic burden that we place on them that we don’t get that much benefit from. We need to protect safety, health and the environment, but we don’t need the government dictating how gover- how private sector allocates its resources for those goals. We should set the standard and then let the incentive effect of the private sector and competition, you know, you can d- who can meet the goal the cheapest and the most effect-
David McIntosh
And that’s, lemme just close by saying, the cost of that is born almost directly by working middle class Americans. Um, job, a job in America costs an extra 30, 35,000 in regulatory costs. If the job goes to Mexico or to China, they don’t pay those costs. So in addition to the wage differential that people look at, the cost of government in our working economy is enormous and, and we’ve gotta have, find leadership who’ll deal with that and cut it.
Oren Cass
I think there are, are enormous number of things we could be doing to promote growth, many of which David just described, not coincidentally though, we’re not talking about taxes any more. Because on the tax question it is not at all clear that at the current tax rates that we have, more tax cuts is somehow the thing that we need. And, and I just, there, there’s this wonderful anecdote, this was as they were trying to sell the Trump tax cuts. And this was the Wall Street annual CEO cont- conference, one of the Bush officials was up on stage talking about how this was gonna unleash investment, whatever… Moderator just turned to the audience and said, “How many of you, uh, are gonna increase your investment if the Bush tax cut goes through?” And like, literally no one raised their hand to the point where the Bush official said, “Why aren’t your hands up?”
Nayeema Raza
So I wanna ask a specific choice in that, and we have a few minutes left, and I wanna ask specifically about a particular kind of tax, which is very politically heated discussion, uh, carried interest. The carried interest tax, uh, provision which, which, uh, was thought that it would come down under Biden’s um, Inflation Reduction Act, but Senator Kristen Sinema, Democrat, uh, you know stood up for the lobby and kept that, ensured that the private equity, uh, tax benefit, private equity venture capitalist hedge fund tax benefit, that allows their, uh, carry in these vehicles to be taxed at a lower, uh, long-term capital tax gains rate, um, be allowed to continue. So I’m curious if each of you would support, uh, raising taxes on those, you know, on those financiers, by getting rid of the carried interest tax. So Oren, you first, d- are you supportive?
Nayeema Raza
[inaudible
Nayeema Raza
Uh, yes, because it would not make as much of a dent as real significant tax [inaudible
Nayeema Raza
Would you agree to such a tax? Because that, that wouldn’t affect the middle class [inaudible
Oren Cass
Well, so one area is tariffs, and I think this gets into trade policy also, but tariffs generate a huge amount of revenue. That’s one place. I think another is we have a lot of tax expenditures, tax breaks in the code, especially for higher income households, mortgage interest deduction, health insurance deduction, these kinds of things. There, there’s literally hundreds of billions of dollars in those places.
David McIntosh
To take it on it’s merits, um, the one part I would agree with is to close a lot of the tax expenditures. I wouldn’t touch the interest rate deduction and I wouldn’t touch the charitable deduction because those are so fundamental to they way our society’s been built up in very good ways. But the rest of them, a lot of these corporate benefits and, and little deductions and, and exemptions they have, I agree with Oren, we should eliminate those, get closer to a flat tax.
Nayeema Raza
(laughs) Okay. Sounds a bit like a no to me. Um, I, with that I wanna get into our closing arguments. Uh, Oren, you’re gonna have the first, uh, first shot at the mic drop. So you have two minutes to tell us why you’re arguing yes to the question, is the Republican party’s refusal to raise taxes fiscally irresponsible?
Oren Cass
Well I think the definition of insanity is doing the same thing repeatedly and expecting a different result. Uh, we have now had 30 years of a Republican party that has insisted on signing Grover Norquists tax pledge and s- also banging the table and claiming that we are somehow going to get spending down and balance the budget and things have only gotten worse, regardless of who’s in power. Um, the idea that if we just do that a little bit harder, it’s, it’s really gonna work now, is totally implausible and, and, and would I think, lead to exactly the pessimism you described. Yet the three, four trillion is just gonna keep going up if we keep doing that. And it will keep going up until the system truly breaks. Uh, and, and that is the definition of fiscal irresponsibility.
What are the alternatives? I guess one alternative would be betting that somehow you’re gonna claim some super majority and have a totally different set of leaders and all the world’s incentives are going to change and magically this approach that has never worked at all is going to work. Or we could look at the thing that worked repeatedly and consistently throughout American history, and, by the way, is common sense, which is that people have to compromise. We have to pay for the spending we do. And if we want people, the voters, to care about spending and bringing it down, they have to understand that they have to pay for the spending that we do. And so what does that look like? That looks like an actual deal where both sides come to the table and make real commitments.
The idea that like, well, but we’re never gonna get the spending cuts just isn’t true. You can… that’s the entire premise of legislating. If you do a package, if all we did was say, hey, all of those expenditures that we were talking about, we wanna actually put those on the table, and in return for which, we actually want some serious legislative changes to things like farm subsidies, that could be a bill that actually moved with bipartisan support very quickly and was now a positive step. And that is entirely plausible except for the Republican party’s refusal to raise taxes which is fiscally irresponsible.
David McIntosh
Thank you, and it’s been great to be here with both of you. I firmly believe it would be a terrible mistake for the Republican party to embrace a tax increase agenda. I think it would, first of all, hurt Americans who are working and trying to make a living for their families. It would hurt the investment in the economy and it would grow the government which would limit individual freedom. Um, when government takes resources out of the economy for its spending priorities it means people have fewer resources to pursue their dreams, their lives, their freedom to make choices for themselves. And the economic affect of that is to slow down the entire economy and to become more like a socialist country like they are in Europe, which the citizens end up suffering for that with a lower co- benefit of living. A lower life s- lifestyle and less, less benefits for them and their children. So it would be a mistake for Republicans to embrace that.
I also think it would be politically disastrous for Republicans to do that because their viewed now as the only thing that is holding back government. And as you pointed out in pole after pole shows Americans no longer feel government is actually good for them. Um, the government has lost the trust of the American people, in part because of the dysfunction we see, in part because of the self interest that the elite who run government have shown in the way they deploy it. So I think the best economic solution is to face the fact that there is an automatic tax increase on the table, oppose that, say we’re gonna extend the current tax cuts, and then develop a program to grow the economy to get back to a robust competitive economy that isn’t micromanaged by the government.
Nayeema Raza
Thank you, David. Thank you, Oren. I’d like to thank our debaters for being with us here today. We so appreciate you showing up, your approaching this debate with an open mind and strong arguments, and bringing your thoughtful disagreement to the table. In short, your being open to debate. Thank you for being here gents.
Nayeema Raza
Thank you, and I wanna give a big thank you to the audience who tuned to this episode of Open to Debate. As a nonprofit working to combat extreme polarization through civil debate, our work is made possible by listeners like you, the Rosenkranz Foundation, and supporters of Open to Debate. This show is generously funded by a grant from the Laura and Gary Lauderer-Bencher Philanthropy Fund. Robert Rosenkranz is our chairman, our CEO is Clay Ed Conner, Leah Mathau is our Chief Content Officer. This episode was produced by Alexis Pencrazi and Marlet Sandovol, editorial and research by Gabriella Meir and Andrea Foote. Andrew Lipson and Max Fulton provided production support. Millie Shaw is director of audience development and the Open to Debate Team includes Gabrielle Yaniceli, Rachel Kemp, Linda Lee and Devon Shermer. Damon Whitemore mixed this episode and our theme musid is by Alex Clement. And I’m your guest hose Nayeema Raza. We’ll see you next time on Open to Debate.
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