Throughout negotiations over raising the debt ceiling, many potential solutions have been haggled over, involving various cuts to spending programs, reforms of entitlement programs, and potential revenue increases. One thing that's not currently being discussed, however, is the idea of eliminating the deficit solely through increasing taxes.
Fox, however, devoted a curious amount of time to attacking this phantom proposal, seemingly suggesting that this is the solution Democrats are pursuing. That's not true. What congressional Democrats and President Obama have actually proposed -- and what the majority of Americans support -- is a balanced approach that lowers the deficit through both spending cuts and revenue increases.
But Fox & Friends plowed on, inviting Fox Business host Stuart Varney on air to prove that taxing the wealthy -- and doing nothing else -- won't eliminate the deficit:
GRETCHEN CARLSON (co-host): The House, as you're now learning as you're waking up, yep, they delayed the vote to lift the federal debt limit after negotiations fell flat. Some Republicans are still not convinced that the bill does enough to cut big government spending. So is the problem one of revenue or spending?
CLAYTON MORRIS (guest host): Stuart Varney is here from the Fox Business Network to break it all down for us. Stuart, you're doing math this morning.
MORRIS: So, if we talk about the rich side of this, and if income is taxed at a higher level, does that solve all the problems?
VARNEY: No, not at all. Let's go crazy. Let's, for example, imagine that we tax at 100 percent every dollar anybody makes over $250,000 a year. In other words, you take it all off them. You make $250,000 and $1, that $1 comes right off you -- goes to the government. You'd still only bring in $900 billion a year. You've still got a deficit of $750 billion, even with 100 percent tax rate above $250K per year. Now, let's suppose you go utterly insane, and totally illegal, and you confiscate the wealth, not the income, the wealth --
DOOCY: The stuff in the bank.
VARNEY: The -- your real estate, your stocks, your bonds, your yacht, your corporate jet, your business, just take it all off the 400 richest people in America. You confiscate the lot. You still balance the budget for just one year. And the year after that, you're back to a trillion dollar deficit, and plus you've wrecked the economy and ruined the Constitution. That's another story.
Fox also spent some time trying to rehabilitate the Bush tax cuts:
DOOCY: And what about the Bush tax cuts?
VARNEY: OK, you restore the Bush tax cuts. In other words, you tax the wealthy at a higher rate, over 250, you bring in just $80 billion a year. That's it. You've still got a deficit of $1.52 trillion a year. Plus, you're likely to have a bigger deficit the following year because you have really hurt the economy.
Finally, Doocy declared that Varney's math made it clear that “there's a spending problem in Washington.” Later, Carlson decided: "[T]he president has been effective in messaging that taxes actually will help cut down the deficit. If he looked at your charts, he wouldn't be able to say it." From the show:
DOOCY: And you know what, Stuart? By depicting what's going on mathwise there in Washington, D.C., it's clear there's a spending problem in Washington, and that's why all these tea party Republicans are saying, look, I came to Washington to stop this. So I get their conundrum.
VARNEY: They've got a point.
DOOCY: They do.
VARNEY: They are looking long term and saying none of these plans addresses America's long-term dilemma. It's not that long term. It will hit us next year. That's why we're being downgraded. We're spending so much.
DOOCY: What do you mean we're being downgraded?
CARLSON: Might be.
VARNEY: It's highly likely that the rating agencies will drop us down.
CARLSON: But it all comes down to the PR message, and the president has been effective in telling people that taxes actually will help cut down the deficit. If he looked at your charts, he wouldn't be able to say it.
VARNEY: Do you think he'll be able long term to look good when we're downgraded on his watch?
First of all, this entire segment seems to suggest that there's a proposal calling for the deficit to be blasted away with taxes alone. But no one is claiming such a thing. President Obama and other Democratic leaders have only called for revenues to be part of the solution.
And they are supported by economic experts; many have said the deficit is, in fact, a revenue problem, not a spending problem. In October 2010, Justin Fox, editorial director of the Harvard Business Review Group, determined that our deficit “is mainly the result of the collapse in tax receipts brought on by the recession, not the increase in spending.” Pulitzer Prize winner and economics author David Cay Johnston wrote in a March 4 column, “We have a revenue problem.” And in October 2010, Nobel-Prize winning economist Paul Krugman wrote that “government spending has continued to rise on its pre-crisis trend” while "[r]evenue has plunged." It included this chart:
Even conservative economists have recently admitted that both revenue increases and spending cuts are required to eliminate the deficit. According to The Hill, N. Gregory Mankiw, chairman of former President George W. Bush's Council of Economic Advisers, said last month that “both tax increases and spending cuts are required” to lower the deficit. Former Reagan budget director David Stockman also told The Hill that "[i]t is simply unrealistic to say that raising revenue isn't part of the solution." And even on Fox Business, regular Fox guest Ben Stein said: “We've got to raise taxes. There is just no way around it. The deficit situation is so serious that while I wish we did not have to raise taxes, we just can't cut spending enough.”
The American public agrees with these economists: a Quinnipiac poll released July 14 found that 67 percent of voters say an agreement to raise the debt ceiling “should include tax hikes for the wealthy and corporations, not just spending cuts.” And a Gallup poll released July 13 found that 69 percent of Americans favor reducing the deficit either “mostly with spending cuts,” “equally with spending cuts and tax increases,” or “mostly with tax increases.”
Finally, it's grossly misleading to try to clear the Bush tax cuts from any blame for the deficit problem. Many experts have shown in great detail that Bush-era policies, including his tax cuts, are largely to blame for the current deficit. The Congressional Budget Office (CBO) projected in January 2009, based on spending and taxes authorized by Bush, that the deficit in FY2009 would total $1.2 trillion; the actual deficit was $1.4 trillion, meaning only $200 billion came from additional spending or revenue losses. In an August 2009 analysis, the Center for American Progress determined that at least 40 percent of the then-projected budget deficit came from Bush-era policies. The Center on Budget and Policy Priorities (CBPP) estimated in May that by 2019, under current law, the Bush tax cuts and the wars in Iraq and Afghanistan would account for almost half of the debt the nation would owe. This chart accompanied the CBPP's report:
So, contrary to the claims made on Fox & Friends, the facts show we do have a revenue problem.