“The middle-class tax cuts will be made permanent and the tax cuts for high income would be allowed to expire in 18 months,” she said, reiterating the Democratic position on the issue. But that’s as far as House Democrats are willing to go. “We’re not going to see a big debate on eliminating the middle-income tax cuts.”
But Pelosi also spent much of the morning decrying the savage cuts she felt Republicans were going to make to the federal government. Environmental protection and food safety were topmost in her mind. Those programs happen to be part of that “non-defense discretionary spending” bucket that politicians turn to first when they want to make cuts. Extending almost all of the Bush tax cuts and preserving almost all of the government’s essential function are two great tastes that go terribly together.
When I asked her how she would protect these sorts of programs if significant new revenues were off the table, she didn’t have much of an answer for me. “Can I say one word to you?” She said. “Growth. We can rebuild America. We can invest in infrastructure. We can build clean energy jobs for the future. You can pass the Chinese currency manipulation bill, which we have passed many times. Job creation is the biggest deficit reducer of anything we can name.”
In theory, there’s something to this. An extra percentage point of GDP growth over a decade raises revenues by $2.5 trillion and cuts social spending because more Americans have jobs. But in practice, there’s almost nothing to this. Even if Democrats could pass their favored programs through Congress, they wouldn’t raise growth by a percentage point. They probably wouldn’t even raise it by a quarter of a percentage point. It’s really, really hard to raise national growth rates. If it were easy, every country would do it.
Which is not to say we shouldn’t try to accelerate growth, and hope desperately that we succeed. But hope is not a plan. If Democrats aren’t going to push for a more significant increase in revenues, they’re tacitly accepting many trillions in spending cuts. That’s a defensible choice, if it’s indeed the one they want to make. But they shouldn’t fool themselves that it’s a choice they can somehow avoid, or wish away.