Why ‘Fix the Debt’ Just Can’t Quit Paul Ryan

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Paul Ryan Introduces House Republicans' Tax Reform Agenda
Paul Ryan has a better way, which involves affluent people paying lower taxes.Photo: Chip Somodevilla/2016 Getty Images

Last week, House Republicans released a plan for a gigantic, regressive tax cut. Since gigantic tax cuts increase the budget deficit, you would think an organization devoted to the singular mission of reducing the deficit would oppose it. But no. The anti-deficit lobby Fix the Debt released a statement of qualified praise, which I ridiculed. Fix the Debt responds with a new, brief defense of its position. What its argument actually reveals is its denial about the state of the Republican Party.

Here is the relevant portion of Fix the Debt’s response:

We don’t endorse the plan, but we do welcome it because it puts tax reform on the agenda in Washington. It also moves in the right direction by eliminating or limiting many of the tax breaks that complicate the tax code and shrink the tax base.

Tax reform should contribute to deficit reduction, and definitely not increase deficits. We hope that the new plan will spur discussion and bipartisan negotiation on reform that will simplify the tax code, make the country more competitive, and help to fix the debt.

The nub of the argument is that the Republican plan, while admittedly imperfect, “moves in the right direction.” But if you define the right direction as reducing the debt, then the plan doesn’t move in the right direction. It moves in the wrong direction. The Republican plan is for massive cuts in tax rates, including the complete elimination of the estate tax. It is true that the proposal gestures vaguely in the direction of closing loopholes and expenditures, but it does not define what these would be. What’s more, the plan’s authors have made clear that the proposal will be a net tax cut.

So how can Fix the Debt claim that a plan to increase the debt can “help to fix the debt”? It can only be understood as an extension of the organization’s dysfunctional enabling relationship with the Republican Party. For more than 25 years, the centerpiece of Republican doctrine has been the necessity of reducing taxes for upper-income Americans and an absolute opposition to higher tax revenue in any form. During President Obama’s first term, anti-deficit activists came up with a plan that they hoped would induce Republicans to abandon their fanatical opposition to higher tax revenue. First, they would get Democrats to support cuts to Social Security and Medicare as part of the trade. And second, the higher revenue would come not in the form of tax-rate increases but instead by reducing loopholes and expenditures in the tax code. In theory, one could reduce enough deductions that the tax code could raise more revenue while still reducing tax rates.

In reality, Republicans refused to go for this deal. They didn’t just refuse once. They refused time after time. In 2010, the Simpson-Bowles commission came up with a plan that traded revenue-increasing tax reform for cuts to retirement programs, and leading Republicans like Paul Ryan all rejected the deal. Then, in 2011, Obama tried to strike a similar bargain with House Republicans when they held the debt ceiling hostage, but they rejected it again. That standoff led to the creation of a “supercommittee” that was tasked with creating another version of the revenue-increasing tax-reform-for-retirement-cuts deal, which predictably failed again. And then, when the Bush tax cuts were set to expire at the end of 2012, the Obama administration hoped the pressure of an imminent tax increase would force Republicans to make some version of the deal, but once again they refused, instead using their leverage to minimize the tax hit on upper-income households.

In 2014, Dave Camp, the retiring chairman of the Ways & Means Committee, proposed a tax reform that would not have raised revenue, but would have kept revenue at current levels — a dramatic departure from party orthodoxy. But fellow Republicans treated Camp like he was a leper and have basically acted since then like it never happened. Paul Ryan recently reaffirmed that he will only support tax reform that reduces the tax burden on the rich. All of this proves conclusively that the debt-hawk theory on how Republicans could be induced to give up their fanatical opposition to higher revenue failed. The theory was that Republicans would be willing to make rich people pay higher effective tax rates if this happened within the context of a reformed tax code with lower nominal tax rates. But reality is that Republicans don’t care about the form that low taxes for the rich take. They like low tax rates for the rich, and they also like big tax deductions for the rich. In sum, they just want the checks that rich people send the IRS every April to be for the smallest possible amount. They absolutely, positively will not accept any plan that makes rich people send the IRS a check for a higher amount.

Conceding that this is the Republican position would subvert Fix the Debt’s entire theory of change. So instead the group continues to reside in a fantasy world where the GOP can be coaxed into doing the thing it has proven extensively it won’t do. In this fantasy world, a Republican using the words “tax reform” means a step toward “discussion” and “bipartisan negotiation” and, ultimately, a result that would be the precise opposite of what Republicans actually want to do.