The sky is falling! The sky is falling!
Okay, not really. But revenues are falling. And it feels just as dramatic.
As the economy slowly begins to recover, another challenge looms on the horizon: how to pay for of this “stimulus.” Cash for Clunkers? Stimulus checks for the disabled? TARP relief for banks? Extended unemployment benefits? Just where is the money coming from? If you said “taxes”, you’re only sort of right.
The money for all of these programs – as well as spending on Iraq, Afghanistan and other big budget items – is supposed to be drawn from tax revenues. There’s just one teensy problem: we don’t have much in the way of tax revenues.
If the current pace continues, tax receipts for 2009 will be almost 20% less than last year. That’s before the tax cuts expire. It is the steepest decline since 1932, during the Great Depression.
According to the AP, individual taxes, Social Security and Medicare revenues are all down from the same time last year. Even more striking? Corporate revenues are down more than 50%.
What’s particularly scary about these numbers is that, even before the $1 trillion health care bill gets passed, spending continues to rise. Despite attempts to scale back in Iraq, military spending is still up from last year. Together with other spending, increases are set to hit more than 10%. That’s right: increases in spending, decreases in revenues.
You do the math.
When President Obama was running for office, he pledged not to raise taxes on the middle class. Is he about to go back on his word?
Pundits are screaming that tax cuts for the middle class are “imminent.” I don’t know that I’d go that far.
What all of the hullaballoo is focusing on is this interview between George Stephanopoulos and Treasury Secretary Tim Geithner which aired on “This Week.”
In the interview, Stephanopoulos asks Geithner about the current state of the economy and what’s on tap for the future. At one point, Stephanopoulos asks Geithner very pointedly:
The President has said that taxes won’t go up for any Americans earning under $250,000, but it doesn’t appear that he’s going to be able to keep that promise if you’re going to bring the deficits down.
And Geithner didn’t say no. He started his reply by stating, “George, we can’t make these judgments yet about what exactly it’s going to take and we’re going to get there.”
Okay, yes, yes, yes. I get that’s not a no. But it’s hardly a yes either. It doesn’t warrant the headlines that I’m seeing in the press.
If you follow the interview, when Stephanopoulos asks Geithner about reducing the deficit again, Stephanopoulos uses the phrase “revenues” without specifically limiting it to the middle class. And to this is the exchange that followed:
GEITHNER: Again, we’re not at the point yet where we’re going to make a judgment about what it’s going to take. But the important thing…
STEPHANOPOULOS: But you’re not ruling it out, you can’t rule it out.
GEITHNER: I think what the country needs to do is understand we’re going to have to do what it takes, we’re going to do what’s necessary.
And that’s the few words that have pundits jumping up and down.
Come on. I don’t think there is a single American out there that thinks that taxes aren’t going to go up. It’s just a question of who bears the burden of the increases. And if you’ve been paying attention so far, it looks like it will be the rich and perhaps, corporations.
To run screaming from this interview shouting, “Middle class taxes are going up” is, in my opinion, irresponsible. We don’t know what’s going to happen yet. And keep this in mind: 2010 is a major election year for Congress. Who in Congress will vote in a package that will raise taxes on 95% of the population in an election year?
So, let’s try and look at this for what it is: Geithner admitting that he doesn’t have a plan. Nothing more.
Wanted: Assistant Treasury Secretary for Tax Policy. Must love taxes and be willing to undergo grueling nomination process. Also important to demonstrate understanding that everyone will hate what you do.
As it turns out, nobody seems to want that job.
Funny, at a time when the public is highly critical of the Treasury – clearly linked to our sucky economy – job applicants to fill some of the highest positions have been few and far between. Several key positions remain empty and Assistant Treasury Secretary for Tax Policy is one of them: earlier today, Helen Elizabeth Garrett withdrew her nomination for the job, citing “aspects of my personal family situation.” I think those aspects involved her family screaming, “What could you possibly be thinking?!”
Garrett is not a stranger to DC politics, despite serving as faculty at USC. She likely would have had bipartisan support, having worked as a tax aide for former Sen David Boren (D-OK) and sat on former President George Bush’s 2005 tax advisory panel. Mark Weinberger, Bush’s first Assistant Treasury Secretary for Tax Policy, believed that Garrett was well regarded by Democrats and Republicans.
There is no disputing that Garrett’s withdrawal leaves a big hole at the top of the Treasury. Obama has recently publicized a series of aggressive tax positions, including targeting multinational corporations and high net worth individuals utilizing tax havens, which have made tax policy a hot button item in this administration. Additionally, the administration is expected to announce tax-related initiatives in the health care and energy industries. All of this comes at a time when the feds and most states are facing massive budget shortfalls and revenues are expected to decrease.
The Assistant Secretary for Tax Policy would be the public face for the administration’s tax policies. In other words, Obama’s tax policy wonk. It’s a job that apparently nobody wants (can you blame them?).
Jeff Trinca, a tax policy lobbyist and friend of Garrett, says, “The nomination process has gotten so harsh that good people like Beth are unwilling to put them and their families through the wringer.”
So who does that leave?
It’s official: we have a new Secretary of the Treasury. The Senate has confirmed Timothy Geithner, President Barack Obama’s pick for Treasury Secretary.
The votes for Geithner did not reflect overwhelming confidence in Obama’s pick. The final vote was 60-34 in favor of Geithner. The vote was not strictly partisan with many Republicans embracing Geithner, including Sen. Orrin Hatch (R-UT) who hailed him as “intelligent” and “gifted.”
The number of “no” votes reflected concerns over Geithner’s tax problems. The number of “yes” votes, however, were no doubt a nod to dire economic times with a reported 71,000 jobs being cut today from such big names as Home Depot, Pfizer and Caterpillar.
Despite his confirmation, there were still worries in the Senate. Sen. Tom Harkin (D-IA) expressed what many taxpayers felt, with respect to Geithner’s prior tax issues, wondering, “How can Mr. Geithner speak with any credibility or authority?”
I guess we’ll see.
