Monday, 28 April 2008

You getting to keep your money = government spending

Ezra Klein reinvents government accounting today:

McCain’s tax cuts—which include the extension of the Bush tax cut and the repeal of the Alternative Minimum Tax, neither of which are included on CAP‘s cool McCain thermometer—dwarf the spending plans of the Democrats before you even look into his programs (or his war agenda). But that’s rarely mentioned, because the media doesn’t really view tax cuts as spending in the way they view new social programs as spending. [emphasis added]

I’ll hazard a guess that outside Klein’s brain, nobody views tax cuts in general as government spending. I suppose a refundable tax credit, like the earned income tax credit, would be a form of government spending—but that’s not a “tax cut” in the same sense that reducing one’s tax liability (say, by repealing the AMT) is a tax cut.

I propose a very simple criterion for government spending: if the government cuts you a check for more money than you paid in tax withholding and estimated tax contributions, that excess is government spending. The rest… well, that’s taxes.


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I’m tired and my head already hurts, so I’ll ask you this question since you have given it more thought than I have: How does the national debt factor into this shell game of politicians and paid pundits calling something spending or not? Again, I am not putting a lot of thinking into this, so…upon reflection….I may reverse myself, but if his other spending priorities neglect servicing the national debt….and/or the debt increases due to lack of additional funds, would that not fall under some (clearly loose) definition of spending?

The answer may be, “no.” As I said, I haven’t thought that much about it.


I’d say that running up the debt itself is spending. To the extent tax cuts don’t correspond to spending cuts, you could argue that it results in an increase in net spending (expenditures minus income), but not gross spending.

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