Morning Bell: Tax and Spending Our Way to a Smaller Economy

Conn Carroll /

The House budget that passed earlier this month increases discretionary spending by 8% (otherwise known as $74 billion) over this year’s level. Federal spending already tops out at near $25,000 per household and discretionary spending has expanded 45% since 2001. While increased defense spending for Iraq and Afghanistan do account for a share of that growth, non-defense discretionary spending has increased 28% under President Bush — nearly twice as fast as the rate under President Clinton.

As bad as all the current spending in the House budget is, the tax hikes in the plan are far worse. Using the Center for Data Analysis Microsimulation Tax Model and the U.S. Macroeconomic Model of Global Insight Inc., Heritage analysts have projected the likely impact the House’s tax raising will have on jobs and economic growth in all 50 states and 435 congressional districts.

Overall, the House budget has the potential to cost the average American taxpayer more than $2,000 in additional taxes in 2012 alone (estimates were projected to 2012 because that is the first full year when all of the tax provisions will be in effect). The House plan’s higher taxes on capital are projected to lead to a fall in private investment that will cost average personal income to decrease $1,767. Employment will also suffer as investment falls; the models show the House budget could cause about 1 million fewer jobs to be created and could lower economic output by more than $100 billion.

The district-by-district numbers show that while the wealthier regions of the country will end up paying more in taxes (Speaker Nancy Pelosi’s and DCCC chairman Chris Van Hollen’s constituents will pay $2,936 and $3,146 more in taxes, respectively, while Minority Leader John Boehner’s and NRCC chairman Tom Cole’s constituents will only pay $1,774 and $1,894 more), the job losses will be spread more equally (2,295 in CA-8 and 2,407 in MD-8 compared to 2,199 in OH-8 and 2,163 in OH-4). Unfortunately, Pelosi’s and Van Hollen’s richer constituents are better able to cope with higher taxes than Boehner’s and Cole’s constituents are able to cope with looking for jobs that liberals have taxed out of existence.

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