Everything in This Column Is Free Stuff
Let's talk about free stuff. Republican presidential candidates are against it. They accuse Democrats of bribing voters with it. And when they debate taxes, deficits, debt and other economic policy matters on Wednesday in Boulder, Colorado, they're likely to bring it up.
Free stuff is the politer way to disparage the "moocher class," identified in the 2012 campaign as those who rely on food stamps, unemployment benefits, Obamacare and other safety-net programs.
At a South Carolina event last month, Jeb Bush said he'd attract black voters, though not by telling them to "get in line and we'll take care of you with free stuff."
Two weeks later, Marco Rubio critiqued the first Democratic presidential debate as a contest over "who was going to give away the most free stuff." He listed the ways: "free college education, free college education for people illegally in this country, free health care, free everything."
Both echoed Mitt Romney's directive to an NAACP crowd in 2012 to vote for Barack Obama if they want "more stuff from government, more free stuff." (Romney even blamed his loss on Obama's ability to offer policy gifts to minority voters.)
Racial condescension? Perhaps. But the real intent seems to be to signal to like-minded voters -- to "dog-whistle," in political lingo -- that the candidates oppose government programs that transfer money from people who have it to those who don't.
Democratic candidates Bernie Sanders, Martin O'Malley and to a lesser extent Hillary Clinton indeed are pumping out one proposal after another aimed at helping those with lower incomes obtain better housing, health care and higher education without taking on huge debt burdens. No doubt, they're competing to attract Democratic votes. Sanders's proposal for government-run health care alone would cost $15 trillion over a decade, by one calculation.
That's a lot of free stuff. But Republican candidates are offering piles of free goodies for their constituents, too. It's just that they call them "tax cuts."
Even while claiming that they want to reduce the U.S.'s $18 trillion national debt pile, they're in a surreal competition to offer more tax breaks, as Howard Gleckman of the Tax Policy Center explains. Six candidates -- Bush, Rubio, Rand Paul, Rick Santorum, Bobby Jindal and Donald Trump -- propose an average of $6.5 trillion in new cuts over 10 years.
In past elections, Republicans sought to make their tax plans revenue-neutral, meaning that tax cuts were offset dollar-for-dollar with tax increases or spending cuts to avoid adding to the deficit. This year, they make no pretense of budget neutrality. The candidates' tax cuts, according to the Tax Foundation, would add an average of $633 billion to the deficit each year.
That's more than the fiscal 2015 deficit of $439 billion (an eight-year low).
The tax code already is a fount of giveaways that have the same bottom-line effect as, say, increased Medicaid spending. The collection of exemptions, credits and deductions known as tax expenditures are functionally equivalent to direct spending. They're also bigger than social-welfare spending.
They range from deductions for interest on a home mortgage (costing $74 billion a year) and charitable contributions ($47 billion) to deductions for payment of state and local taxes ($83 billion).
And let's not forget the tax breaks for individual retirement accounts and 401(k) plans ($79 billion), or the exclusion employers get for providing health-insurance to employees ($207 billion).
In fiscal 2015, the grand total of all this tax spending came to $1.4 trillion, of which $1.3 trillion benefited individuals and the rest went to corporations. In a $3.8 trillion federal budget, that's a hefty dose of free stuff.
Who benefits? In 2013, the Congressional Budget Office looked at the top 10 tax breaks by dollar value and calculated that more than half of the tax expenditures went to taxpayers in the top-20-percent income bracket. Seventeen percent went to the top 1 percent. Households in the bottom one-fifth of the income scale got 8 percent.
Because low-income people pay relatively little federal tax, they can't take advantage of most tax breaks. Two federal tax credits that do benefit low-income households -- the child tax credit and the earned income tax credit -- came to just $28 billion last year.
By comparison, the much-maligned social-welfare free stuff -- food stamps, housing vouchers, Medicaid, unemployment benefits, cash benefits to needy families and a raft of others -- cost less than the tax expenditures. According to the conservative Heritage Foundation, the fiscal 2013 total was $949 billion. It's probably lower today with the economy and employment improving.
So keep this in mind when the Republican candidates boast about their tax cuts: If a subsidized Obamacare plan or help with college loans deserves the label "free stuff," then so does a tax cut.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Paula Dwyer at email@example.com
To contact the editor responsible for this story:
Jonathan Landman at firstname.lastname@example.org