The second highest ranking Republican in the Senate doubled down on a controversial statement he made this weekend, arguing in greater detail that tax cuts for wealthy people should never be offset by tax increases in other areas — but that unemployment benefits need to be fully paid for by either spending cuts or tax increases. In so doing, he claimed candidly that the very existence of unemployment insurance is a “necessary evil,” while tax cuts ought not be paid for by increases in order to make it easier to shrink the size of government.
“My view, and I think most of the people in my party don’t believe that you should ever have to offset a tax cut,” Senate Minority Whip Jon Kyl told a handful of reporters outside the Senate chamber this afternoon. “That clearly reduced savings is a better way to offset increased spending than a tax increase is.”
The rationale, Kyl said, goes back to the fundamental conservative goal of shrinking the size of government. If tax cuts are offset by tax increases in other areas, then it’s hard to drown government in a bathtub.
“Who does the money belong to?” Kyl asked rhetorically. “The money belongs to the taxpayer, to the people. The money does not belong to the government, and yet that’s what this kind of a rigid paygo rule would assume: that the money belongs to the government, and therefore if you’re going to deny the government some of that revenue through a tax cut, you have to make the government whole, because the government can never lose any money. That would mean that you could never reduce the size of government. Each year, when it gets bigger, it stays at that level or it gets bigger yet, but you can never reduce it.”
Kyl dismissed the view of the Congressional Budget Office, and a large swath of economists, that during a recession, extending unemployment is one of the ripest forms of stimulus.
“CBO’s been wrong before,” Kyl said. “It’s not a stimulus for the economy, to try to help people through tough times. It’s a necessary evil, in a sense. We’d like not to have to raise revenue in order to pay people for not working–or not to pay them for not working, but because they can’t get work.”
Kyl concluded:
To me you shouldn’t look at it as an economic matter, it’s a humanitarian matter. You got people who are out of work, who can’t find work, you want to help ’em out. Families need help. That’s why you provide it. You don’t do it because it’s going to stimulate the economy. You have to borrow the money in order to pay the folks. That borrowing has huge costs. They are adverse economics costs. So it’s not a good thing for the economy. It’s a bad thing for the economy but it’s still the right thing to do for other reasons.
The stimulus argument for extending emergency unemployment benefits during a recession is simple: If unemployed people lose benefits, then they stop spending money, which shrinks the economy, and costs more jobs. Extending the benefits forestalls that. Kyl says that, while there is a political and humanitarian benefit to giving constituents unemployment benefits, the government deficits they engender do more harm to the economy than systemic unemployment could.
There’s a political aspect to this as well. Democrats have sought to juxtapose the Republican view of tax cuts — they should be free! — with their view of unemployment benefits — they must be paid for! — to argue that Republicans will seek to return to Bush era economic policies if they retake Congress in November. You can expect this to fuel that argument.
This Sunday, Kyl took to the airwaves to defend not paying for tax cuts. “You do need to offset the cost of increased spending, and that’s what Republicans object to. But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans.”
