Hildzig: Here’s how a budget cut turns into a budget deficit

Just a week into the term of House Speaker Mike Johnson (R-La.), and his view of American voters and the press as nosy people to be fooled is becoming clearer every day. Case in point: His proposal to advance $14.3 billion in aid to Israel by “offsetting” it with a $14.3 billion cut in the Internal Revenue Service’s budget.

The truth is, as anyone with a thorough understanding of IRS funding knows, this cut to the agency’s budget will blow a much bigger hole in the federal budget.

The Congressional Budget Office was not fooled one bit. In rated Johnson’s proposalestimated that the $14.3 billion IRS cut would reduce federal revenue by $26.8 billion over 10 years.

That’s because most of the money goes to “enforcement and related activities,” the CBO noted — that is, it goes after wealthier American taxpayers for the money they owe but don’t pay, the so-called tax gap.

Asked about that finding, Johnson doubled down. “Only in Washington when you cut spending do they call it increasing the deficit,” he said.

We’ll do Johnson the (undeserved) favor of calling his comment “disingenuous.” Closer to the mark is New Democracy’s Alex Shephard’s description of it being one “Troll, stupid trick.”

Late Thursday, a majority of House members agreed with Johnson’s approach, passing the Israel aid measure, which included the IRS cut, in a largely party-line vote. Senate leaders said they would not bring the measure up for a vote, and President Biden said even if it passed, he would veto it.

A few threads came together in Johnson’s ruse. One is the Republican Party’s ongoing effort to become the party of fiscal soundness. This is a self-portrait that has long been funny in the extreme.

This image has been expressed in recent years by the Democratic Party’s periodic predominance of the federal debt ceiling, which looks like a spending cap until you dig beneath the surface, when it becomes clear that it has nothing to do with restraint of government spending — that’s completely under the control of Congress, which spends whatever it wants under a majority of Democrats and Republicans.

The other thread is the party’s supine deference to its wealthy and corporate patrons. This was shown in her hostility towards the Tax Office. It should be recalled that when Congress passed the Inflation Reduction Act in April 2022, Republicans mislabeled the $80 billion in additional IRS funding the measure provided to a scheme to create a horde of government thugs with jackpots who will have the power to tear the bread from the middle class out of the mouths of infants.

Of course it was nothing of the sort. The goal was to give the IRS the resources to enforce the law against those most prone to cheating on their taxes – the wealthy. As a group of IRS analysts and academic economists reported in 2021, the The 1% were able to hide up to 21% of their taxable income by tax collectors, primarily because their pursuit required enforcement resources that the IRS did not have.

As I reported last year, anti-tax conservatives in Congress have systematically impoverished the IRS for decades, with the unmistakable goal of undermining its ability to do its job, not to mention its public reputation.

In 1991, the agency employed more than 114,600 full-time employees to serve a population of 254 million and generate revenues of approximately $1.1 trillion.

By 2020, full-time employment had dropped to less than 75,800, serving more than 330 million Americans and grossing $3.5 trillion. In just the previous decade, the agency’s budget had fallen by 20% in inflation-adjusted terms.

For congressional Republicans, that amounts to “mission accomplished.”

Johnson’s ploy shows the mission is still alive and well. What is particularly troubling about this is that not a few Washington political reporters and political newsletters have chosen to take it at face value. Judd Legum of the must-have blog Popular Information put it at the center of a post titled “Why Journalists Play Dumb.”

Legum’s main target was Jake Sherman of PunchBowl News, a fledgling DC newsletter that tried to make a name for itself by relentlessly cultivating access to members of Congress and marketing to Washington insiders like lobbyists.

As documented by Legum, Sherman initially Johnson’s description of IRS cut as ‘compensatory’ returned in a tweet and addressed his improbable passage as a product of the opposition Democratic Party. Sherman followed two days later by describing the CBO projection as “heartbreaking” news.

Sherman must have known the truth all along because he had covered the debt limit negotiations in April 2022 when the CBO had noted the GOP proposal for IRS cuts as an addition to the deficit.

But Sherman was not alone. Per Legum, Bloomberg, the Guardian, CBS News and others are parroting the GOP’s cut of the IRS as “compensatory,” understating its deficit impact or leaving it out entirely.

Thus disinformation is injected into the bloodstream of American political discourse.

The ingrained habit of political reporters is to parrot the views of lawmakers as if they were neutral observers of nature and then (if ever) circle back and correct the record — usually after the original lie has already been embedded in the public mind.

As we have learned, this no longer serves the public. It’s what allowed Donald Trump to trample reality during his four years in the White House — and what allowed him to continue to do so in recent interviews with CNN and NBC News. Johnson seems eager to exploit the same phenomenon.

His effort this time didn’t work too well, mainly because the CBO was ready with an almost immediate rebuttal to his claim. But it was a near miss.

The bet here is that if the CBO hadn’t issued its analysis so quickly, the trope that Johnson “offset” Israel’s aid by cutting the IRS budget would have become ingrained in the public mind to the point where it was impossible to dislodge . And that’s scary.