Now that Congress has finalized its tax cut package, the focus of debate has shifted from competing tax packages on the Hill to the differences between Congress and the White House. During this debate we are sure to see people on both sides employing a technique called "selective quoting," to bolster their argument.
Selective quoting in Washington terms, is when a politician uses a statement made by someone who is universally respected in order to support his position. Instead of using the full statement however, they pick the sentence or two that supports their claim while ignoring the part that could be perceived as undermining it.
In fact, we've already seen this in action. Take the recent comments made by Federal Reserve Board Chairman Alan Greenspan, the man most in official Washington (rightly or wrongly) hold up as singularly responsible for our economic good times. Anti-tax cutters like White House economics advisor Gene Sperling continually point out that when brought before the House Banking and Financial Services Committee last month and questioned on the proposed tax cuts, Chairman Greenspan said: "Now is not the right time for tax cuts. The first priority, in my judgement, should be getting the debt down."
This by itself would seem to argue that Chairman Greenspan is against the Republican tax cut package and fully supportive of the administration's plan. This is clearly not the case however. Those who would make that argument would have to forget the fact that this is not really a debate between tax cuts and debt reduction, as if the two were mutually exclusive. In fact, Congress' tax package includes a significant amount of funds targeted towards debt reduction, as well as a trigger that makes tax cuts contingent on reducing the national debt.
Sperling and Company also seem to forget a little annoying fact about their debt reduction argument. According to the non-partisan Congressional Budget Office (CBO), if your first priority is debt reduction and you were given a choice between the Congress' plan and the administration's plan, Congress' plan would win hands down – by about $200 billion in additional debt reduction.
How could Congress' tax cut package include more debt reduction than the administration's? That would be because of another fact they choose to forget. According to CBO, the administration's budget calls for over $1.3 trillion of new government spending. And, while Congress' tax cuts are phased in slowly and end after ten years, the administration's spending spree could be with us forever. As Ronald Reagan used to say, "There's nothing more permanent than a government program."
So faced with a choice of debt reduction and tax cuts or debt reduction and more Washington spending, which would Chairman Greenspan choose? According to his comments to the House Banking committee, he'd choose tax cuts, no question.
Reality is, in a perfect world where he controls the movement of every nickel, Mr. Greenspan would probably choose "Option C," and hold back every bit of the surplus for debt reduction. He is trying as hard as he can not to create any kind of ripple in his carefully crafted pond that is the nation's economy. But this is not a perfect world this is Capital Hill, and history shows that any money that is left on the table is snatched up quicker than you can blink an eye and blown at the candy store. Therefore, it is best to get it out of town and back to those who are truly responsible for the surplus in the first place.
Eventually though, there will be a tax cut. The question is the size and shape. You can see the political elite conceding this reality already. But wait," the administration and their Democrat congressional colleague's will say, "it is not a question as to whether or not we should have a tax cut. It's what kind of tax cut that matters."
On this question, we go back to Chairman Greenspan. During his testimony to the House Commerce committee in March, he was asked pointedly which type of tax cut he would favor. His answer? Reductions in marginal tax rates have a "significant impact on the economy and growth while targeted ones do not." Guess which type of tax cut the administration would favor? Here's a hint, it's not a rate reduction.
The lesson to be learned here is this. If someone is going around frantically quoting someone who they usually would ignore, they're probably suffering from selective quotation. The truth usually lies in statements not quoted by anyone.