Currently, as Buffett notes, taxes as a percentage of GDP are well below average at 15.5 percent, a postwar low. But this is not due to tax cuts passed by President George W. Bush (taxes as a percentage of GDP were 17.5 percent when he left office), but rather a result of the weakest economic recovery since World War II. According to the Congressional Budget Office, even if all of the Bush tax cuts were extended, taxes as a percentage of GDP would reach Buffett’s 18.5 percent target by 2020.
It is spending, not taxes, that drives our fiscal imbalance. Buffett’s man in the White House is the worst offender. President Obama’s budget calls for the federal government to spend 23.4 percent of GDP next year and an average of 22.6 percent of GDP through 2017.
Contrast Obama’s high-tax, high-spending approach with the budget passed by Paul Ryan and the House Republicans last year. The Ryan budget allows taxes as a percentage of GDP to reach Buffett’s 18.5 percent target by 2017, and then rises to 18.7 percent by 2022. Ryan then restores fiscal balance by bringing spending down near historic norms, averaging 20 percent through 2022.
If Buffett is serious about the parameters he outlined on Monday, he should spend less time trying to force others to pay more in taxes and more time trying to get Washington spend less.