Victory of the Pod People

Instapundit (as many are) mocked the president for saying that closing tax loopholes is a spending reduction.

Let me offer a partial defense of President Obama. He's referring to loopholes in the tax code that collectively are called "tax expenditures." That is, reductions in a basic tax rate that apply to some narrow set of taxpayers. The idea behind calling these loopholes a "tax expenditure" is that absent the loophole, the government would have collected more tax revenue from the basic law. The loophole that reduces the tax rate for a company that otherwise wouldn't relocate to your state or for a local company that went bankrupt and needs help (or even for a home buyer who otherwise couldn't afford a mortgage) is the functional equivalent of keeping the tax rate the same for everyone but writing a government check to those same narrow set of taxpayers. See? There is some logic to the idea of lumping government favoritism to a class of taxpayers regardless of whether the government sends you a check or allows you to send the government a check for an amount that is less than other similar people must send to the government.

But that is where my defense ends. You are too far inside the beltway (whether Washington or state capitals) if you think that this way of looking at tax loopholes should be used beyond the scope of looking at how the tax code extracts money from taxpayers (individual or corporate). It is on par with thinking that "I voted for it before I voted against it" is a brilliant explanation of your voting record in the Senate.

The bottom line is that you just look like an ass for describing the closing of tax loopholes as a reduction in government spending. In the real world, that is a tax increase. It may be reasonable and fair to eliminate the tax loophole for some class of taxpayer (which probably hired lobbyists* to get the preferential tax treatment), but it is a tax increase and not a spending reduction. That President Obama could forget that talking to tax code specialists and government accountants is not the way to talk to the rest of us who simply deal with money taken by the government or not taken by the government shows just how far gone he is in governmental thinking.

*I'm not bashing lobbyists here. They simply represent people hired in the spirit of petitioning our government by people who don't know how to do it. In my experience at the state level, lobbyists simply provided information. They rarely outright lied out of fear of losing their audience. Sure, their smile and hearty greating ended the moment you stopped chairing a powerful committee, but that's the business. Don't think they were your friend. They provide information favorable to their cause, of course, but how different is that than the New York Times or CNN? Sure, if lobbyists bribe, that's a crime. And it is surely disturbing that there is a revolving door between government service and lobbying firms. But that is all just a logical consequence of the higher stakes in shaping what our government does. If you don't like lobbyists, lower the stakes--make the government's role in our economy smaller so it makes more sense to hire engineers and marketing people to build or sell your products and services to beat your competition rather than to hire a multi-client lobbying firm to shape the laws and rules to make your company more profitable by tilting the playing field to you and away from your competition.