Washington's Dirty Little Secret

Ezra Klein uncovers something most people don't realize: tax expenditures and government spending are really the same thing:

"The government pays employers $700 billion to offer health insurance to their employees, which no economist would say is a good idea. We’re subsidizing select parts of the energy sector, spending almost $2 billion, for instance, to subsidize “open-loop biomass” rather than simply pricing carbon emissions and letting the market work out the details, and we’re handing $4 billion to oil and gas companies that explore for new reserves.

Midway through my excavation, however, when I was really just getting warmed up, I realized I had made a mistake. I wasn’t looking at the federal budget — I was looking at the U.S. tax code. So cutting all those costly programs wouldn’t count as cutting spending to Republicans in Washington. It would count as raising taxes.

All those programs are tucked in the tax code, classified as “tax expenditures.” Like traditional government spending, the point is to achieve specific ends by throwing money at a problem. The only difference is that the beneficiaries don’t receive checks from the government, they simply have their tax liabilities reduced. The Center on Budget and Policy Priorities estimates that, in 2010 alone, tax expenditures cost the government more than $1 trillion — more than Medicaid and Medicare combined."