WSJ:
Debates over taxes and spending are at root about political philosophy: How big should government be? How much income should it redistribute, and to whom? We mention this to explain why today’s report from President Obama’s deficit commission is landing with such a predictable political thud.
This doesn’t mean that Co-Chairmen Alan Simpson and Erskine Bowles haven’t offered some useful ideas, much better ideas overall than we feared. As conceived by former White House budget director Peter Orszag, the commission was supposed to be a Trojan Horse for a value-added tax (VAT) to raise federal revenues to a new and much higher level than their 18.5% or so modern average.
The idea was that the proposal would sit on a shelf until deficits led to a Greek-like crisis, the bond markets demanded action, and the political class reached in desperation for the Simpson-Bowles deus ex machina. Mr. Orszag and other liberals know they need a VAT, or some other kind of new tax, to finance ObamaCare and their other spending ambitions. What they want is a political device to lure Republicans into voting for it.
Messrs. Simpson and Bowles rejected the VAT ruse, but their plan is still one of those Beltway specials that fudges the debate over what government should do. Instead, it tries to package things that everyone dislikes in the hope that everyone will swallow the castor oil at the same time. Such proposals never have a chance unless Presidents and Congressional leaders sign on, and in this case Democrats are already in open revolt, while Republicans are saying nicer things than Mr. Obama is about his own commission.
The U.S. federal deficit problem isn’t hard to understand. In the short term, revenues have collapsed to 14.9% of GDP thanks to the recession and feeble recovery. Meanwhile, Democrats have raised spending to as high as 25% of GDP, a level not seen since World War II. (See nearby chart.) Faster growth should return revenues over time to 18% or 19% (they have never reached 21%), while spending restraint and program eliminations can gradually reduce outlays toward 20%. The key variable here is economic growth, which is why a tax increase would be especially counterproductive.
Longer-term, the problems are the liberal entitlements of Medicare, Medicaid, Social Security, and, starting in 2014, ObamaCare, which will add about 20 million to the Medicaid rolls. Democrats want to keep these programs as they are and pay for them with much higher taxes—first by balancing the budget at 25% of GDP, and later by necessity at 30%, 40% or more. The alternative—which we support—is to reform the programs and reduce their scope.
Yet, incredibly, the Simpson-Bowles report has almost nothing to say about the runaway health-care entitlements. This is a bow to the left and the White House, which cut Medicare by $500 billion to finance a corner of ObamaCare and wants its signature achievement untouched. But this is like doing a Pentagon budget review and excluding Iraq and Afghanistan. Republicans ought to reject the report on those grounds alone.
The deficit commission is more honest on Social Security, on which a bipartisan deal would be possible if Mr. Obama got behind it. Republicans are willing to cut the benefits of future retirees by changing the annual inflation increase formula, but Democrats will have to be willing to raise the retirement age and forgo a payroll tax increase.
The other place for potential common ground is tax reform. The deficit commission suggests cutting tax rates in return for closing tax loopholes, which would help the economy and raise revenue by increasing the efficiency of the tax code. It would also improve tax equity. Many tax loopholes go to the affluent and powerful who have clout in Congress, such as the mortgage interest deduction for $1 million homes. Alas, Mr. Obama has shown no signs that his philosophy of “spreading the wealth” can abide lower tax rates.
Given this reality, we think commission members Paul Ryan and Jeb Hensarling are right to oppose the final report. The House GOP campaign proposal to reduce spending to 2008 levels is already more stringent than what the commission recommends. Mr. Ryan points out that because the commission starts from Mr. Obama’s spending baseline, its proposed cuts are also fewer than advertised—only $1 in cuts for every $2 in tax increases ($1.13 trillion in total tax hikes).
The best strategy for Republicans is to take the commission’s better ideas and make them part of their own budget proposals next year. GOP Senators and commission members Judd Gregg, Mike Crapo and Tom Coburn have endorsed the report on grounds that something has to be done, but this is the triumph of desperation over experience.
Perhaps.
Or maybe it’s just political cover to distract us from what’s really going on.
Pragmatism.
(thanks to TerryH)
Finding Nobody –
And, in a fit of progressive inspiration, Jerry Brown, newly re-elected ex-Governor of California, has decided he wants his OWN “Deficit Commission” to spread the blame as widely as possible. And he’s magnanimously gonna let the “little peepul” get involved, so it’s officially a “Forum”…
As some fish once noted: “This is gonna be good. I can just tell!”
A VAT itself is also a Trojan Horse for what Progressives desire. From pages 61-62 of the 1999 book The Future of American Progressivism, An Initiative For Political and Economic Reform, by Roberto Mangabeira Unger and Cornel West. My bolding.
Of course the VAT has saved Europe and turned it into a paradise of saving and investment so there is that.
oh gawd … the “close the loopholes” cliche is used almost as much as the “cut waste and fraud” one.
The government doesn’t have a “revenue” [snort] problem, it has a spending problem. NEVER has an increase in revenue (even massive ones like after Reagan’s tax reform) been met by Congress by anything other that spending increases, spending that even outstrips the revenue.
Let Congress squabble for two years, until we can sweep out another batch of the bastards. At this point, I don’t need the current GOP to win; I just need ’em to tie things in knots.
The Executive over-reach is a different problem, but I’m not sure what can be done apart from some Oversight Committee hearings. I fear we may just have to suck it up, live with the current regime for the time being, document the abuses, and start piecing ’em together for the 2012 campaign. I think a parking lot full of former blue-collar workers, unemployed because OSHA shut down their shop for having a placard 2″ too high would make for a fairly effective ad.
That is, of course, assuming His Majesty’s FCC hasn’t taken over the airwaves and the Series Of Tubes in the meantime…
geoffb
So, the government is going to make it easier to save and invest so not only are you paying more taxes throughout your life, you’re also accumulating wealth to give to the government upon your death!
Obama sez WIN-WIN!
Yep.
“If you build it they will come”… and take it all.
I’m going to skip the preamble and just say once more that progressives are insane.
Boom!
Mr. Allah was concerned in his concerned place that Mr. Ryan blew an opportunity for to highlight fiscal issues by supporting the plan.
Me I trust Mr. Ryan’s instincts in these matters.
Very little of what Allah says is of any interest to me. This is not Hot Air.
I love how they act like this is hard. It’s not. Well, it might be hard politically but it’s not hard objectively.
Cut all expenditures not related to an enumerated power. Done.
As noted very well here, each $1 in higher tax revenue results in $1.17 of new spending. Amount that goes towards paying down the debt or reducing the deficit? yes… ZERO.
And they NEVER will.
Raising taxes in order to reduce the deficit is the ultimate “the check’s in the mail” scam.
That’s right. I actually registered and used part of my day so I can post here.
Because you are so unimportant to me.
When’s the last time you washed the sheets in your guest room? Why can’t you be more like your cousin Josh?
When was the last time you visited and pee’d the bed?
Marsha, Marsha, Marsha!
I really have nothing else going for me. Mind if I hang here?
An attack. Not an administration.
– In a related story….
– Looks like ‘ole Harry is giving his Quid pro for the Vegas quo….see, you knew there was a reason the casino state stuffed the ballot boxes for him.
“We are not talking about an activity that harms others where we properly step in,” Rep. Barney Frank, D-Mass., the current Financial Services chairman, said at a hearing this year. “We are talking about a decision by adults to do what they want with their own money.”
– Sure Barney, like all those houses that had to go back….didn’t really hurt anybody, because those useful idiots couldn’t afford them anyway, and besides that was after the votes were all safely in hand.
– And about the “do what they want with their own money” thing. That’s limited to just revenue raising you understand. Everything else from shower heads to soda drinks still has to be controlled by a benevolent government of course.
You have to spend less than you are bringing in to make a difference. And until Obama does that, he is fucked.
– And the beat goes on…
“The jobless numbers are perhaps the most disappointing. Unemployment rose last month to a seven-month high of 9.8 percent, according to Labor Department numbers. Nonfarm payrolls rose by only 39,000, far short of the expected 140,000, which would have kept the jobless figure steady at 9.6 percent. One cause of the bleak picture was the contraction of government payrolls, as local authorities cut jobs in response to budget problems.”
– All Ur shower heads R belong to Us.
– Hellofajob Barry!
– By 2012 it’s doubtful anyone will actually admit, you know, to being a Democrat, and the word Progressive will mysteriously disappear from the landscape.