Even though America’s fiscal policy is in bad shape and getting worse, I’m afraid that politicians who claim to want to make things better will wind up making things worse.
For instance, when two former Senators (Rob Portman of Ohio and Kent Conrad of North Dakota) wrote earlier this year that it was time for a bipartisan commission to deal with the budget, I offered two reasons why I was unhappy with their proposal.
1. They focus on red ink, which should be viewed as a symptom. The real problem is excessive spending. Real-world evidence shows that if you cure the underlying disease of excessive government, you automatically solve the symptom of deficits and debt.
2. They explicitly – and mistakenly – open the door to tax increases. But once taxes are on the table, we know from history that the result will be a deal filled with (very bad) tax increases and make-believe (and quickly vanishing) spending restraint.
By the way, my opposition to higher taxes is practical rather than ideological. Back in 2012, I listed three big tax increases I would accept assuming politicians would be willing to make some long-overdue spending changes such as genuine entitlement reform.
But nobody on the left is interested in the types of deals I listed, even though I offered to accept $1 trillion of higher taxes over 10 years.
Instead, they want a traditional Washington budget deal, which means permanent tax increases mixed with make-believe (and quickly evaporating) spending cuts.
If you think I’m being too pessimistic, let’s look at some excerpts from a recent column in the Washington Post by two law professors, Natasha Sarin and Kimberly Clausing.
…let us offer a ray of hope: An opportunity is fast approaching to turn onto a more fiscally sustainable path. Many of the Trump administration tax cuts are set to expire at the end of 2025, and a full extension of the expiring cuts would cost more than $3 trillion, presenting an important moment of fiscal reckoning for policymakers. …At minimum, policymakers should commit to paying for any tax cuts they extend. But given the seriousness of our fiscal problem, their aspirations — and ours — need to be loftier: Raise enough to make a meaningful dent on the deficit, while paying for needed policy changes such as a fully refundable child tax credit… To do this, policymakers will need to find better sources of revenue for the years ahead.
As you might expect, the two academics propose a bunch of class-warfare taxes (which won’t raise as much money as they think), along with a big energy tax on American consumers.
…In a recently released paper, we suggest a menu of nearly $3.5 trillion in progressive revenue increases…corporate changes would raise (on net) about $1.5 trillion over 10 years…we suggest a corporate carbon fee… For individuals, we suggest somewhat higher rates on capital income and estates, raising $650 billion.
They say their plan is a “ray of hope,” but it would be a nightmare for taxpayers.
And they don’t even pretend to match their huge tax increases with any restraint on the spending side of the fiscal ledger.
Heck, they openly propose to use a big chunk of the new revenues to finance a bigger welfare state.
P.S. Just in case you want to put hope over experience and allow taxes to be part of the discussion, check out this updated data from Europe.
P.P.S. There was one budget deal that led to a surplus and it had one major difference compared to the budget deals that failed.
