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September 29, 2015

Kevin D. Williamson: I'm Not Sure I'm So Keen on Tax Cuts

Everyone from Rubio to Trump has proposed some kind of tax cut for the nation; it's a standard bit of Republican electioneering.

But is it the right proposal?

Every Republican tax-reform plan should be rooted in this reality: If you are going to have federal spending that is 21 percent of GDP, then you can have a.) taxes that are 21 percent of GDP; b.) deficits. There is no c.

If, on the other hand, you have a credible program for reducing spending to 17 or 18 percent of GDP, which is where taxes have been coming in, please do share it.

The problem with the Growth Fairy model of balancing budgets is that while economic growth would certainly reduce federal spending as a share of GDP if spending were kept constant, there is zero evidence that the government of these United States has the will or the inclination to enact serious spending controls when times are good (Uncork the champagne!) or when times are bad (Wicked austerity! We must have stimulus!).

It is standard conservative theory that tax cuts and spending cuts go hand in hand. But after decades of ever-rising spending, coupled with occasional tax cuts, I'm not so certain of that any longer.

I believe it was after Reagan that Republican theorists began justifying his model of tax-cuts-now-spending-cuts-later as the "starve the beast" theory of limiting government -- if we cut taxes, therefore cutting government's resources, we should, logically, force the government to adapt itself to living with fewer taxpayer dollars. Ergo, spending should be forced down by the practicalities of the situation -- either you start cutting spending, or else you start running up dangerous, Greece-level of debts.

The problem is that this country has always elected the "or else" part of this syllogism: We are racking up dangerous, Greece-levels of debts, and we're barely even talking about that any longer.

The problem has grown so immense that we've decided to declare it officially a Non-Problem. (It will decide to re-assert itself as a Really Big Problem in a short period of time.)

So I no longer believe in the "starve the beast" theory, because the "starve the beast" theory relies upon Americans understanding the mid-to-longer term trajectory of their spending choices, which they plainly do not.

Since Americans are not capable of understanding the mid-to-longer term trajectory of their spending choices, it seems to me the only way to impose budget discipline and spending rollback is to offer Americans an immediate, as opposed to future, confrontation with reality: that is, if Americans wish to have so much government, they should be forced to pay for the level of government they are choosing, and not defer that payment (as they apparently will choose, every single time) into the future, to be imposed upon their children.

But, instead, they must be forced to reckon with the level of government they are choosing now by paying the full freight and cost of that government now.

That is to say: I believe that rolling back spending is only possible when Americans are made to feel the costs of the government they're choosing, and that will only happen when they're forced to actually pay for it.

If Americans want 21% of GDP to be wasted on government, then we should make them pay 21% of their GDP to pay for this clumsy, murderous goliath.

And when they grow tired of paying 21% of GDP for this level of gold-plated, clay-footed government, perhaps they will see the sweet reason of reducing government expenditures down to, say, 19% of GDP, or, dare we dream, 18%.

I don't see any other way, frankly. And removing ever-more people from the tax rolls altogether -- making lower income people not even pay a small amount of tax -- accelerates the growth of government, as we create a larger and larger class for whom Big Government has tangible inducements and no visible drawbacks.

I've been thinking about this for some time. Am I a tax-hawk, or a spending-hawk? The typical conservative formulation is that we should be both at the same time, but that results in an ever-growing deficit that will, in fact, one day soon overwhelm us. (As the captain said in Titanic said about the ship's alleged unsinkability: "She is made of iron. She will sink, I guarantee it.")

So I suppose I'm more of a deficit hawk -- and a spending hawk.

I just don't see how the American people -- or the GOP, for that matter, but I should say they are only doing what their irresponsible citizen voters demand -- can be trusted to choose less government at some later date.

It does not help that even fairly well informed conservatives still blather about cutting foreign aid and waste and fraud, while willfully blinding themselves to the fact that the major drivers of spending are Social Security, Medicaid, and military spending -- three things they all insist not be cut, ever, no ways.

The non-military discretionary part of the budget is only one sixth of total spending, so even if you imposed draconian cuts on this section of the budget, slashing it by a full half of all spending (and you know the shrieking that would occur from that), you would only have cut the budget by 1/12th -- a bit more than the net interest we have to pay just on servicing the debt we've already acquired.

No one, including conservatives, seems willing to deal with this reality, preferring Fantasy Mathematics in which we cut some ethanol subsidies and some foreign aid to UNESCO and we're all ship-shape and square on matters budgetary, so it's time to force some reality into people's thinking.

Cutting taxes while raising spending teaches people that there is no connection between spending discipline and lower taxes. It teaches us we can have our cake and eat it too, so why not do both?

But of course we cannot have both -- or, at least, not for very long.

A reckoning is coming. We ought to start paying for the things we buy, and we're buying an awful lot of government, and conservatives are very nearly as hungry for big government as the liberals they decry.

The only way to bring reason to this madness is to make people square up their accounts every year -- for each year you want 21% of GDP spending on government, you pay 21% of GDP in taxes.

Then maybe we can start talking seriously about cutting government.

Thinking Twice: I guess this is really just a call with a Balanced Budget Amendment with forced tax hikes if spending goes up the previous year -- therefore strongly underlining in the public's mind the direct consequences of that Democrat goody-bag Congress just passed (with, no doubt, some moderate Republicans in support who want to prove they "can govern").


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posted by Ace at 02:17 PM

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