Tax and Spend, Everyone

Paul Ryan has been taking a lot of bashing from the liberal blogs because his budget plan uses a chainsaw rather than a scalpel, and is unlikely to pass.  Given that the Republicans have suddenly become the latter-day saviors of Medicare, it's even less likely, as Bruce Bartlett points out.  That's why Bruce favors a VAT; I too have been known to tell a Republican or two that they might want to start looking for campaign planks beyond tax cuts.

But I'm not sure how much more realistic a VAT is, and not just because the Republicans are against it.  It occurs to me that over the last twenty years, the parties have adopted each others' rhetoric so completely that now almost all viable solutions are off the table.  By which I mean that Democrats want to be the party of tax cuts . . . as long as you make under $250,000 a year.  And Republicans want to be the party of big spending . . . as long as you're elderly, or have a farm.

The problem is, neither party is willing to go where the money is.  You cannot fund our budget deficit with tax increases on the rich.  The people who make over $250,000 control a large share of national income.  But not that large.  Your ability to tax tops out somewhere--and not at 90%.  Eventually, avoidance, evasion, and changed work habits start rapidly eroding your gains.

Nor can you fund it with unspecified cuts in spending, not even pork.  Pork should be cut because it's a waste--but it's a drop in the bucket compared to social security, medicare, defense, veterans affairs, and other things that Republicans don't really want to mess with.

Ryan's budget is honest.  But it's not workable.  But the Democrats aren't showing courage either--mostly, their savings are of the "Sometime in the future we'll get around to this" variety.  Obama's much-heralded decision to use current policy as a baseline, rather than current law, turns out to be less an exercise in political bravery, than a way to avoid grappling with the political cost of spending more money--and particularly, to avoid having to find a way to pay for it. 

All this implies something really scary about our ability to get our fiscal house in order.