The strange thing about deficit reduction is that even as politicians duck the question of entitlement reform or tax increases, there is broad agreement in the economic community that deficit reduction would involve some combination of spending cuts -- probably within entitlements -- and tax increases -- probably along the lines of tax expenditures or a broad-based low-rate value-added tax. Of course, that's exactly the problem for the Obama administration. Entitlement cuts are anathema to Democrats and new taxes oppress the conscience of Republicans. There is no political victory in promoting either, and yet both will probably be necessary.
Enter the Wall Street Journal editorial board, doing that thing where it stands athwart common sense, yelling stop:
Now that they have raised federal spending as a share of GDP to 25% and don't want to return to the 20.7% 40-year average, Democrats are looking for political cover to pay for it. They want the commission to declare that there's no way you can cut future spending enough to balance the budget, and then to propose ways to raise huge new chunks of revenue beyond the current tax code. Mr. Obama's nominees will endorse both propositions, and if GOP appointees go along the headline will be: Bipartisan Commission Says Taxes Only Way to Balance Fisc.
Look, I don't begrudge the WSJ editorializers their right to be conservative. I begrudge them their right to create a separate reality. There is no way you can cut future spending enough to balance the budget. We will have to raise new chunks of revenue beyond the current tax code. To say otherwise is either delusional or draconian.
Former CBO director Rudy Penner explained to me what a deficit reduction plan would look like if we didn't touch taxes, and the two highlights are: (1) move the full entitlement benefit age back five years, means-test the programs, and put them on a tight budget; (2) squeeze defense spending until you can't build new weapons systems or wage full-scale wars. It would, in other words, require the dramatic dismantling of our senior entitlement program and the crippling of our military. That's is what not touching taxes looks like.
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