By the time you read this post, it’s possible that the buffoons in Washington will have announced a deal on the fiscal cliff. Or perhaps we’ll have another month or more of fake drama.
Regardless of when the deal is announced, I fear the final result will be some sort of victory for Obama, with class-warfare tax policy that will undermine the economy’s long-run growth and reduce American competitiveness.
So let’s at least enjoy some good cartoons while taking another step in our journey to Greek-style fiscal collapse.
If you wonder why I’m feeling so glum, this cartoon is a pretty good summary of the debate. Or perhaps I should say bad summary. No wonder I’ve been wearing my red jacket to cheer myself up.
At the beginning of the month, I posted a bunch of cartoons that portrayed Obama as being very dogmatic and inflexible in the negotiations, while showing Republicans as being clueless and naive. Well, here’s another one with the same message.
So true. If anyone thinks we’ll get something good out of this, such as entitlement reform, get in touch with me because I have some great oceanfront property in Kansas that I’m willing to sell you.
This one targets Congress instead of Republicans, but the idea’s the same.
And in the middle of the month, while speculating why the GOP has been losing the debate, I shared a couple of cartoons illustrating potential explanations. Here’s a Chuck Asay cartoon based on the “co-conspirator” theme in that earlier post.
The part in the final frame about the fiscal cost of Obamacare is a nasty touch, but sadly true.
All told, this is a very unpalatable situation. We’re going to give more of our income to a bunch of spendaholics, and they’re going to use the money to increase the burden of government spending and dig us into a deeper fiscal hole.
But I admit there’s lots of guessing and speculation in those sentences.
There is one thing, however, that I can say with complete confidence. We don’t need a tax increase to balance the budget. We can get rid of red ink in just 10 years simply restraining spending so that it grows by only 2.5 percent per year.
P.P.S. I was glad to have an opportunity in the interview to defend Robin Hood’s reputation. As I’ve explained, he was a Tea Party guy, helping to reclaim and return money that was taken by the tax collectors of Prince John and the Sheriff of Nottingham. Here’s another Ken Catalino cartoon that sort of makes this point.
P.P.P.S. This is my second attempt at creating a video in the absence of the Cato expert. There’s a hiccup around the 2:25 mark, but I think the picture quality is much better than my first effort.
P.P.P.P.S. If you like the red jacket, previous attempts to be on the cutting edge of fashion can be seen here and here.
The politicians claim that they are negotiating about how best to reduce the deficit. That irks me because our fiscal problem is excessive government spending. Red ink is merely a symptom of that underlying problem.
But that’s a rhetorical gripe. My bigger concern is that politicians are prevaricating. They’re really talking about higher taxes in order to enable a bigger burden of government spending, not less red ink. I make this point in an interview on Fox Business Network.
This is the point where I often elaborate on issues raised in the interview, but let’s instead build on the discussion to look at policy and political reasons why the GOP should not surrender to Obama’s tax demands as part of fight over the fiscal cliff.
Here are the policy arguments against higher taxes.
1. There is no need for higher taxes since the budget can be balanced merely by restraining spending so that it grows 2.5 percent each year.
According to the most recent Congressional Budget Office fiscal estimate, the 2001 and 2003 tax cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 percent each year. Other nations have shown that this type of spending restraint is very successful, while no nation has ever taxed its way to fiscal success.
2. Since the tax increases stick and the supposed spending cuts quickly evaporate, budget deals that raise taxes have a long history of failure.
Last year, in an article that was designed to browbeat Republicans for being unreasonable about tax hikes, a New York Times columnist inadvertently revealed that the only budget deal that actually led to a fiscal surplus was the 1997 agreement that lowered taxes instead of increasing them. None of the tax-hike budget deals ever resulted in a balanced budget.
3. America’s short-run fiscal problem is the result of too much government spending, not inadequate tax revenue.
Because of large spending increases during the Bush-Obama years, the burden of federal spending has doubled in just 11 years. This is why today’s fiscal numbers look so grim. Some argue that tax revenues are below their long-run average of 18 percent of GDP, but CBO estimates show that tax collections will be above the long-run average by the end of the decade even if all the 2001 and 2003 tax cuts are made permanent. And the White House recently admitted this was true as well.
4. America’s long-run fiscal problem is the result of too much government spending, not inadequate tax revenue.
In the absence of entitlement reform, the burden of federal spending will double, measured as a share of GDP, and the overall burden of government will exceed the levels that currently exist in every single European welfare state. Tax revenues also will climb as a share of GDP thanks to “real-bracket creep,” so there is no plausible argument that the long-run problem is inadequate revenue.
5. The European evidence shows that genuine spending cuts are the only effective way of solving a fiscal crisis.
Nations such as Italy, Greece, France, Spain, Ireland, Portugal, and the United Kingdom have imposed massive tax increases, yet their fiscal problems remain. Indeed, in some cases, these nations are in worse shape because the tax hikes contributed to anemic economic performances. Some of these countries have belatedly begun to trim their spending burdens, but generally by relying on transitory savings rather than permanent reductions in the obligations of the welfare state. The only relative success stories on the continent are Switzerland, which never got into trouble in the first place thanks to a spending cap, and the Baltic nations, which imposed genuine spending cuts when the crisis first began and now are reaping the rewards of that fiscal discipline.
And here are the political arguments against higher taxes.
1. With Republicans easily retaining control of the House of Representatives, the election was not a mandate to raise taxes.
Nobody argued that there was a mandate to raise taxes before the election, when Republicans controlled the House and Democrats controlled the White House and Senate, so how can there be a mandate to raise taxes today since the election didn’t change anything? Some assert that Obama has a mandate since he campaigned in favor of his soak-the-rich tax plan. That’s true, but House Republicans prevailed after campaigning against class-warfare taxes, so that’s a wash.
2. The GOP prevailed in the exact same tax battle back in 2010, before they controlled the House and when they had fewer seats in the Senate.
This is not the first fiscal cliff battle. The same fight took place at the end of 2010. At the time, Democrats has an overwhelming majority in the House and even stronger control of the Senate than they do today. But by holding firm and staying united, Republicans prevailed. If they lose today, when they have far more political power, it will be a damning indictment of their incompetence.
3. Acquiescing to tax hikes would set a tone of weakness for 2013 and 2014, much as the 2011 “shutdown fight” needlessly gave Obama the upper hand on fiscal battles in 2011 and 2012.
5. Integrity matters, so politicians who promised the people that they wouldn’t raise taxes should honor those commitments.
I realize that it is silly to make an argument about honor and integrity when we’re discussing the actions of politicians, but I’m old fashioned. A promise should mean something. And even if promises don’t mean anything to these guys, they should remember that voters don’t like dishonesty.
I’m not terribly hopeful that any of my advice will be followed, so let’s close this post with some gallows humor.
…it’s a fight that has important implications, particularly since some of the tax increases will have a significantly harmful impact on incentives to work, save, invest and create jobs. In a competitive global economy, for instance, it is bizarrely self-destructive to increase the double taxation of dividends and capital gains. …This is all bad news, but it is not a crisis. If we go over the cliff, it simply means the economy will grow a bit slower and politicians will spend a bit more money. And the sequester actually would be (modest) good news, since it means the burden of government spending would be “only” $2 trillion higher 10 years from now, rather than $2.1 trillion higher. And even if Obama prevails in the fight, that simply means that we get a different mix of tax hikes and spending rises at a faster rate. Sure, that’s bad for the economy, but it’s not the end of the world. The real crisis is the ticking time bomb of entitlement programs and the welfare state. This bomb won’t explode this year or next year. It may not even explode for another 20 years. But at some point America will experience a Greek-style fiscal collapse if these programs are not reformed.
Just how bad is this future problem? Gee, I’m glad you ask.
A lot of people get upset about the national debt, which is somewhere between $11 trillion and $16 trillion, depending on whether you include money the government owes itself. Those are big numbers — but if you add up the amount of money that the government is promising to spend for entitlement programs in the future and compare that figure to the amount of revenue that the government projects it will collect for those programs, the cumulative shortfall is more than $100 trillion. And that’s after adjusting for inflation. Some politicians claim this huge, baked-into-the-cake expansion of government isn’t a problem, because we can raise taxes. But that’s exactly what Europe’s welfare states tried — and it didn’t work. Simply stated, even huge tax hikes won’t stem the flow of red ink in the long run if government keeps growing faster than the private economy. This is the fiscal problem that demands attention. Absent real entitlement reform, such as block-granting Medicaid to the states, the burden of government spending will consume ever-larger shares of our economic output with each passing year.
P.S. If my only choice is surrendering to Obama or going over the fiscal cliff, I’ll take the plunge without a second’s hesitation. At least we get the sequester if we go off the cliff, so there’s a tiny bit of spending restraint. Moreover, if the GOP capitulates to Obama on this fight, it will set the stage for additional bad policy over the next two years (much as the acquiescence to Obama during the March 2011 “government shutdown” fight was a sign of things to come for the last years, but at least we resuscitated two good cartoons and got some good jokes out of that debacle).
P.P.S. In addition to the Ramirez cartoon above, you can enjoy this bunch of amusing fiscal cliff cartoons. Or I should say they’re amusing so long as you don’t think about the implications.
Even though the data on tax revenue comes from the left-leaning Congressional Budget Office (yes, the same folks who seem to think you maximize growth with 100 percent tax rates), many folks on the left simply refuse to believe the numbers. In their minds, it is a religious tenet that red ink is the result of “tax cuts for the rich.”
So I wonder what they will think of this chart, produced by the White House, that shows tax revenues will…drum roll please…rise above 18 percent of GDP even if lawmakers decide to “extend current policy.”
Apologies for the poor quality of the chart, by the way. It was sent out in an email by the White House and posted on the TaxProf Blog. It’s the best copy I can find.
But you don’t need 20-20 vision to see that tax revenues will get to about 18.5 percent of GDP 10 years from now if current tax policy is made permanent.
Here’s a chart I made. It’s not as fancy, but it shows tax revenue for the last 50 years of the 20th Century, plus the years leading up to Obama this century. The average is exactly 18.0 percent, with a slight upward trajectory according to the Excel auto-trendline feature.
The moral of the story is that the tax increase battle is not about deficits and debt. The President’s class-warfare tax policy is designed to enable bigger government.
In the long run, though, the left will want even more taxes to enable the demography-drive expansion of the welfare state. Higher revenues, in other words, are a substitute for real entitlement reform.
P.S. You may have noticed that the White House used 20 percent of GDP as a benchmark in its chart, apparently because we should strive for the fiscal policy we had in Bill Clinton’s second term. I might be willing to take them up on that offer, so long as they’re also willing to accept Bill Clinton’s spending levels.
Okay, I’ll admit the title of this post doesn’t really say anything. My toaster is smarter than most Republicans.
But let’s focus specifically on the budget and tax negotiations. As I explained the other day, we basically have a situation where the President wants to trick GOPers into jumping out of the “fiscal cliff” frying pan and into the Obama class-warfare fire.
The frying pan is not a good option since it means a return of Clinton-era tax rates (but unfortunately not a return to Clinton-era levels of spending and regulation), but at least there would also be “sequestration,” which is budget-wonk term for automatic reductions in the growth of government spending.
Obama’s class-warfare fire, by contrast, is nothing but bad news. The tax increases might not be as large in the short run, but they would be designed to impose maximum damage on the economy. And the sequester would disappear. Indeed, Obama’s actually demanding more Keynesian stimulus!
Gullible Republicans seem to think this is just peachy keen, but here is the work of some cartoonists with a more realistic assessment. We’ll start with my favorite, from Robert Ariail, if for no other reason than it builds upon a cartoon I created for this 2011 post.
Here are two cartoons about that share the same theme, putting Obama in the role of Wimpy from the Popeye series. If that’s not a familiar cultural reference (i.e., if you’re not as old as me), watch this YouTube clip.
We can add another one to the list. The Heritage Foundation shows us what Obama has in mind when he talks about a “balanced” plan.
This chart, while horrifying and visually powerful, actually understates the case against Obama.
The President is not proposing to cut spending by $400 billion. He’s only proposing to reduce future spending growth by that amount. In other words, his “spending cut” is only a cut if you play the dishonest DC game of measuring “cuts” against a baseline of ever-expanding government.
To give you an idea of what this really means, here’s my chart showing the CBO projection of what will happen to spending if the budget is left on autopilot. That’s the blue line.
The red line, by contrast, shows the impact of Obama’s supposed $400 billion cut. Feel free to pull out a magnifying glass to examine the difference between the two lines.
All you need to know is that the burden of government spending will climb by about $2 trillion over the next 10 years without Obama’s budget plan.
But if we enact Obama’s plan, the burden of spending will climb by…drum roll please…about $2 trillion over the next 10 years. In other words, it’s not much more than a rounding error.
P.S. Don’t forget that revenues also are projected to rise dramatically over the next 10 years, even if the 2001 and 2003 tax cuts are made permanent. All that’s actually needed to balance the budget is modest spending restraint, restraining outlays so they grow by an average of 2.5 percent. In other words, good things happen if policy makers comply with Mitchell’s Golden Rule.
Washington frustrates me. The entire town is based on legalized corruption as an unworthy elite figure out new ways of accumulating unearned wealth by skimming money from the nation’s producers.
But one thing that especially irks me is the way people focus on the trees and forget about the forest. Politicians and journalists are now engaged in an inside-baseball game of analyzing every twist and turn of the fiscal cliff negotiations.
That’s all fine and well, but perhaps it would be a good idea to talk about the need to fix the real crisis of excessive spending instead of arguing about how fast we should be traveling in the wrong direction.
And let’s not delude ourselves. In the absence of real entitlement reform, the United States is doomed to repeat Europe’s mistakes.
Another month, another record unemployment rate for the economy of the 17 European Union countries that use the euro. Figures released Friday by Eurostat, the EU’s statistics office, showed that the recession in the eurozone pushed unemployment up in the currency bloc to 11.7 percent in October, the highest level since the introduction of the euro in 1999. …Eurostat found that 18.7 million people were out of work across the eurozone, an increase of 173,000 on the previous month and 2.2 million higher than the year before. The wider 27-nation EU that includes non-euro countries such as Britain and Poland had an unemployment rate of 10.7 percent in October and a total of 25.9 million out of work. …”Talk of a `lost generation’ of young people now looks like an alarming possibility,” said Andrea Broughton, principal research fellow at the Institute for Employment Studies.
In other words, we may complain about America’s miserable track record on jobs during the Obama years, but at some point in the future we may someday look back on 8 percent unemployment as good news.
Unfortunately, the crowd in Washington doesn’t want to acknowledge that the real problem is spending. And I’m particularly irked (but not surprised) that Republicans now seem willing to go along with Obama even though they won this fight back in 2010 when they didn’t control the House and had fewer seats in the Senate. Here’s what I said to one of the local DC stations.
I realize I’m sounding glum, so let’s close out this post with a couple of amusing cartoons about America’s European future.
Unless the law is changed, big tax increases will be imposed on all taxpayers next year. This is the so-called fiscal cliff, and President Obama is using this unpalatable situation as an excuse to push for his class-warfare tax policy.
I talk about the political and economic ramification of this fight with Glenn Reynolds, author of the famous Instapundit blog.
As is my habit, there are a couple of points that deserve some elaboration.
We should only raise taxes on those who say they want higher taxes – Since the Hollywood left (with some noble exceptions such as Jon Lovitz and Rob Schneider) is in favor of bigger government and higher tax rates, Glenn has suggested a restoration of the federal tax on movie receipts. That hasn’t worked very well in Spain, but I like the idea. In the same spirit, I’ve proposed a tax on CEO salaries since the big business community is trying to curry favor with the political class by endorsing tax hikes.
Republicans won this fight in 2010 when they had less power – The same fiscal cliff fight took place two years ago, before the Republicans controlled the House and when they had fewer seats in the House. Yet GOPers prevailed because Senate Republicans stuck together. It would be a sign on remarkable incompetence if they lost this year’s fight since they now have much more power.
Long-term incumbents get too comfortable with big government – I joked about politicians who come to Washington thinking it’s a cesspool, but eventually think it’s a hot tub, but that’s actually a very serious point. As I explain in this post, too many GOPers get corrupted by big government.
Most important, I sneak in an endorsement of my beloved Bulldawgs at the end of the interview – I’ve been very restrained and have not used this blog as a platform to celebrate Georgia being two wins away from the national title. Actually, the SEC Championship Game this weekend is the de facto national title game, though whichever team that prevails will have to take the pro forma step of mopping the floor with Notre Dame in January. This cartoon shows the state of play.
P.S. I appreciated Glenn’s reference to Lucy, Charlie Brown, and the football. To see my re-creation of that Peanuts classic, look at the cartoon in this post.
I appeared on CNBC yesterday to talk about the “fiscal cliff” and the potential impact on economic performance.
You won’t be surprised to learn that I’m mostly concerned with how the issue gets resolved. Yes, there is some temporary uncertainty that is probably making markets skittish, but I’m much more worried about Obama bullying the GOP into agreeing to a class-warfare deal that leads to higher tax rates on investors, entrepreneurs, and small business owners, as well as more double taxation on saving and investment.
And the long-run damage caused by a more punitive tax system is much more important than any short-run delay in investment expenditures.
Second, I’m glad I had the opportunity to explain how America’s fiscal status has deteriorated during the Bush-Obama years. One of the CNBC staff understated the magnitude of the problem by looking at just federal spending as a share of GDP and only over the past few years. I pointed out that total government spending is the right variable, and I explained that the trend line has been moving in the wrong direction since Bill Clinton left office.
In this chart, you can see the bad news using either the methodology of the Office of Management and Budget or the approach of the Organization for Economic Cooperation and Development. Since I’m not sure which approach is right, I basically split the difference when discussing the overall burden of government spending.
We need some sort of spending cap, ideally akin to the Swiss Debt Brake. But that won’t happen for at least the next four years.
But maybe, with enough pressure, we can convince politicians to comply with my Golden Rule. After 12 years of excessive spending, it’s time to let the private sector grow faster than the government.
I took part today in a nine-person debate on the fiscal cliff for U.S. News & World Report. We were all asked, “Is Going Over the ‘Fiscal Cliff’ Necessarily the Worst Outcome?”
Readers are allowed to vote up or down on each presentation, so I’ll be curious about the outcome.
Here are some of the key excerpts from my contribution to the debate, including a defense of the sequester and a very important point at the end about the Laffer Curve.
America actually will fall off two fiscal cliffs in January, but only one of them is bad. The good fiscal cliff is the so-called sequester, which is the inside-the-beltway term for automatic spending cuts. …anything that restrains the growing burden of government spending is a good idea, so a small step is better than nothing. The bad fiscal cliff is the automatic tax hike, which exists because the 2001 and 2003 tax cuts are scheduled to expire at the end of the year. This means higher tax rates for all taxpayers, as well as increased double taxation of dividends and capital gains. …that fiscal cliff would be bad news, it’s not the worst possible outcome. President Barack Obama has proposed a class-warfare plan that would repeal the sequester and maintain—and exacerbate—the tax hikes on the so-called rich. …But it gets worse. Obama wants to double the size of the soak-the-rich tax hikes, thus maximizing the potential harm to job creation. In other words, not just the automatic tax increases, but then additional tax hikes on top of that—all designed to penalize success and innovation. If Obama prevails, he’ll be rewarded for dogmatism, but he won’t find a pot of gold at the end of the class-war rainbow. Successful taxpayers will adjust their behavior in ways that reduce taxable income, which means the government won’t get much money even though it will impose a lot of damage.
Since I had only limited space for my essay, let me briefly elaborate by stating that the fiscal cliff is not the right outcome. As I explained in a column for the New York Daily News, the best option would be to keep the sequester and make all the tax cuts permanent.
Will GOP sheep accept Obama’s bad fiscal-cliff proposal?
But if I have to choose between the maximum destructiveness of Obama’s approach and the routine nastiness of the fiscal cliff, then I’ll take the latter.
By the way, if my subtle hint from above wasn’t sufficiently blunt, I’ll close by emphasizing that your support would be most welcome and highly appreciated. So don’t be bashful about going to this link and voting your conscience (unless, of course, you’re a statist, in which case you should keep reading this blog until you’ve cast out that demon).
I’ve commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you can believe that) and proponents of higher taxes (the “austerity” camp, which almost never seems to mean spending restraint).
That’s a left-vs-left battle, which makes me think it would be a good idea if they fought each other to the point of exhaustion, thus enabling forward movement on a pro-growth agenda of tax reform and reductions in the burden of government spending.
That’s a nice thought, but it probably won’t happen in Europe since almost all politicians in places such as Germany and France are statists. And it might never happen in the United States if lawmakers pay attention to the ideologically biased work of the Congressional Budget Office (CBO).
For all intents and purposes, the CBO has a slavish devotion to Keynesian theory in the short run, which means more spending supposedly is good for growth. But CBO also believes that higher taxes improve growth in the long run by ostensibly leading to lower deficits. Here’s what it says will happen if automatic budget cuts are cancelled.
Eliminating the automatic enforcement procedures established by the Budget Control Act of 2011 that are scheduled to reduce both discretionary and mandatory spending starting in January and maintaining Medicare’s payment rates for physicians’ services at the current level would boost real GDP by about three-quarters of a percent by the end of 2013.
…the agency has estimated the effect on output that would occur in 2022 under the alternative fiscal scenario, which incorporates the assumption that several of the policies are maintained indefinitely. CBO estimates that in 2022, on net, the policies included in the alternative fiscal scenario would reduce real GDP by 0.4 percent and real gross national product (GNP) by 1.7 percent. …the larger budget deficits and rapidly growing federal debt would hamper national saving and investment and thus reduce output and income.
In other words, CBO reflexively makes two bold assumption. First, it assumes higher tax rates generate more money. Second, the bureaucrats assume that politicians will use any new money for deficit reduction. Yeah, good luck with that.
To be fair, the CBO report does have occasional bits of accurate analysis. The authors acknowledge that both taxes and spending can create adverse incentives for productive behavior.
…increases in marginal tax rates on labor would tend to reduce the amount of labor supplied to the economy, whereas increases in revenues of a similar magnitude from broadening the tax base would probably have a smaller negative impact or even a positive impact on the supply of labor. Similarly, cutting government benefit payments would generally strengthen people’s incentive to work and save.
But these small concessions do not offset the deeply flawed analysis that dominates the report.
While I’m irritated about CBO’s bias (and the fact that it’s being financed with my tax dollars), that’s not what has me worked up. The reason for this post is to grouse and gripe about the fact that some people are citing this deeply flawed analysis to oppose Obama’s pursuit of class warfare tax policy.
Why would some Republican politicians and conservative commentators cite a publication that promotes higher spending in the short run and higher taxes in the long run? Well, because it also asserts – based on Keynesian analysis – that higher taxes will hurt the economy in the short run.
…extending the tax reductions originally enacted in 2001, 2003, and 2009 and extending all other expiring provisions, including those that expired at the end of 2011, except for the payroll tax cut—and indexing the alternative minimum tax (AMT) for inflation beginning in 2012 would boost real GDP by a little less than 1½ percent by the end of 2013.
At the risk of sounding like a doctrinaire purist, it is unethical to cite inaccurate analysis in support of a good policy.
Consider this example. If some academic published a study in favor of the flat tax and it later turned out that the data was deliberately or accidentally wrong, would it be right to cite that research when arguing for tax reform? I hope everyone would agree that the answer is no.
Yet that’s precisely what is happening when people cite CBO’s shoddy work to argue against tax increases.
Elaborating on this concern, I wrote a column for today’s New York Daily News. I started with a description of the three issues that are getting lumped together.
…we face the threat of higher tax rates for some or all taxpayers on Jan. 1. …there’s also a possibility of a “sequester” — automatic budget cuts that also are scheduled to take place on Jan. 1. And politicians have been spending so much money that we’re about to bump up against the nation’s debt limit. So it’s likely that all these issues will get joined as President Obama and congressional leaders attempt to negotiate a deal.
I then outlined what might happen if the 2001 and 2003 tax cuts expire.
The higher tax rate portion of the fiscal cliff exists because 2001 and 2003 tax cuts are scheduled to expire at the end of the year. All taxpayers would see more of their earnings confiscated by the IRS beginning in January if Washington fails to act. All tax brackets would increase, taxes on dividends and capital gains would rise… The total yearly hike would be in the range of $400 billion. This could have profound implications, both because of immediate reductions in take-home pay and the negative long-run impact of economic stagnation.
Many are worried about these potential changes, with Congressional Budget Director Doug Elmendorf warning that Americans should expect a “significant recession” and the loss of some 2 million jobs. From my point of view, all the tax cuts should be made permanent. The bad news, to me, is that Obama wants to raise rates on investors, entrepreneurs, small business owners and other “rich” taxpayers. The sequester should be replaced by a more targeted set of fiscal reforms to restrain the growth of the entitlement state. Finally, the debt limit should be raised in exchange for a workable and enforceable cap on government spending.
I originally included an explanation of why the CBO estimate is flawed because of Keynesian methodology, but those sentences fell victim to space constraints. Nonetheless, it’s worth noting that even folks on the left think big tax hikes aren’t a good idea (though they’re perfectly happy to have a series of small tax hikes that get you to the same Greek destination).
But set that aside. Is there any chance of seeing my solution adopted? Well, there’s no chance of a spending cap. The sequester will be stopped, but it won’t be replaced by better reforms.
I’m not terribly hopeful that any of my advice will be followed, so let’s close this post with some gallows humor.
But the cliff is not our biggest fiscal problem.
Most important, I sneak in an endorsement of my beloved Bulldawgs at the end of the interview – I’ve been very restrained and have not used this blog as a platform to celebrate Georgia being two wins away from the national title. Actually, the SEC Championship Game this weekend is the de facto national title game, though whichever team that prevails will have to take the pro forma step of mopping the floor with Notre Dame in January. This cartoon shows the state of play.
