Archive for the ‘Democrats’ Category

Yesterday, I shared some of the highlights (and lowlights) of the Democratic Party platform.

It wasn’t a fun task. The Democrats put together a rat’s nest of taxes, spending, cronyism, and red tape, so my blood pressure probably went crazy as I read the document. Crazy Bernie Sanders may have lost the war for the nomination, but it seems that he mostly won the battle over the platform.

The plank about letting states be in charge of marijuana policy was the only part of the platform that I actually liked (even though I personally disapprove of drug use).

Though it mostly doesn’t matter what’s in party platforms. As I pointed out yesterday, platforms tend to be ideological statements to please party activists. Politicians generally don’t care about their respective party platforms, and they definitely don’t allow their behavior to be constrained by platform language.

With that important caveat in mind, let’s now review the GOP platform. And I’ll use the same approach that I used when looking at the Democrat’s document. I’ll provide a short excerpt and then give my two cents.

Here are some of the main economic issues addressed (or bungled) by Republicans.

We believe the Constitution was written not as a flexible document, but as our enduring covenant.

That’s true, but why aren’t GOPers defunding most of the federal government if that’s what they really believe?

Because of the vital role of religious organizations, charities, and fraternal benevolent societies in fostering generosity and patriotism, they should not be subject to taxation and donations to them should remain deductible.

Endorsing the deduction for charitable contributions isn’t an optimistic sign for those of us who support fundamental tax reform.

To guard against hypertaxation of the American people in any restructuring of the federal tax system, any value added tax or national sales tax must be tied to the simultaneous repeal of the Sixteenth Amendment, which established the federal income tax.

This may be my favorite part of the GOP platform. Hopefully it will discourage Rand Paul and Ted Cruz from including a VAT if they run for president again and put forth tax reform plans.

We propose to level the international playing field by lowering the corporate tax rate to be on a par with, or below, the rates of other industrial nations.

Hard to argue with that plank, though it raises the question of why Republicans haven’t enacted this change already.

We endorse the recommendation of the National Commission on Fiscal Responsibility and Reform, as well as the current Administration’s Export Council, to switch to a territorial system of taxation so that profits earned and taxed abroad may be repatriated for job-creating investment here at home.

Territorial taxation is good policy, so amen.

Republicans believe that no financial institution is too big to fail. We support legislation to ensure that the problems of any financial institution can be resolved through the Bankruptcy Code.

This is the right policy. Too bad many GOPers ignored this bit of wisdom and voted for TARP.

We propose to phase out the federal transit program.

They should phase out the entire Department of Transportation, but this would be a good start.

…we oppose a further increase in the federal gas tax.

That’s good, though repealing the tax would be even better.

Amtrak is an extremely expensive railroad for the American taxpayers, who must subsidize every ticket. The federal government should allow private ventures to provide passenger service in the northeast corridor.

All this sounds good, but it’s a bit vacuous. There should be an explicit commitment to end Amtrak subsidies.

We reaffirm our intention to end federal support for boondoggles like California’s high-speed train to nowhere.

A welcome commitment, though it should be extended to all transportation projects.

We should reduce the occupational licensing laws that shut untold millions of potential workers out of entrepreneurial careers.

This is largely a problem caused by state and local governments, but it’s nonetheless nice to see a statement of support for much-needed change.

We must overturn the regulatory nightmare, created by the Dodd-Frank law, for the community banks and savings and loans that provide nearly half of all small-business loans and over three-quarters of all agricultural loans.

Maybe I’m being paranoid, but where’s the language explicitly calling for repeal of the Dodd-Frank bailout bill?

The taxpayers spend an average of $35,000 a year per employee on non-cash benefits, triple the average non-cash compensation of the average worker in the private sector. Federal employees receive extraordinary pension benefits and vacation time wildly out of line with those of the private sector. We urge Congress to bring federal compensation and benefits in line with the standards of most American employees.

Federal bureaucrats are overcompensated, so it goes without saying (though I’m still glad they said it) that costs should be contained.

We must impose firm caps on future debt… A strong economy is one key to debt reduction, but spending restraint is a necessary component that must be vigorously pursued.

Capping debt is fine. Capping spending would be far better.

The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements result in government’s warrantless seizure of personal financial information without reasonable suspicion or probable cause. …FATCA not only allows “unreasonable search and seizures” but also threatens the ability of overseas Americans to lead normal lives. We call for its repeal and for a change to residency-based taxation for U.S. citizens overseas.

Unambiguous opposition to FATCA is great, but it’s also big news that the GOP wants territorial taxation for labor income.

We call on Congress and state legislatures to enact reforms to protect law-abiding citizens against abusive asset forfeiture tactics.

Civil asset forfeiture is abusive by definition. Repeal the laws entirely.

The Constitution gives the federal government very few powers, and they are specifically enumerated… In obedience to that principle, we condemn the current Administration’s unconstitutional expansion into areas beyond those specifically enumerated.

This is true, but it’s too bad Republicans aren’t serious about this plank.

We oppose any carbon tax.

Good. It’s never a good idea to give politicians a new source of tax revenue.

The Republican path to fiscal sanity and economic expansion begins with a constitutional requirement for a federal balanced budget.

At the risk of being repetitive, spending caps are better.

We support the following test: Is a particular expenditure within the constitutional scope of the federal government? If not, stop it. Has it been effective in the past and is it still absolutely necessary? If not, end it. Is it so important as to justify borrowing, especially foreign borrowing, to fund it? If not, kill it.

If GOPers were serious about this part of the platform, this would put them on record to abolish 90 percent of the federal government.

Impose no changes for persons 55 or older. Give others the option of traditional Medicare or transition to a premium-support model designed to strengthen patient choice, promote cost-saving competition among providers, and better guard against the fraud and abuse that now diverts billions of dollars every year away from patient care.

To their credit (and notwithstanding Trump’s unserious approach to the issue), Republicans still embrace the right type of Medicare reform.

We applaud the Republican governors and state legislators who have undertaken the hard work of modernizing Medicaid. We will give them a free hand to do so by block-granting the program without strings.

It’s also good to see support for the right kind of Medicaid reform.

…all options should be considered to preserve Social Security. As Republicans, we oppose tax increases and believe in the power of markets to create wealth and to help secure the future of our Social Security system.

This is vacuous language, though at least it provides an indirect endorsement of personal retirement accounts. Though I don’t want “all options” on the table since that could be construed to include tax hikes.

We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment.

What?!? This is the most disappointing and economically illiterate part of the GOP platform.

…the Constitution gives [the federal government] no role in education.

True, so why don’t Republicans explicitly call for abolishing the Department of Education?

We agree with the four dissenting judges of the Supreme Court: “In our view, the entire Act before us is invalid in its entirety.” It must be removed and replaced with an approach based on genuine competition, patient choice, excellent care, wellness, and timely access to treatment.

Nice, though remember that repealing Obamacare is just the first step if you want a genuine market-based healthcare sector.

We propose to end tax discrimination against the individual purchase of insurance and allow consumers to buy insurance across state lines.

I like the latter part about breaking down the government-imposed barriers to interstate commerce, but I worry the part about tax discrimination is so vague it could be used to expand tax preferences when the real goal should be to get rid of the healthcare exclusion.

The FDA has slowly but relentlessly changed into an agency that more and more puts the public health at risk by delaying, chilling, and killing the development of new devices, drugs and biologics that can promote our lives and our health.

This is correct, but it would be nice to see specific reforms.

We commend those states that have passed Right to Try legislation, allowing terminally ill patients the right to try investigational medicines not yet approved by the FDA. We urge Congress to pass federal legislation to give all Americans with terminal illnesses the right to try.

This is a very good idea. If I ever have a deadly illness, I’ll want the freedom to roll the dice in hopes a new medicine or procedure will work.

Two grave problems undermine the rule of law on the federal level: Over-criminalization and over-federalization. In the first case, Congress and federal agencies have increased the number of criminal offenses in the U.S. Code from 3,000 in the early 1980s to more than 4,500 today. That does not include an estimated 300,000 regulations containing criminal penalties. …We urge Congress to codify the Common Law’s Rule of Lenity, which requires courts to interpret unclear statutes in favor of a defendant.

If bigwigs like Hillary Clinton can get away with violating very clear-cut national security laws because she didn’t intend to do damage to the nation, then ordinary people surely should get the benefit of the doubt as well when they inadvertently violate some complicated law or regulation.

…we oppose any form of Global Tax.

Amen. Now let’s see if Republicans put our money where their mouths are and defund pro-tax international bureaucracies such as the Organization for Economic Cooperation and Development.

Let’s wrap this up. There are more policies that could be addressed, but this column already is too long.

The bottom line is that the platform has many good policies. Heck, if I though GOP politicians actually planned to pursue the agenda outlined in the document, I might consider becoming a Republican.

But does anybody think the average Republican politician even knows what is in the GOP platform? More importantly, does anyone think that Donald Trump has any commitment to the policies in the platform?

So now perhaps you can understand why advocates of small government sympathize with Uncle Sam in this cartoon.

Is it Tweedledee and Tweedledum, or the other way around?

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It’s very risky to trust the promises made by politicians.

But at least there’s a potential downside when they break their word. President George H.W. Bush lost the 1992 election, for instances, after violating his read-my-lips, no-tax-hike promise.

So I think it’s useful to get politicians to explicitly commit to good policies, such as the no-tax-increase pledge.

But what about getting language in a party platform? Is that a vehicle for getting good policy, or at least is it a way of blocking bad policy?

For the most part, I don’t think party platforms bind politicians or constrain their behavior. To be sure, I’m happy when platforms embrace policies that I like, but I’m not foolish enough to think that this automatically will translate into better policy after politicians get elected.

For the most part, platforms are a way for politicians to appease the more philosophically inclined people in their parties. So the Democratic platform is generally farther to the left than Democratic politicians and the GOP platform is generally farther to the right than Republican politicians.

With these caveats taken care of, let’s review the proposals and policies in the Democratic platform (I’ll assess the Republican platform tomorrow). I’ve excerpted the items that are noteworthy and I follow each item with a brief observation.

Let’s get started.

Democrats will expand Social Security…[and] will achieve this goal by taxing some of the income of people above $250,000.

This is like stepping on the accelerator while approaching a cliff. In inflation-adjusted dollars, the program’s unfunded liability is a staggering $37 trillion, yet Hillary and her friends want even more spending. And they want to compound the damage with a huge tax increase on investors, entrepreneurs and small-business owners.

Democrats will also create an independent, national infrastructure bank.

This is a recipe for cronyism that will further expand the federal government’s role into an area that should be reserved for states, local governments, and the private sector.

Democrats will defend the Export-Import Bank.

Bernie Sanders was good on this issue, so this platform language means Hillary Clinton’s support for corporate welfare prevailed.

Democrats will provide direct federal funding for a range of local programs that will put young people to work and create new career opportunities.

Since job-training programs have a long track-record of failure, too bad they didn’t suggest repealing job-killing minimum-wage laws.

Democrats will not hesitate to use and expand existing authorities as well as empower regulators to downsize or break apart financial institutions when necessary to protect the public and safeguard financial stability, including new authorities to go after risky shadow-banking activities.

Other than pointing out that big isn’t necessarily bad, I don’t really have any policy reaction. I’m only sharing this blurb since I imagine you’ll also laugh out loud at the platform’s implicit assertion that Hillary Clinton somehow will crack down on her friends and donors at Goldman-Sachs. Yeah, I’m sure that’s high on her list. Right after putting inner-city schoolkids before the teacher unions.

We will ban golden parachutes for those taking government jobs.

Will that rule apply retroactively to Treasury Secretary Jacob Lew?

Democrats will claw back tax breaks for companies that ship jobs overseas, eliminate tax breaks for big oil and gas companies, and crack down on inversions and other methods companies use to dodge their tax responsibilities.

There are no “tax breaks” for companies that invert.

We will end deferrals so that American corporations pay United States taxes immediately on foreign profits and can no longer escape paying their fair share of U.S. taxes by stashing profits abroad.

The “fair share” should be zero for income that is earned (and therefore already subject to tax) in other nations.

We will ensure those at the top contribute to our country’s future by establishing a multimillionaire surtax to ensure millionaires and billionaires pay their fair share.

Even the IRS admits the tax system is very biased against the so-called rich.

…we will shut down the “private tax system” for those at the top, immediately close egregious loopholes like those enjoyed by hedge fund managers, restore fair taxation on multimillion dollar estates, and ensure millionaires can no longer pay a lower rate than their secretaries.

Wow, endorsing higher capital gains taxes, higher death taxes, and dishonest math in one sentence fragment.

We will work to crack down on tax evasion.

Unfortunately, they want higher compliance by expanding the power of the IRS, not by lowering tax rates.

…we will make sure that law-abiding Americans living abroad are not unfairly penalized by finding the right solutions for them to the requirements under the Foreign Account Tax Compliance Act (FATCA) and Report of Foreign Bank and Financial Accounts (FBAR).

This language is vacuous, but it’s nonetheless noteworthy that even the Democrats feel compelled to say bad things about one of Obama’s worst laws.

Democrats believe it is long past time to close this racial wealth gap. Disparities in wealth cannot be solved by the free market alone, but instead, the federal government must play a role in eliminating systemic barriers to wealth accumulation for different racial groups and improving opportunities for people from all racial and ethnic backgrounds to build wealth.

More vacuous language, though it’s disappointing that the platform doesn’t endorse personal retirement accounts, which would fix one of the ways minorities are hurt by government policy.

We believe that the states should be laboratories of democracy on the issue of marijuana, and those states that want to decriminalize it or provide access to medical marijuana should be able to do so.

Easily the most pro-liberty part of the Democratic platform.

Democrats will develop a national strategy, coordinated across all levels of government, to combat poverty. We will direct more federal resources to lifting up communities that have been left out and left behind.

Anyone think this will work any better than all the other failed anti-poverty schemes from Washington? I didn’t think so.

Democrats will protect proven programs like the Supplemental Nutrition Assistance Program (SNAP)—our nation’s most important anti-hunger program—that help struggling families put food on the table.

The only thing “proven” about the food stamp program is that it’s riddled with fraud and it creates dependency.

We will dramatically increase federal infrastructure funding for our cities.

It’s not the role of the federal government to pave roads and and build bridges and corrupt big-city political machines shouldn’t be offloading their responsibilities onto taxpayers in the rest of the country.

We will continue to support public funding for the National Endowment for the Arts, for the National Endowment for the Humanities, and for programs providing art and music education in primary and secondary schools.

If I want to listen to cowboy poetry, I should pay for it myself.

We believe America must be running entirely on clean energy by mid-century. We will take bold steps to slash carbon pollution.

Mostly vacuous rhetoric, but it could lead to “bold steps” to undermine prosperity.

Democrats believe that carbon dioxide, methane, and other greenhouse gases should be priced to reflect their negative externalities, and to accelerate the transition to a clean energy economy and help meet our climate goals.

You don’t have to read between the lines to recognize that “should be priced” is DC-speak for a big energy tax.

All corporations owe it to their shareholders to fully analyze and disclose the risks they face, including climate risk. Those who fail to do so should be held accountable. Democrats also respectfully request the Department of Justice to investigate allegations of corporate fraud on the part of fossil fuel companies accused of misleading shareholders and the public on the scientific reality of climate change.

This is probably the most reprehensible part of the Democratic platform. America is not a banana republic and people shouldn’t be attacked with “lawfare” for disagreeing with the political establishment.

Democrats are unified in their strong belief that every student should be able to go to college debt-free, and working families should not have to pay any tuition to go to public colleges and universities.

A plan that unambiguously will increase the cost of college.

Democrats believe that health care is a right, not a privilege, and our health care system should put people before profits. …Americans should be able to access public coverage through a public option, and those over 55 should be able to opt in to Medicare.

For those who think the Obamacare boondoggle didn’t go far enough.

Democrats will fight any attempts by Republicans in Congress to privatize, voucherize, or “phase out” Medicare as we know it. And we will oppose Republican plans to slash funding and block grant Medicaid and SNAP.

Let’s bury our heads in the sand and pretend there’s no entitlement crisis.

Democrats believe that global institutions—most prominently the United Nations—and multilateral organizations have a powerful role to play

A powerful role is not the same as a productive role or positive role. Though the United Nations is mostly feckless. The real damage is caused by the International Monetary Fund and the Organization for Economic Cooperation and Development.

I could analyze additional planks, but there’s a limit to have much statist claptrap I can endure.

If I had to give a grade to the Democratic platform, it would be “L” for leftist. Just like the Party’s nominee.

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I will always have fond feelings for Playboy, though not for the stereotypical reason.

My appreciation for the magazine is largely based on the fact that I got a very nice honorarium from the German version back in the 1990s for writing an assessment of Bill Clinton’s likely approach to economic policy (confession: he turned out to be much better than I predicted).

Unfortunately, I’ve forgotten almost all of the German I learned in high school, so I can’t read the translated version of the article that appeared in the magazine.

Now Playboy has done something else that I appreciate, putting together a very clever matrix showing what Democrats, Republicans, Libertarians, and Greens think about various policy issues.

It’s obviously satire, but it’s very clever and effective because it does a good job of capturing stereotypes from each group (just like this poster showing 24 types of libertarians).

As you can see, the “libertarian chicken” obviously provided the answers for the third column.

In addition to mind-your-own-business Libertarians, Playboy gives us abortion-über-alles Democrats, elitist Republicans, and fuzzy-headed Greens. A bit of truth in all those caricatures.

So kudos to them for mocking all parties equally. Comedy Central probably wouldn’t be losing so many viewers if it also took this even-handed approach.

P.S. If you like libertarian-oriented humor (both pro and con), then click here and here.

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If you like to go along to get along, I suggest you don’t become a libertarian. At least not if you follow politics or work in Washington.

Otherwise, you’re doomed to a life of endlessly pointing out that the emperor has no clothes. Here are three examples.

1. When almost every Republican and Democrat argued for a Keynesian-style stimulus in 2008, libertarians had the lonely job of explaining that you don’t get more growth by increasing the burden of government spending.

2. And when most Republicans and Democrats said we needed a TARP bailout that same year, it was libertarians who futilely argued that the “FDIC-resolution” approach was a far more sensible way of dealing with the government-created crisis.

3. More recently, there were a bunch of stories complaining that 2013 was a very unproductive year for Congress, and libertarians were among the few to state that we’re better off with fewer laws rather than more laws.

The same is true for “bipartisanship.” Almost every pundit, politician, and lobbyist in Washington will extol the virtues of bipartisanship. But what they really mean is that they want both Republicans and Democrats to join arms in a business-as-usual game.

Indeed, the standard libertarian joke is that you get bipartisanship when the Stupid Party and the Evil Party both agree on something. Needless to say, that often means laws that are both stupid and evil.

Which is a good description of Bush’s 2008 stimulus and the corrupt TARP legislation.

But since we’re at the end of the year, I don’t want to get overly depressed. So let’s share some cartoons that celebrate the Murray-Ryan budget, which is the most recent example of “bipartisanship.”

We’ll start with ones that have a Christmas theme.

The politicians were glad to escape the fiscal constraint of sequestration, but Lisa Benson is not overly impressed by their cooperative effort.

Budget Deal Cartoon 8

Gary Varvel isn’t very happy, either.

Budget Deal Cartoon 1

Varvel is very explicit in this cartoon about Democrats and Republicans being united against taxpayers.

Budget Deal Cartoon 4

The bag should have been labelled “spending,” but that’s a minor complaint.

Steve Breen points out that the budget deal achieved three out of four goals.

Budget Deal Cartoon 2

And Michael Ramirez astutely identifies too much spending as the problem and shows that the budget deal did nothing to address that issue.

Budget Deal Cartoon 3

Here’s another Lisa Benson cartoon, though this one focuses on establishment GOPers trying to hook the Tea Party on the demon rum of big government.

Budget Deal Cartoon 5

Sort of reminds me of this great Henry Payne cartoon about Obama and Greece. Or maybe this Nate Beeler cartoon about weak-willed GOPers.

I’ve saved the best for last.

This Glenn McCoy cartoon shows what bipartisanship really means inside the DC beltway.

Budget Deal Cartoon 6

McCoy had another cartoon last year with a similar theme, as did Michael Ramirez.

In closing, I want to say something vaguely optimistic. The Murray-Ryan budget deal was unfortunate, but it was a rather minor setback compared to the kinds of “bipartisan” big-government schemes we got during the Bush years.

It was sort of akin to the fiscal cliff deal at the beginning of the year. Government got a bit bigger and a bit more expensive, but it was peanuts compared to TARP, the prescription drug entitlement, and many of the other schemes that eroded economic liberty last decade.

P.S. Fairness requires that I point out that bipartisanship doesn’t automatically mean bad legislation. The bipartisan 1997 budget deal between the GOP Congress and Bill Clinton cut some taxes and reduced the growth of federal spending. And the successful sequester came about because of the bipartisan 2011 debt limit legislation.

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According to a story from U.S. News and World Report, there’s new research showing that 4th of July celebrations boost the GOP. I have no idea if the methodology is sound, but the researchers found that attending Independence Day events influences voting behavior. Key findings include: “When done before the age of 18, it increases the likelihood of a youth identifying as a Republican by at least 2 percent” and “It raises the likelihood that parade watchers will vote for a Republican candidate by 4 percent.”

Here’s more from the USNWR story.

Democratic political candidates can skip this weekend’s July 4th parades. A new Harvard University study finds that July 4th parades energize only Republicans, turn kids into Republicans, and help to boost the GOP turnout of adults on Election Day. …”The political right has been more successful in appropriating American patriotism and its symbols during the 20th century. Survey evidence also confirms that Republicans consider themselves more patriotic than Democrats. According to this interpretation, there is a political congruence between the patriotism promoted on Fourth of July and the values associated with the Republican party. …Their findings also suggest that Democrats gain nothing from July 4th parades, likely a shocking result for all the Democratic politicians who march in them. …What’s more, the impact isn’t fleeting. “Surprisingly, the estimates show that the impact on political preferences is permanent, with no evidence of the effects depreciating as individuals become older,”said the Harvard report.

I’m interested in how to get people to believe in freedom, not vote Republican, so I’m not sure what to think about the Harvard study. But my Republican friends can probably make a few snarky observations about whether patriotism is inconsistent with being a Democrat. My thoughts on patriotism, meanwhile, can be found here.

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The main political goal of the left is to seduce Republicans into supporting higher taxes. Bluntly stated, all of their fiscal policy goals require more tax revenue coming to Washington.

The most important factor (from their perspective) is that they can’t make government much bigger than it is right now without a major tax increase. Sure, they can finance spending with borrowing, but it appears that we’ve finally gotten to a point – both politically and economically – where higher deficits are no longer an option.

But here’s the problem for the left. Higher taxes generally are not popular with voters and politicians who campaign for higher taxes do not fare very well. This is why Democrats, if they want to get more tax revenue and avoid political fallout, need to somehow convince GOPers to be part of the process (indeed, The Hill has reported that “the Democratic playbook has changed, with a key goal: get Republicans to violate the Americans for Tax Reform (ATR) pledge not to raise taxes.”

It’s easy to understand why the left wants the GOP to give up the no-tax-increase pledge. Voters today think Democrats want to raise their taxes and Republicans want to protect them. That’s political gold for the GOP.

But if dumb Republicans can be convinced to sell out, then the political dynamics get completely reversed. All of a sudden, voters have a big incentive to make sure they’re not the ones who get hit, so they are prone to support higher taxes on the rich. This is where the Democrats have a home-field advantage.

Democrats already are willing to endorse higher tax rates on upper-income taxpayers, to be sure, even without getting cover from Republicans. But it’s much better to lure the GOP into a tax deal. After all, even soak-the-rich tax hikes generate a lot of opposition. Simply stated, voters wisely suspect that higher taxes on the so-called rich eventually will translate into higher taxes on everybody else.

But even if they could unilaterally impose class-warfare taxes on upper-income taxpayers, that still doesn’t solve the left’s problem. They would never admit it publicly, but smart left wingers understand that there are two very powerful reasons why soak-the-rich tax increases won’t raise much revenue.

    1. There are not enough rich people to finance big government. According to the latest IRS data (from 2008), there are only about 321,000 households with income greater than $1 million of annual income. And they have aggregate taxable income of only about $1 trillion. That’s a lot of money, of course, but it wouldn’t balance the budget even if the government confiscated every penny (which would have catastrophic consequences on the incentives of rich people to earn and report income in future years).

    2. Rich taxpayers will change their behavior to avoid the tax increases. This is the “Laffer Curve” effect, and it basically means that higher tax rates don’t raise as much revenue as expected because people respond to incentives and reduce the amount of income they are willing to earn and report. The Laffer Curve is especially strong for upper-income taxpayers because rich people have much greater access to lawyers, lobbyists, and accountants. Moreover, rich people are far more likely to earn capital income (interest, dividends, capital gains, etc), and it is much easier to control the timing, level and composition of capital income.

This doesn’t mean the left won’t push for class-warfare tax increases. They will. But their main motive will be politics, not raising revenue.

This is why, looking at the long-run fiscal situation, the left needs a value-added tax. The VAT is the only realistic way to collect the huge amount of revenue that would be necessary to finance promised entitlement benefits. As I’ve noted before, the VAT is a giant source of tax revenue, so the left no longer would have to worry about financing a European-sized welfare state. After all, a VAT would give America a European-style tax system.

But a VAT would generate a firestorm of opposition. The Democrats would be committing political suicide to push such a tax scheme, especially since it would be a huge burden for the poor and middle class. This is why the left desperately needs to trick gullible Republicans into going along with a tax hike.

Enacting a VAT would be a win-win situation for the left. The torrent of new revenue would make it much easier to preserve the welfare state, so it’s easy to understand why they want to make it happen from a policy perspective. But the political benefits for the left are equally large. Here are a couple of inevitable consequences if GOPers get tricked into participating in a budget summit and wind up getting seduced into supporting a VAT.

    1. There will be civil war inside the Republican Party. The vast majority of GOP politicians have pledged to vote against higher taxes. Some of them are insincere, of course, but many of them genuinely believe if defending taxpayers. A tax-increase deal would create a divisive fight, similar to what happened in 1990. This is a very nice fringe benefit for the left.

    2. Conservative voters will rebel against the GOP establishment. When Republicans do the wrong thing, “base” voters get disillusioned. Some inside-the-beltway GOPers say this doesn’t matter because these voters have “no other options.” But they have the option of staying home, like they did in 2006 and 2008. Or sometimes they have a third party option, like in 1992. This is a very nice fringe benefit for the left.

    3. Putting a VAT on the table will give the left a perfect opportunity to impose additional class warfare taxes. Because of the zero-sum mindset on Capitol Hill, there is strong bias to maintain the existing “distribution” of the tax burden. This means that a VAT, which is perceived as discriminating against the poor and middle class, almost surely will be married with some punitive taxes that target the nation’s most productive taxpayers. This is a very nice fringe benefit for the left.

To summarize, the VAT would be a fiscal policy disaster. It would single-handedly guarantee that the United States would turn into a Greek-style welfare state. And for those who care about the political future of the GOP, it would cripple the party in the eyes of voters.

Fortunately, there is a very simple way of stopping this horrible outcome. Republicans merely need to say no. At the risk of stating the obvious, there is no way that a VAT would be imposed without the GOP giving political cover to the Democrats. Indeed, it is highly unlikely that any significant tax increase, from this point forward, could be enacted without Republicans providing the margin of victory.

They may be the “Stupid Party,” but it’s an open question whether they are that self-destructively foolish. Especially when there is no legitimate argument for higher taxes.

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For my latest electoral prediction, click here.


A lot of my Republican friends (yes, I admit to having some) are feeling very confident about the 2012 election. They’re not quite measuring the drapes in the Oval Office, but this electoral map seems to be their “worst-case” example of how the states will break in 2012.

Notwithstanding my reasonably accurate 2010 election predictions, I don’t think I’m an expert on politics. But that’s never stopped me from commenting on things beyond economics, so here’s why I think Republicans are prematurely giddy.

First, while I certainly agree that Obama is much less popular than he was in 2008, that’s not terribly important since the election is still more than 18 months away.

Second, we don’t know what the economy will be a net plus or net negative next year. There’s a lot of evidence that people vote on pocketbook  issues, and it appears that disposable income is an important variable. If we manage to have any sort of growth, even sub-par growth of perhaps 2.5 percent annually, that may be enough to make people more comfortable and to bring unemployment down close to 8 percent. If that happens, Obama will claim he brought the nation back from the brink of a second Great Depression. The fact that his policies actually retarded the recovery will be overlooked.

Third, you can’t beat something with nothing. Barack Obama’s secret weapon is the names on this list.

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