After expressing serious reservations about the policy discussions of the current election campaign, it seems to me useful to remember that the country’s principal problems can be addressed fairly straightforwardly.
Tax policies are available that would stimulate rational economic growth while reducing the deficit. Income taxes should be lowered on all incomes below $250,000, and taxes should be raised on elective spending, such as gasoline not consumed to earn the taxpayer’s living, as with taxis or delivery vehicles. Restaurant meals, luxury goods, and financial transactions other than simple equity or bond-market buying and selling could be lightly taxed, but very profitably for the Treasury. Taxes on capital-gains and dividend and interest income should all be reduced, and former Senator Santorum’s proposal for an extended and increased family tax credit and a reduced tax rate for manufacturing should be enacted, if not exactly as he proposes.
Some variant of the tax plans of the Republican candidates should be adopted, possibly Newt Gingrich’s proposal of a reduced tax rate or a 15 percent flat-tax alternative. More investment and savings, and less consumption of non-durable goods and products for swift and transitory gratification, should be encouraged.
Instead, the barricades have gone up between Republicans frenzied at the thought of any tax increases and the determination of the Democrats to mobilize the 97 percent of Americans who earn less than $250,000 per family per year against those above that threshold. Republicans should settle for a blend of income-tax reductions and sales-tax increases that raises taxes for discretionary consumers and stimulates the economy while shrinking the deficit. Shrieking the mantra of no new taxes is just sterile dogmatism, though the motive for it is commendable.
And if Democrats are determined to assault “the millionaires and billionaires” (as if they were in the same condition), a self-eliminating tax on very large fortunes, and not on incomes as such, could be acceptable if designed carefully. Those with a net worth of $50 million or more could pledge 1 percent of their net worth to a project they could design and supervise themselves under liberal criteria, for the reduction of poverty, as defined. As poverty declined in the country, the tax would decline, and would be eliminated when poverty was eliminated. Those who fell below the $50 million net-worth figure would have this tax already paid credited back to them. This would put the country’s most agile financial minds behind the goal of reducing poverty, and give them a vested interest in its elimination. The current Democratic crusade to take money from those who have made it and give it to those who haven’t, greasing the state administrative apparatus on the way through, in the name of a fable of social justice while really just crudely buying votes, is unjust in itself, poor economics, and indifferent politics. This tax would also at least slightly and relatively painlessly address the widespread concern about wealth disparity.
In the locked horns of the parties now, entitlement reform has been trampled in the dust, though all serious analyses of deficit reduction, including such bipartisan efforts as Simpson-Bowles, acknowledge that it will be necessary. The sooner we start, the more lead time contributors to Social Security and other schemes will have. Raising the Social Security kick-in age to 67 starting in 15 years would be a start. But the whole subject is so complicated and treacherous that, once one launches on it, it is best to make a comprehensive reform. The sacred cow of universality can be gently eased into eternity through discreet means-testing through tax data without the ancient bugbear of a pauper’s oath.
Obviously, health care is a terrible challenge to the system. Seventy percent of people have first-class health care that they don’t pay for, and 30 percent have various levels of inferior care that they generally do pay for, until they have run out of resources; and, in the case of the majority, the providers (if corporations) and the recipients both enjoy favorable tax treatment. The tyranny of the satisfied majority is therefore understandable and intractable. Health care costs $7,000 per capita per annum in the United States, against about $3,000 in Australia, Canada, France, Germany, Japan, and the United Kingdom, countries whose standards of living and medical care are roughly comparable.
It is too complicated an issue to take very far here. But we could start with the Republican platform of four years ago and give a $2,500 tax credit to everyone to use at the individual’s choice, open insurance competition completely, tax as income the health benefits above a reasonable average level, insure the financially disadvantaged and those threatened with that condition by catastrophic health problems, cap malpractice awards, and oblige the pharmaceutical companies to charge American customers for drugs at price scales similar to those enjoyed by the other nations mentioned above.