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Tags: Deficit

The United States vs. Egypt: Exchequer Metrics



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National Review has had a lot to say about American exceptionalism in the past year. There is no question, in my mind, about American exceptionalism during the 20th century. What about today? How do we stack up with, say, those poor, benighted Egyptians, with their thug president?

Here are some metrics dear to Exchequer’s heart:

National Debt as Share of GDP: USA, 95.6, Egypt, 76. That’s assuming Egypt’s economy takes a significant hit this year. Advantage: Egypt.

Deficit as Share of GDP in 2011 (Estimated): USA: 9.8, Egypt, 8.7. Advantage, Egypt.

Rate of Pillage, a/k/a/ Government Spending as a Share of GDP: USA, 24, Egypt, 27. Advantage: USA. But not by all that much.

Freedom from Corruption, as scored by the Heritage index: USA, 75, Egypt 28. But I think we’re being too easy on ourselves limiting the discussion to Heritage’s very useful index. Corruption is not as widespread in the United States, but the stakes are higher: In License to Steal, Harvard’s Dr. Malcolm Sparrow estimates that Medicare and Medicaid fraud in the United States could exceed $300 billion a year, or half again as large as Egypt’s GDP. Which is to say, Egypt would have to dedicate 150 percent of its economic output to corruption to catch up to Medicare and Medicaid corruption. Advantage: USA, with an asterisk.

Why do I point this out? Because I want to remind you: The conditions that have resulted in 200-odd years of relative peace and prosperity for the American people are not normal. The normal state of mankind of a lot more like Mubarak’s Egypt than Reagan’s America, or Obama’s. Institutions matter, and one of the institutions that matters is sober, responsible  government. Drawing a line forward from 2011 into the future, which does the American government more closely resemble? The one that helped make this nation great by allowing liberty to thrive, or one of the ones that used to be a punchline until such jokes stopped being very funny?

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Egypt

Brady’s Bunch of Low-Hanging Fruit



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Republican Rep. Kevin Brady of Texas has proposed some reductions in federal outlays — hoorah! — that amount to . . . not much: about $44 billion in the next fiscal year, and about $156 billion over the next five years. Okay, fine, do it: Go ahead and cut foreign aid and the Robert Byrd memorial scholarship, and collect those billions in unpaid taxes from federal workers. That, along with some military-spending cuts, covers, oh,  about 1 percent of the expected 2011 spending. Which is to say, Brady’s bill eliminates in one year about half of the national debt the geniuses in Washington piled upon us in the month of December alone.

Yes, yes — journey of a thousand miles, and all that. This is not going to get the job done. And it will be hard even to get Brady’s modest little trims through the Senate and past President Obama.

Congress is going to have to make cuts of the size Brady proposes about once every two weeks (fortnightly, as we say around here) to get the budget balanced.

Brady goes for the easy ones, mostly: subsidies for fossil-fuel research (hippies cheer!) and eliminating the Corporation for Public Broadcasting (Republicans cheer!).

Here is what Republicans have to cut: Social Security, Medicare, Medicaid, and the Pentagon: That’s pretty much the whole show, budget-wise. Yes, by all means, take the low-hanging fruit first, do it now — do it today! — but congressional Republicans aren’t going to get out of the hard ones. Remember: You guys asked for this job, begged for it, pleaded for it. And you know what you have to do.

Now go do it. We ran a $150 billion deficit in November, 2010. A five-year plan that covers one month of deficit spending is a start. It is not a good start, not an impressive start, but it is a start.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, which will be published on Tuesday. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Spending

The Conservative Case for Raising Your Taxes (And I Mean: You)



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Here is an exercise that requires some assumptions. Just thinking out loud, here.

First: Assume a simple universe, one in which public finances operate according to simple, Newtonian physics–type rules: Higher tax rates mean precisely proportional higher taxes, lower tax rates mean precisely proportional lower taxes, government spending comes in on budget, etc. (Yes, I know — imagine.)

Second: Assume a world in which public policies, to be enacted, must represent, at some level, a compromise between John Boehner, Harry Reid, and Barack Obama. (Assume a political world that is very much like the present political world.) Or between: Boehner, Reid, and a Generic Republican president;  or between Boehner, Mitch McConnel, and Obama.

Third: Assume we as a nation in fact want to balance the budget, and want that deeply enough to do uncomfortable and unpleasant things to make it happen. (That most implausible assumption of these, I reckon.)

Fourth: Assume that we can conduct policy without sending the economy back into recession. (Assume that the positive effects of our budget-balancing discipline equal or outweigh the negative effects of changes in taxing and spending levels.)

Some conditions: We have a very large deficit — 40 percent of federal spending, last time around. We have very large hidden liabilities — unfunded entitlement obligations that will prove massively expensive if we try to pay them and massively disruptive if we do not. There are limitations on our ability to act, and limitations on our ability to not act.

Our issues are taxing and spending. We have some choices, and they are, in the order I prefer them on this particular evening in January:

1.   Cut spending, raise taxes.

2.   Cut spending, maintain taxes.

3.   Cut spending, cut taxes.

4.   Maintain spending, raise taxes.

5.   Maintain spending, maintain taxes.

6.   Maintain spending, cut taxes.

7.   Raise spending, raise taxes.

8.   Raise spending, maintain taxes.

9.   Raise spending, cut taxes.

You may notice a readily identifiable pattern at work here. The Party of Option 1 in Washington in a very small one. Nobody will admit to being a member of the Party of Option 9, but I fear they are in control of the government. (Somebody wants a huge deficit. Is it you?)

The real-world reasons for not raising taxes are many. The ones I find most persuasive are these: 1. Tax hikes have unpredictable effects on taxpayers’ behavior, but one very likely consequence is higher levels of tax-avoidance strategies, resulting in economic inefficiencies; 2. If you succeed in raising revenue, you will simply encourage Congress to engage in higher levels of spending. Okay. I will grant the power of both of those arguments, but I am writing here about a simpler model, in a simpler exercise.

Under my assumptions, I would prefer to cut spending and raise taxes right now, to reduce the deficit as quickly as possible, to eliminate the deficit as quickly as possible, and to begin paying down the debt as quickly as possible. There are many prudential reasons for this, one of which is that I believe the risk of a major crisis in American public finances is very dangerous, more dangerous than is widely appreciated, and ameliorating that risk is worth the price of higher taxes. But I also have simpler reasons for this: We can cut the budget now, and we can raise taxes now. We can cut the NEA and we can cut the military and we can cut Medicare spending. But the debt is piling up, and debt service is, basically, non-negotiable.  As debt service takes up a bigger and bigger share of our budget, that is a bigger and bigger piece of the budget that we cannot cut in the future. The worst kind of fiscal crisis is the one that we can neither tax nor cut our way out of, and avoiding that — avoiding even an elevated risk of that eventuality — seems to me worth the price of firing with both barrels against the deficit now.

Here is the thing: All books must eventually balance. We are going to pay $1 in taxes for every $1 in spending, and for every $1 in borrowing we are going to pay $1 plus interest — very, very low interest, at the moment, but who knows if that will be the case in a year? In five years? If you think interest rates for U.S. sovereign debt will remain low — and I hear from those of you who believe so all the time — what are you willing to risk against the possibility that you are wrong? How did you do predicting the 2008 financial crisis, and do you believe government finance, in the United States, is less complicated than bank finance, or insurance-company finance? My view is that the price of being wrong about that risk is potentially very high.

What kind of tax hike would I endorse? I remain very much in favor of the Simpson-Bowles tax proposal. (And “Simpson-Bowles” already sounds like ancient history, doesn’t it? Like Smoot-Hawley? Like the Great Compromise?) Which is to say, I am sympathetic to a tax increase that reduces overall income-tax rates but eliminates most (I would prefer all) deductions, including the destructive mortgage-interest deduction. Many Americans would pay lower taxes under such a reform; many would pay higher taxes, but the net effect would be a tax increase, albeit a modest one. (My very strong preference is for a flat, no-deductions tax, one rate for all forms of income: personal income, dividends, capital gains, inheritances, whatever.) Simpson-Bowles contemplated a 3:1 ratio of spending cuts to tax hikes. Some conservatives I spoke with said they would prefer 5:1 or 10:1. I think I would prefer 5:1, too, but I would take 1:1.

I believe that restoring order to our public finances is not an issue but the issue, the thing that will be the source of endless contentious post-facto debate forever if we get it right — but will define our era if we get it wrong. (And not in a good way.) I believe our public finances are a more important issue than Islamic terrorism or Chinese mercantilism, and a more pressing threat to our national well-being. (I do not believe that those are unimportant; I believe they are less important.)

That being the case, I cannot agree with those who say, for instance, that military-spending cuts should be off the table, or those who say that tax increases, even modest ones performed in the course of simplifying and improving our tax code, are off the table. (Hello, Ryan.) And I will argue that this is a conservative position, conservatism being rooted in prudence and a certain amount of risk-aversion when it comes to political institutions and their grand plans, such as ending poverty or eradicating evil.

I also have in mind a kind of Pascal’s wager for the debt. If those of you who believe that the debt and deficit are basically manageable problems rather than a clear and present danger to the republic are wrong, finding out you are wrong is really, really going to hurt. If I am wrong — what? We shift taxes forward, paying them ourselves instead of foisting them onto our children and grandchildren. No doubt that will do some economic damage. But we also cut the size and scope of government, which will provide some economic benefits, and which is, separately, something that I regard as desirable regardless of how much government we can afford. (The cost is not my only reason for opposing an expansive state.)

Given that the real-world politics of getting this done are difficult and imperfect, and given that at the real policy level rates of change matter more than absolute levels, am I wrong in my fundamental argument that we should throw everything we can at the debt, as fast as we prudently can?

And if I am wrong, why?

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, which will be published on Tuesday. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Desperate Measures , Fiscal Armageddon , Taxes

State Budget Shenanigans Monday



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Two big things in the news today:

1. California is expected to reveal its state budget. I cannot imagine that there is going to be any good news in there.

2. Texas will reveal its revenue forecast, meaning the state will learn how big a shortfall it is actually looking at.

Should be an interesting compare-and-contrast exercise as the two big guns work out their fiscal woes.

Tags: Debt , Deficit , Despair , Fiscal Armageddon , The States

No, Ezra Klein, Obamacare Will Not Reduce the Deficit



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Ezra Klein, he of recent “the Constitution’s old, and stuff” fame, is one of the great and most persuasive cheerleaders for the belief that Republicans cannot repeal Obamacare and remain fiscally responsible since — as everybody knows! — Obamacare reduces the national debt by $100 billion over the next ten years. He makes his case here. Taking a slightly different but in many ways similar view in National Review Online, Avik Roy concedes that, purely as a matter of parliamentary process, Obamacare’s deficit-reduction features have to be taken into account. (Roy is no doubt correct in his analysis of the process questions.)

Klein makes a persuasive case, in the same way that a lawyer who knows his client is guilty makes a persuasive case. Yes, if we confine ourselves to a very narrow range of debate and a very narrow selection of possible outcomes, then Obamacare does reduce the deficit over the next ten years, and its repeal would add to it over that time.

But there is a bit more to the story than that.

First, it is worth asking how complete and how accurate the CBO’s estimates are. You know who has some useful insights into that question? The CBO. For instance, CBO director Douglas Elmendorf readily concedes that “estimates of the effects of comprehensive reforms are clearly very uncertain, and the actual outcomes will surely differ from our estimates in one direction or another.” One direction or another. (Guess!) It will not come as a shock to observers of federal activities ranging from the ethanol program to the Iraq war that — unthinkable as it may seem — a government program may under some circumstances exceed its budget. If Obamacare spends not a nickel more than the CBO estimates, and if Obamacare produces every dime of the revenue promised, then it will prove a deficit-reduction tool over the next decade, by definition: That’s $411 billion in spending and $525 billion in revenue. I wonder if Ezra Klein would like to place a very large bet with his own money on the possibility of that happening. I would. In fact, I am willing to bet not only that there will be significant variation, I am willing to bet on the direction of that variation, at least insofar as the spending goes. (I would not be surprised if revenue projections fell short, too: Those tax increases are going to be even less popular when people start paying them.)

You know who seems sympathetic to my position? Douglas Elmendorf of the CBO, who writes: “CBO’s cost estimate noted that the legislation maintains and puts into effect a number of policies that might be difficult to sustain over a long period of time. For example, the legislation reduces the growth rate of Medicare spending (per beneficiary, adjusting for overall inflation) from about 4 percent per year for the past two decades to about 2 percent per year for the next two decades. It is unclear whether such a reduction can be achieved, and, if so, whether it would be through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care. The legislation also indexes exchange subsidies at a lower rate after 2018, and it establishes a tax on insurance plans with relatively high premiums in 2018 and (beginning in 2020) indexes the tax thresholds to general inflation.”

Take a look at the 1965 cost and revenue projections for Medicare and compare them to the reality of Medicare today. In 1965, Medicare was going to be totally solvent on a 1 percent payroll tax. How’d that work out?

And it is worth noting that Obamacare does not vanish into the legislative ether after this ten-year window we’re talking about. What happens in 75 year? In 100 years? There are very reasonable estimates that Obamacare will add many billions of dollars to the national debt over a longer timeline, even assuming that the bill is not monkeyed with piecemeal to reduce the taxes and increase the benefits — which is to say, assuming Washington suddenly is populated by saints and stoics.

This discussion, as framed by Klein, also rewards the Democrats for engaging in dishonest parliamentary shenanigans. As Klein well knows and the CBO reminds us, the Medicare “doc fix” was spun off into a separate bill specifically in order to keep some costs from being counted on Obamacare’s tab. As Cato’s Michael Tanner notes, “In a letter to Congressman Paul Ryan (RWI), the Congressional Budget Office confirms that if the costs of repealing the payment reductions, known as the “doc-fix,” as reflected in HR 3961, were to be included in the cost of health care reform, the legislation would actually increase budget deficits by $59 billion over 10 years.” This is a cheap accounting gimmick, conveniently excluded from the discussion. But it certainly is convenient to be able to account for the costs of Obamacare without having to account for the cost of bribing the doctors, and the congressmen who are most sensitive to them, to accept it. That is, of course, far from the only cost-shifting mechanism at work.

More broadly speaking, what the Obamacare-reduces-the-deficit argument neglects is this: Repeal is not the end of the story. Repeal need not be followed by . . . the void. If we want to reduce the federal deficit by $100 billion over ten years, there are lots of ways to cut $10 billion a year from spending. The federal government in 2004 estimated that it spent $10 billion a year on services for illegal aliens. Cut it. Done. Color me skeptical that we have to spend nearly $1 trillion over a decade to get $10 billion a year in spending cuts. If I’m reading the budget right, HUD spent $45 billion in 2007. And Republicans have some very good ideas for health-care reform that also will reduce federal outlays, thereby reducing the deficit. It is not as though the choice is Obamacare or nothing.

Treating the CBO ten-year estimate as though it is the alpha and the omega of the Obamacare-deficit discussion is a debater’s trick, one that we should not fall for. We have a good deal of history and experience on our side, and good reason for skepticism — if only we had a word for a political philosophy grounded in history, experience, and skepticism, in standing athwart history . . .

– Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, wherein you can learn more about the socialistic intrusions of Obamacare, and which now available at Amazon.com. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Fiscal Armageddon , Obamacare

National Debt Tops $14 Trillion



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Or so they say.

I say: You wish.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, now available at Amazon.com. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Fiscal Armageddon

How Do You Say “Subprime” in French?



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The French, God bless them, are picky about what foreign words get adopted into their language. But I was not surprised to see that one hated Anglo-Saxon term has made it into the Francophone world unmodified: subprime.

France is on the verge of losing its AAA sovereign credit rating. Other European nations surely will follow.

This is a good news / bad news thing for the United States, I think. Short term, we will continue to benefit from the flight to the dollar and U.S. Treasury bonds — so long as the world does not offer much of an attractive alternative, our debased currency and our flimsy government securities will continue to look good, and so we’ll enjoy a meaningful subsidy. But it’s the subsidy that comes from being at the end of the domino line rather than at the beginning. The longer Washington enjoys artificially cheap borrowing and a propped-up dollar, the worse it is going to be when it comes down. The problem is the boom, not the bust. Even if the boom hasn’t felt like much of a boom.

Wildcard: Chinese inflation. If inflation continues to run high in China, those relatively low-yield investments in Treasuries and other sovereign debt are going to start looking a lot less attractive, no? The portion of our publicly held debt owned by the Chinese government and Chinese institutions under government control is often exaggerated, but it is still a big chunk. China is still a very poor country — one where food prices are going up at an uncomfortable rate. Beijing might very well decide to buy fewer bonds and more rice, or decide to hold fewer U.S. dollars and more oil.

Question: When does the United States lose its AAA rating? Give me your predictions in the comments section.

Tags: Bonds , Debt , Deficit , Despair , Fiscal Armageddon , Public Finance

Bernie Madoff, Keynes, St. Augustine, and Cassanova



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A stinging observation from John Cochrane:

If you really believe Keynesian Stimulus, you think Bernie Medoff is a hero. Seriously. He took money from people who were saving it, and gave it to people who were going to consume it. In return he gave the savers worthless promises that look a lot like government debt.

Brutal. And this:

The current policy attempt, consisting of  stimulus now, but strong promises to address the deficit in the future, can have no effect whatsoever. If you think stimulus works by fooling people to ignore future tax hikes or spending cuts, then loudly announcing such tax hikes and spending cuts must undermine stimulus!  Augustinian policy, “give me chastity, but not yet,” will not work. Casanova is needed.

Cochrane’s essay, “Fiscal Stimulus, R.I.P.,” is well worth a read.

Tags: Bonds , Debt , Deficit , Despair , Fiscal Armageddon , General Shenanigans , Stimulus

Why the Stimulus Stimulated Nothing



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Balancing the Budget, without Tax Hikes



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Nick Gillespie and Veronique de Rugy share the bad news:

Since Bill Clinton left the White House in 2001, total federal spending has increased by a massive 60 percent in inflation-adjusted 2010 dollars. In fiscal year 2010, which ended September 30, the federal government spent $3.6 trillion, or 25 percent of Gross Domestic Product. That’s the most spending, in terms of percentage of GDP, since 1946. Likewise, last year’s $1.5 trillion deficit, as a percentage of GDP, was the largest deficit since 1945.

Most economists talk about a debt-to-GDP ratio of 60 percent as a trigger point that makes investors very nervous about a country’s ability to pay its obligations. The debt to GDP ratio was 63 percent this year and the Congressional Budget Office (CBO) projects it will be 87 percent in 2020. Just three years ago, it was 36.5 percent.

In other words, stock up on bottled water and canned goods.

But they have, if not exactly a plan, then an argument that the budget can be balanced without higher taxes and without draconian cuts. They argue that higher tax rates will not produce higher revenue. I am a bit skeptical that there is some hidden law of taxation that ensures that government’s share of GDP cannot exceed 19 percent, a claim they endorse, but we can agree that, for whatever reason, federal revenue tends to stay in a fairly narrow band. But it is not that narrow: There’s a big difference between revenue equal to 15 percent of GDP (right about now) and revenue equal to about 20.5 percent of GDP (the millennial surplus). I’d prefer to see federal revenue equal to something more like, oh, 7 percent of GDP, presuming that federal spending also is equal to about 7 percent of GDP. We spend way too much, and 20 percent of GDP is way too much government for my taste, but I am not convinced that a government that spends 20 percent or 21 percent of GDP cannot collect 20 percent or 21 percent in taxes. (Again, not that I want it to.) And I also believe that the deficit is more dangerous right now, and worse for the country, than tax hikes would be. If you balance the budget and reduce spending, you can repeal a tax hike; you cannot repeal a fiscal crisis.

So, I think things are pretty dire and that radical action is needed. But Nick and Veronique argue for relatively painless cuts:

A balanced budget in 2020 based on 19 percent of GDP would mean $1.3 trillion in cuts over the next decade, or about $129 billion annually out of ever-increasing budgets averaging around $4.1 trillion. Note that these are not even absolute cuts, but trims from expected increases in spending.

Meaning, we’ve got a $1.3 trillion deficit, so cut $1.3 trillion out of spending growth in the next ten years and you’ve got a balanced budget.

Which is true. But you’ve also got ten more years’ worth of crushing deficits piling up, the economic effect of which is unknown. The United States is not much like Japan (it is not much like any other country) and it probably cannot carry a debt load of proportional weight. We do not which T-bill will be the one that breaks the camel’s back.

That being written: Cutting $1.3 trillion would be a heck of a good start — it beats the status quo. I’ll send John Boehner flowers if he announces $1.3 trillion in spending reductions.

But here’s a question for Nick and Veronique: Do we have ten years?

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Tags: Debt , Deficit , Politics

The Committee to Increase the Deficit



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The Committee to Reinflate the Bubble — the National Association of Realtors, the builders’ lobby, and the rest of the gang committed to using government policy to artificially increase real estate prices, enriching themselves while undermining the economy and imperiling the nation — is now the Committee to Increase the Deficit. The Simpson-Bowles panel has released its deficit-reduction report, and, to nobody’s great surprise, the proposal to reduce bubblicious tax subsidies for homeowners has drawn a pledge of resistance from the most self-interested parties. Reports the WSJ:

Joe Stanton, chief lobbyist for the National Association of Home Builders, said his organization would use “the full weight of our grass roots” to prevent any reduction of the mortgage-deduction tax break. “You are already talking about an industry that is completely battered, and this will kill us,” he said.

If your industry cannot survive without special benefits from the government, then it deserves to die, whether you’re an ethanol huckster or the National Association of Home Builders. Never mind that Mr. Stanton is totally full of beans — lots of builders will survive, and houses will continue to be built, when it makes economic sense to do so — but consider this: During the boom, Stanton’s crew got rich in part because of government policies that artificially drove up the price of houses and the incidence of homeownership. Nobody profited from the housing bubble like the builders — ask Bruce Toll. It being inescapable that unsustainable trends will not be sustained, the builders now are suffering from the results of the very same policies that once padded their profits, and they are willing to sacrifice the good of the nation, which is critically threatened by our enormous deficits, for their own narrow financial self-interest. So much for Ask not what your country can do for you . . . .

In public-choice theory, these kinds of problems are described as concentrated benefits vs. dispersed costs. The nation’s need to reduce the deficit is real and it is acute, but it is also general and diffused. A deficit-reduction measure that costs 1 million people $1 million will get nobody’s attention, but if the same program costs one person $1 million, he’ll pay very close attention, indeed. The Committee to Reinflate the Bubble has a very concentrated interest in doing everything possible — including irresponsible, economically destructive things that are bad for the country and impoverish their neighbors — to keep housing prices artificially high. People with concentrated interests will dedicate a lot of capital and energy to politics, so they are apt to get their way, and they generally don’t give a fig about the consequences for anybody else.

That, to me, is the real case for limited government. I’m a sucker for misty talk about our ancient liberties, at least as much as the next conservative, but set aside the philosophical ruminations and bear this in mind: Every time the government does something — anything – some apple-stealing miscreant will find a way to use that to rip off his neighbors. That is what the National Association of Home Builders is promising to do here: to fight necessary fiscal reforms to ensure that the price is paid by anybody but the very people who profited from the bubble in the first place. And they don’t even have the decency to be ashamed of themselves.

That’s just one little example in one little panel, the recommendations of which probably will be ignored, anyway. But it is an epidemic — and it’s a big part of the reason we’re in this debt mess to begin with.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Tags: Debt , Deficit , Despair , General Shenanigans , Public-Choice Theory , Real Estate

Real Deficit Reduction vs. Theoretical Deficit Reduction



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A reader asks: “So an Obama commission proposes a $1 trillion-plus tax hike, and you, a managing editor at the flagship conservative publication, endorse it? Exactly how or why is this a conservative position?”

Answer: A conservative’s first duty is to deal with reality — not with the theoretical world we wish existed, not with ideology, and not with wishful thinking. We are running a deficit of 40 percent, and it is implausible to think that a government with a Republican House, a Democratic Senate, and Obama in the White House is going to balance the budget by cutting 40 percent of spending.

I think it is equally implausible that a government with a Republican House, a Republican Senate, and Ron Paul/Sarah Palin/Mitch Daniels/Rush Limbaugh/The Ghost of Ronald Reagan in the White House is going to balance the budget with spending cuts alone. Why should I rely on the performance of theoretical Republicans when I have the evidence of actual Republican Congresses and actual Republican administrations to inform me that radical spending cuts are unlikely under a unified Republican government?

The burden of taxation is not equal to what the government collects; it is equal to what the government spends. Deficit spending just greases the skids for ever-more-incontinent fiscal shenanigans — I’d rather the taxpayers bear the pain of government spending as the money is spent than evade it, kicking the taxes down the road to the next generation. We can either pay the taxes today or pay them in the future — with interest, trillions of dollars in interest. The Bowles-Simpson proposal is far from perfect, but it is three-and-a-half times better than anything I expected from a panel with any political proximity to Barack Obama. It’s a good start, and it’s politically viable. If the Republicans are smart, they’ll run with it and remind voters every five minutes that this is the proposal of the Obama deficit commission’s co-chairmen.

If I see a better plan with a real chance of being enacted, it will have my support. But given a choice between an ideologically pure program that never is enacted and a problematic one that gets the job done, albeit imperfectly, I’ll take real deficit reduction over theoretical deficit reduction every time.

Nancy Pelosi hates it. That’s a useful piece of evidence, too.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Tags: Debt , Deficit , Despair , Fiscal Armageddon , General Shenanigans

First Thoughts on Bowles-Simpson



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I am surprised that the president’s deficit-reduction panel has produced such a sensible set of proposals: Eliminating tax write-offs while lowering tax rates is a big tax hike — a $100 billion-a-year tax hike, maybe more — but it is the right kind of tax hike, in my view. The simplification of tax filings for most Americans will provide additional private savings in the form of lower compliance costs. Raising the Social Security retirement age, reducing Medicare payments, capping federal revenues, chopping into discretionary spending — all are welcome. I do not think that the authors have “harpooned every whale” as Alan Simpson put it (Obamacare still haunts the fiscal depths), but it’s a very solid start, one that Republicans can pick up and run with.

Alas, I am destined to spend my days disagreeing with Ramesh about the child tax credits — I think taxes are about revenue, not about social engineering — and I very much like the idea of simply getting rid of special exemptions categorically, with a meat ax, rather than reducing them surgically with a scalpel.

Tags: Debt , Deficit , Fiscal Armageddon

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