Normally, when politicians want to escape the hard numbers associated with their decisions, they bring a bit of magic to the party. For Republicans it is the “growth fairy.” We’ll just have so much economic growth that our federal revenues will go up to meet our commitments.
For Democrats and Republicans both, there has traditionally been a dream that a few judicious investigations and a leprechaun will lead us to a pot of gold called “waste and inefficiency.” As soon as we find all the waste and inefficiency, we’ll turn it into the riches that pay for the latest moderate rebels in Syria or prescription-drug benefit.
These are nice stories, and they’re almost always false. Instead, we usually turn to the magic of our reserve currency and international debt markets, which is a powerful sorcery of its own.
While I think that all these mythical stories are false, I do admit that there is something mysterious about federal revenues. They don’t seem to move in a way that perfectly correlates with the policy levers that are pulled in Washington. I’ve come to view the federal revenues, which have run between 16 to 20 percent of GDP no matter the tax rates, as a kind of rough approximation of Americans’ trust in their institutions. After successfully concluding World War II, trust was very high. So too at the turn of the millennium. You can guess which way it went after the financial crisis.
Now, Democrats have come up with a new form of magic: the enforcement dwarves. New IRS agents, 87,000 of them, who will magically turn up a net of $124 billion in new revenue, according to the propaganda of the Inflation Reduction Act. In my book, that looks like an awful lot of squeezing — in middle-class and working-class audits — for not all that much more blood out of the rag.
People don’t remember the agony of mass middle-class audits or the radical expansion of audits to the working poor that was instituted by the earned-income tax credit. There’s a reason Democrats stopped pushing for hard enforcement.
But this has been a season of Democrats relearning the hard lessons of the 1970s and 1980s, hasn’t it?