It profits a man nothing to gain the world if he loses his soul. The whole world, Larry — but a 6 percent cut in the top marginal income-tax rate?
Republicans led by naïve supply-siders are preparing, for the third time in my life, to sell their souls on spending cuts in exchange for tax-rate reductions that are small, ineffective, and sure to be temporary. Ronald Reagan got his tax cuts, but he went to his grave waiting for those spending cuts. George W. Bush got his tax cuts, and ended his presidency with spending soaring and his entitlement-reform program in the garbage. And now certain Republicans are starting to slobber over the Gang of Six plan, because it reduces the top income-tax rate to 29 percent. Overall, the plan is supposed to be a tax increase — a $1.2 trillion one — but it sweetens the deal with rate cuts, and rate cuts turn Republicans into useless piles of goo.
The rate cuts, we are told, are “pro-growth.” Growth is the great magical unicorn that will deliver us from the burden of making hard decisions, we are promised.
But the important drivers of our deficit are entitlements, mainly centered on health care, the cost of which is growing at about three to four times the rate of GDP growth. We aren’t going to grow our way out of that problem — not at 2 percent, not at 5 percent. We’ll simply keep spending, pile up more debt, and have a debate like this again in a couple of years, if we’re lucky — or in a couple of weeks if we aren’t.
Nothing short of comprehensive reform of Medicare, Medicaid, and Social Security is going to stabilize our public finances. The Gang of Six deal contains only very vague language about “efficiency” in health-care spending, and it actually makes Social Security reform more difficult by introducing procedural barriers. It’s a terrible deal, and Republicans would be fools to take it. If John Boehner wants to define his speakership with a capitulation of this magnitude, he’ll be doing himself, his party, and, more important, the country a disservice.
To be fair, there are a couple of alternatives to entitlement reform. One is an 88 percent increase in every federal tax. Anybody game for that? The other is default.
Everybody gets this, except voters and elected officials. Egan-Jones, a credit-rating agency, has just downgraded U.S. Treasury debt. Why?
. . . the rapid rise in outstanding debt and the prospect of retiring baby boomers severely straining social security and healthcare in the coming decade.
The agency said in its downgrade notice: “The major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending.”
Six pathetic little points in the top tax bracket are not going to turn that Titanic around. It is time to retire the tax-and-growth fantasies and put on the green eyeshades and cut, cut, cut.