Magazine | July 18, 2011, Issue

No Taxation without Representation

(Roman Genn)
A message from the future

Hey, Grover Norquist — I have a message from Mason and Emma, two adorable little newborn Americans still in diapers: “Pay your own goddamned taxes.”

Mr. Norquist, the president of Americans for Tax Reform, is the Republican party’s self-appointed policeman working the beat against tax hikes — for us. In effect, he’s working for tax hikes on those Americans being born today and in the next several years, Americans who have no say in our current fiscal policies but will end up paying a heavy price for our indiscipline.

Most Republicans in Congress have signed a well-meaning but destructive pledge to Mr. Norquist’s organization that they will not vote for any tax increase. This includes not only increases in tax rates but also ending special-interest tax subsidies, such as the ridiculous ethanol handout that lately renewed the war of words between Mr. Norquist and his chief Republican antagonist, Sen. Tom Coburn. Senator Coburn, to his credit, has been pushing to get rid of part of our embarrassing corn-gas program, specifically, the part composed of special tax credits for the ethanol emirate. Mr. Norquist, to his discredit, insists that any reduction in the ethanol tax subsidy be accompanied by an equal reduction in other taxes, lest the maneuver constitute a net tax increase and thereby start transforming United States into Germany or Canada or some other country not running Godzilla-sized deficits and spending its children into future penury.

Senator Coburn, Mr. Norquist argues, is an absolute fiend for tax increases: “He’s trying to screw the rest of the Republican party because he is so mad at the world,” Norquist told National Review Online. “He didn’t want to get rid of the ethanol tax credit without raising taxes. The important thing in his life was raising taxes.” Senator Coburn has his shortcomings, to be sure, but it is plainly absurd to claim that “the important thing in his life” is “raising taxes.” Mr. Norquist’s rhetoric then took a sharp turn from the absurd to the perverse as he characterized Senator Coburn’s tactics thus: “He said, ‘Ha, ha, popped your cherry, lost your virginity. Now give me $2 trillion in tax increases.’ As soon as they voted, he turned around and called them sluts. Guys like that didn’t get second dates in high school.” As tempting as it is to apply psychoanalysis here, I’ll stick to fiscal analysis.

The original Americans for Tax Reform were the Boston Harbor renegades and the musket-toting revolutionaries of 1776, and they marched under the banner of “No Taxation without Representation.” The Crown had argued that the American colonists enjoyed “virtual representation” in a parliament in which they had no vote. The Americans didn’t buy it, and neither did William Pitt, whose fine English nose detected a distinctly bovine aroma about the “virtual representation” argument: “The idea of a virtual representation of America in this House is the most contemptible that ever entered into the head of a man,” he proclaimed. “It does not deserve a serious refutation. The Commons of America, represented in their several assemblies, have ever been in possession of the exercise of this, their constitutional right, of giving and granting their own money. They would have been slaves if they had not enjoyed it.”

#page#Slaves, the man said. But the Stamp Act and the tea tax, odious though they were, are the lightest of yokes compared with the burdens the American Congress is laying upon the shoulders of American citizens not yet born, who have absolutely no say in the matter. If tradition is the democracy of the dead, as G. K. Chesterton put it, then thrift is the liberty of the unborn, who ought not to be encumbered with massive debts that will fundamentally alter the very nature of the American enterprise without their ever having been given the courtesy of a vote. They should not be indentured under a social contract they never signed and would not sign if they had a lick of sense about them.

Your average Age of Obama trillion or so in annual deficits? Chump change next to where our entitlement programs are going. Children being born today might expect to retire around 2075. Unless we take serious action in the very near future to reduce the size of our public debt, those newborn Americans will almost certainly spend their working lives encumbered by much higher taxes — 88 percent higher to accommodate present spending, according to an International Monetary Fund working paper, “An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?” You can imagine what such a tax increase would do to economic growth, investment, innovation, and the prospects for satisfying employment. (If you want a picture of the future, imagine a boot stamping on your paycheck — forever.) The middle-of-the-road version from the IMF crew is a mere 35 percent hike in every federal tax, combined with a 35 percent cut in benefits, just to maintain basic national solvency.

And national solvency is a real concern. To get an idea of the size and heft of the millstone we’re hoisting around the necks of little Mason and Emma (the most popular names in 2011 for boys and girls, respectively, inexplicably), take a panicky gander at the annual report of the trustees of Social Security and Medicare. By the time today’s little curtain-climbers get ready to hit the shuffleboard decks or the holodeck or whatever it is retirees end up doing for low-impact kicks in 2075, the two big-boy entitlements will be leaving annual craters in the American economy about the size of the one left by the meteor that sent T. Rex & Co. into the evolutionary version of Chapter 11. Left on its current course, Social Security — Social Security alone — will run a deficit of $3.758 trillion in 2075. (Those are 2011 dollars, not inflated spaceman dollars from 2075, when a loaf of bread will cost $20 or so, if inflation in the next 65 years equals inflation in the past 65 years.) Add in Medicare hospital insurance (which the Social Security trustees also estimate) and you have a one-year deficit of $4.802 trillion — for two programs. That’s under the “intermediate” scenario. The trustees also calculate a “high-cost” run-for-the-hills scenario, under which that 2075 deficit hits $19.3 trillion — which then jumps to $30.5 trillion in 2085. That’s not the whole federal deficit — that’s just the deficit from two programs in one year.

Admittedly, the high-cost scenario is unlikely, which is not to say implausible; fiscal forecasting is hardly an exact science. And, sure, Pollyanna says, those numbers look shocking today, when our GDP is only about $15 trillion or so. But in 65 years our economy will be a heck of a lot bigger, and $30 trillion or whatever won’t be such a big bad wolf of a terrifying deal. About that, I have some bad news for you, Sunshine: If our economy grows for the next 65 years at the same rate it grew for the last 65 years — and that may be optimistic — that gets us only to about $100 trillion, meaning that we’d be spending about 24 percent of GDP on two entitlement programs, and about 5 percent of GDP on deficits in those two programs. Currently, all federal spending amounts to just over 25 percent of GDP — and that’s nearly an all-time high, exceeded only during the war years of 1943–45.

#page#What if we don’t grow as fast as we did for the past half century? If GDP growth looks more like the 1.9 percent it has averaged since 2000 and outlays stay on track, then we’ll be spending about half of GDP on those two programs, which will be running a combined deficit equal to 10 percent of GDP. Which is to say, we’ll be spending about twice as much on Social Security and Medicare hospital insurance as we spend on the entire federal government today.

It is hard to tell a believable story in which a nation remains thriving and competitive — or even solvent and functional — while spending half of its GDP on two entitlement programs. Not when the Congressional Budget Office is projecting that, barring some real reform, our publicly held national debt will hit 200 percent of GDP around the time Mason and Emma are getting out of college. (That’s under CBO’s “Alternative Fiscal Scenario,” which is not a worst-case projection, but one “incorporating some changes in policy that are widely expected to occur and that policymakers have regularly made in the past,” as CBO puts it.)

Everybody but Grover Norquist and the majority of our elected representatives is starting to get the picture. Even AARP, which for years has been to Social Security reform what Americans for Tax Reform is to tax reform — a pig-headed obstacle — has quietly conceded that some cuts in benefits are inevitable, if not desirable. ATR and its allies have been adamantine on taxes but have been in effect AWOL on the real issue, which is spending. Incredibly, the Republicans’ favorite line of attack against Obamacare is that it entails Medicare spending cuts. When Democrats proposed cutting Medicare, Sen. Mitch McConnell denounced them. When Rep. Paul Ryan proposed cutting Medicare, Newt Gingrich denounced him. Granted, the Democrats’ Medicare cuts almost certainly are fictional, but Republicans ran against the very idea of cuts — the one thing they should be championing. If you can’t cut spending and won’t raise taxes, you are, in effect, one half of the Bipartisan Coalition for Eternal Deficits, haunted by the Ghost of Taxes Future.

You think Mason and Emma would, given a choice, vote themselves higher taxes in order to help Newt Gingrich come in third in Iowa instead of fifth? Hard choices have to be made. We demand premium Canadian levels of government spending at discount Colombian levels of taxation. We are demanding that our children pay our taxes so that we don’t have to pay them ourselves. Cutting spending would be a lot easier, and there would be a greater constituency for it, if we paid our own taxes.

King George III, like any self-respecting power-mad colonial potentate, taxed the unrepresented to lard up his treasury and keep himself in wig powder. Our forefathers showed his generals the door at the point of a bayonet. To what end? We’re all Hanovers now, practicing a form of inter-temporal colonialism, a particularly nasty variety of taxation without representation, pillaging our own children and grandchildren to put off unpleasantness now. The longer we wait to fire both barrels at the deficit and debt, the bigger the tax increase we’re passing on to Mason and Emma, and the lower the standard of living we’re leaving them. No taxation without representation — not for us, not for them.

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