Tag: Tax cut

Fiscal Cliff I: The Search for More Money

As Thrill noted, the so-called fiscal cliff was semi-averted last night. I didn’t pay too close attention to the debate since the basics of the deal had been hashed out days before. All we had last night was political theater. It’s true that 2/3 of the Republican House voted against it. But they allowed it to come to a vote and most voted after they were sure it would pass as an ass-covering maneuver. I’m reminded — and not in a good way — of the TARP vote where the Republicans and Democrats agreed to let vulnerable House members vote against it once they’d secured passage.

To be honest, I’m OK with the deal, since the alternative was letting all the tax cuts expire. I would have preferred it be paired with entitlement reform but the Republicans apparently scuttled that, to judge by the GOP Senate leadership’s statements over the last few days. It will mean about $60 billion per year in revenue — a few drops in the bucket that only looks large in comparison to the trivial budget maneuvers we’ve gotten until now.

What no one is mentioning, of course, is that there is a much larger tax increase going into effect: the expiration of the payroll tax holiday, which is expected to add about $100 billion to federal revenue. That means every working person is going to see a 2% slice taken out of their next paycheck. I’ve long been in favor of this, feeling that the longer the holiday went on, the more difficult it would be too get rid of and the worse it would make the situation with Social Security/Medicare. I also thought it was wrong-headed from the beginning. From the employer side, it would have made hiring cheaper and eased unemployment. From the employee side, all it did was (maybe) goose consumption. And it did even more to narrow the wedge of people actually paying taxes in this country. The cut was temporary and it’s gone now. But it will be fun to watch the shocked reactions of people who think taxes are just going up on “the rich”.

The big thing — and the reason my reaction is kind of “meh” — is that two more important cliffs were put off. One is the sequester, which seems to have bipartisan opposition. Republicans don’t want military spending cut, despite spending currently being in excess of Vietnam War levels (although the number of soldiers is only slightly above post-Cold-War levels). And Democrats don’t want anything cut.

Obama has indicated that future spending cuts will have to be matched by tax increases, but I think he’s overplaying his hand here. The Republicans were forced to give in on taxes because the alternative was tax hikes for everyone. Obama is going to have to give in on spending cuts because the alternative is a 8-10% cut in everything else.

He’s also going to have to give in because of the third cliff: the debt ceiling. This could be the most interesting fight as Obama might try to fight this on legal/constitutional grounds. I’m not looking forward to this as it was almost an economic castastrophe last time. Hopefully, our leadership won’t be quite as stupid (yes, I know ….).

In the end, I think the most important thing to be pulled out of this unholy mess is the chained-CPI formulation of Social Security that was temporarily on the table and should be again. This seemingly small change would slow the growth of the program and save us trillions down the road. If we can get that, it will have a more lasting impact than the tax hikes, debt ceiling or sequester.

This isn’t over yet. We’ve got another two months of theater to go.

Starving the Budget

With the fiscal cliff looming, Republicans are indicating some flexibility on taxes, at least for the higher income brackets. Naturally, this is generating some opposition:

To start with, Kristol misunderstands the opponents of the tax increases on the rich, whose main goal is not to ensure that the rich get to keep more of their money. Their main goal is to prevent the federal government from obtaining a new source of revenue. Why might that be?

Tax increases can be immediate, but spending cuts must be spread over many years. That provides politicians with plenty of opportunities for change their minds on spending (i.e.: vote for me and I will increase funding for your program). Contemporary Western Europe provides a perfect example of this phenomenon. In the wake of the 2008 crisis, Western European countries have introduced substantial tax increases that, in my humble opinion, are the primary reason for Europe’s double-dip recession.

There is a reasonable point in this, which is that promised spending cuts often don’t happen. But that’s not a fundamental law of the universe. After the tax hikes of the late 80’s and early 90’s, we did get spending restraint. And we got it from the same people who control the purse strings right now … a Republican House of Representatives. If the GOP wants spending cuts to happen, they can make those spending cuts happen, as they did in the 90’s.

Moreover, the Grand Bargain that has to happen is on entitlement spending with Medicare and Social Security. That will involve statutory changes, not budget changes and those are extremely hard to undo. If Congress raises the retirement age or changes the COLA formula or institutes Medicare vouchers, that will be almost impossible to undo (as we’re now seeing with Obamacare).

To be frank, the argument that we should not give the government new revenue cross me as a rehash of one the most fiscally destructive ideas in the last thirty years: the so-called “Starve the Beast” theory.

Starve the Beast was the theory that if we cut taxes, it would force the government to cut spending because the resulting deficit would be unsustainable (this was before people decided that the Laffer Curve was, in fact, the Laffer Line and that all tax cuts paid for themselves). Starve the Beast sounded tempting, especially to faux conservatives who were big on tax cuts and not so big on cutting spending. But it ran aground on several rocks:

First, spending cuts don’t just fall from the sky. You have to actually cut spending at some point. And the people who had to cut spending were the same people trying to force themselves to cut spending. It was like trying to lose weight by eating a box of doughnuts hoping that will force you to go the gym.

Second, the lesson Congress learned from Starve the Beast wasn’t that they couldn’t tolerate big deficits. The lesson they learned was that they could. As a result, we’re now enjoying our fourth straight year of trillion dollar deficits.

Third, and this is a point I keep harping on, Starve the Beast made spending painless for the taxpayer. This was especially true in the Bush years when we started two wars and put in a prescription drug program while removing millions from the tax rolls. The impression given to the taxpayers was that wars and drug programs were free, or at least were paid for by somebody else (somebody rich). It has continued in the Obama years, with spending and taxes being manipulated so that Obamacare appears to decrease the deficit when it, in fact, does not and tax hikes only acceptable if they hit the dreaded rich.

I keep saying this and I am going to keep saying it: the most important aspect of any government budget is that spending should hurt. Spending should hurt either in cutting other services or in raising taxes. If you aren’t doing either of those things, you are giving people government on the cheap. And they will have no incentive, none whatsover, to support spending cuts.

Would you turn down services that are discounted 40-100%?

One of the problems we face in balancing the budget is that spending cuts are popular in general and unpopular in detail. When you ask people what spending they support cutting, the only thing that even gets 50% is foreign aide. But a big reason for that is that, for most Americans, government spending doesn’t hurt them. They can support all these wonderful things confident that the money for it will come out of somebody else’s pocket.

And that leads in to my real point: if we’re going to raise taxes to close the budget deficit, we have to raise them on everyone, not just the evil rich. The obsession the Democrats have with only raising taxes on the rich is a product of class warfare, not fiscal sanity. To balance the budget with taxes — hell, to balance them with any sensible mix of taxes and spending cuts — is going to mean raising taxes on everyone. Alex’s post made this point very well. Look at the breakdown of where the fiscal cliff taxes are coming from: over 80% are from people who are not rich.

If we just raises taxes on the rich that will, once again, give the American people the impression that the budget deficit is something other richer people will cover. It will make it almost impossible to cut spending in the future because, really, how is all that spending hurting 98% of the voters? But if we raise taxes now, raise them on everyone, then the popular support for spending restraint will come roaring back.

That’s not just ivory tower theorizing. We have a historical precedent. From the early 80’s to the early 90’s, Reagan, Bush and Clinton raised taxes eight times. The resultant backlash brought the Republicans into power in 1994 on a platform of fiscal discipline. And they delivered. And as much as the press tried to whine and cry and tell sob stories about how the budget cuts were destroying our country, the Republicans (and Clinton) got re-elected. Because people didn’t want more spending and they saw that, in many cases, the country was better off without it.

The only way to make spending cuts happen and make them stick is to make sure the American public feel it when we spend too much. And they’re not going to feel it because we eliminated a tax break on corporate jets.

There’s another reason to stop kicking the can down the road. Bruce Bartlett:

At the time the tax cuts were enacted, I recall arguing with my longtime friend Grover Norquist that temporary tax cuts were a really bad idea. Supply-side theory has always held that permanent tax changes are vastly more powerful than temporary changes, I told him. He didn’t disagree, but said the Bush tax cuts were de facto permanent because Democrats would never have the guts to permit them to expire; they would be renewed forever. People and businesses will know that, Mr. Norquist said.

That was a foolish position for political and economic reasons. People and businesses don’t make the sorts of changes in their behavior that would give the economy a supply-side boost unless they have confidence that today’s tax regime will be in place when the payoff from increased work, saving or investment is realized.

You know all that stuff we’ve been saying about regulatory uncertainty and how businesses are afraid to invest because they don’t know what the future will bring? Well, these temporary tax cuts, renewed every couple of years, are part of that. Bartlett specifically gets into the R&D tax credit and how its temporary status has created wonderful lobbying opportunities but little economic benefit. He argues that higher but more certain taxes would be better for our economy than lower but more uncertain taxes. And given that Bartlett basically invented supply-side economics, I’m inclined to agree with him.

Obviously, the best scenario would be to burn the entire tax code down and rebuild it, a la Simpson-Bowles. But that would take months, if it happens at all. If you want to create certainty, putting together a long-term budget deal with higher taxes is the way to go. And then, if we do get a tax overhaul, that will be an unexpected shot in the economy’s arm.

Yeah, I know. This is the dreaded compromise. But the idea that we’re going to cut spending 40% is ridiculous, not just in terms of the politics of the possible but in real terms. Cutting spending 40% means we can pay for Medicare, Social Security, the military and veterans. Everything else — from Medicaid for poor seniors to law enforcement to disaster relief would go. Oh, and every state would suddenly find a 30-50% hole blown in their budget.

Moreover, I’ve been thinking of something Ed Morrissey said the other day, in the context of a compromise on immigration:

The insistence on demanding nothing but the hard-line approach creates big problems for the nation and the GOP itself. First, the issue of border security has been left in limbo for more than 11 years after 9/11, and more than seven years after the 9/11 Commission rightly demanded better security on both borders, and the broken visa program that offers no follow-up on expired entries. If we continue to punt rather than compromise, we will be left waiting for at least four more years to get any kind of solution.

In two years, there will be another election. In four years, we will have a new President. If the Republicans have exercised some serious budget restraint by then and our deficit is falling, then we can reopen the issue of returning to Bush tax rates. Until then, however, we have to deal with the situation we have in front of us. And the situation we have is a big deficit that can not be closed by spending cuts alone and Democratic control of the White House and the Senate.

Keep in mind something else: taxes are already programmed to go up. The price of doing nothing is a gigantic half-trillion dollar tax increase on January 1. If we insist on taxes not going up, the result will inevitably be that they will.

Look, I hate taxation. I’m one of those who will get hit pretty hard if we return to Clinton-era rates or something approaching them. But there is something I hate more than taxes and that is debt. And I don’t see any practical way, outside of Fever Swamp La-la Land, to balance the budget without raising taxes.

Yes, the GOP needs to drive a hard bargain. Tom Coburn has identified tens of billions in wasteful defense spending that we should cut. Agriculture subsidies and ethanol subsidies should be on the table. The Ex-Im Bank should have been killed last year. Hell, maybe we could even taken Obama up on his “Department of Business” idea if it means we kill off Commerce, SBA, Ex-Im and some other budget functions. The hardest bargain, of course, has to be driven on entitlements.

But we can not stick to anti-tax orthodoxy. It’s not realistic. It’s not responsible. And, in my opinion, it’s not conservative.

Let me elaborate on that last point: low taxes are not a conservative value; small government is. Low taxes do not create small government, they are the result of keeping government small. Raise taxes to cover the bloated government we have now, hack at it like hell for four years and then we can talk about cutting taxes back.

Update: If you think you balance the budget without raising taxes, there are various budget simulators that can get you there.

Stimulus … V?

I’ve lost track of the number of stimulus bills our Congress has passed. There were two under Bush (mostly tax cuts), the big Obama spendathon and now two waves of payroll tax cuts:

Two months after vowing to never give up the fight against President Obama’s payroll tax proposal, House Republicans decided Friday that they could not afford the battle any more.

Large bipartisan coalitions in both the House and Senate passed a $143 billion economic package that includes a year-long extension of the payroll tax holiday for 160 million workers, just as Obama had requested more than five months ago, and also extends unemployment benefits for millions of others.

It also includes the doc fix. And this $143 billion hole in the budget is filled by … very little actually. They’ve already quit even pretending to care about the deficit implications. And they wonder why Congress’ approval rate is 10%.

(The WaPo quotes Mark Zandi as saying this will boost the economy. Why that idiot real estate bubble supporter and stimulus maven continues to get press is beyond me. It just shows that no one ever falls out of the MSM rollodex no matter how often or how spectacularly wrong he is.)

A year ago, I thought the payroll tax cut was a decent idea. I now think it was terrible one. Because this tax cut is almost impossible to reverse. Any attempt is branded as “raising” taxes on the middle class (a verb that is conspicuously not used when eliminating the Bush tax cuts is discussed). We seem to now have a permanent $150 billion a year hole in the budget. And no one is interested in fixing it.

Food and ammo, guys. I keep saying it and it keeps looking more and more likely.

The Big Graph

The NYT ran this graph yesterday, showing the cause of the debt we have and our piling up this century.

A number of thoughts:

First, several policies are placed entirely in the Bush column that should really be shared. Barack Obama owns the wars and the tax cuts now, having continued both. Obama supported TARP and has only expanded Medicare D.

I do think it’s a good illustration of which policies are driving the debt. I’ve been encountering way too many people who think the debt is being driven by stimulus spending or Obamacare. But these are dwarfed by the war and the tax cuts (so far). Still … it’s been 2.5 years. Obama has not stopped any of the policies driving the debt. Blaming Bush can only go so far.

I would also point out that the graph represent eight years of actual spending from Bush against eight years of assumed spending from Obama. But even now, there is huge resistance to cutting spending down to pre-stimulus levels, as all the budget projections assume will happen. Obamacare is supposed to cut spending; but most people are extremely skeptical. And there is no accounting in that tally for unexpected spending, such as from a major natural disaster.

We’ll see how it works out in reality. Bu remember — almost all projected budgets are optimistic.

Second, the biggest contributor to the debt they list is the Bush tax cuts, which currently have the fed a 15% of GDP, eight points below its spending and three points below Cut, Cap and Balance. Ed Morrissey tries very hard to argue that the tax cuts have actually increased revenues. To my mind, it doesn’t work. The tax cuts corresponded to the biggest drop in revenue since the end of World War II. After a brief “recovery”, driven mostly by the housing bubble, we fell back down to revenue levels close to what we were getting 15 years ago. I’m all in favor of keeping taxes low, but the Laffer Curve is not a line. And “starve the beast” never works. On the contrary, it makes the public more receptive to new spending because they are getting it at a discount.

Third, the NYT leaves off the biggest contributor to the debt, which is the economy. I’ll let you argue amongst yourselves who is to blame for that. I think there may be about two people in Washington who bear no responsibility.

Finally, I’m not sure what the point of this is. As I said on Twitter:

Once again, it’s not all Obama’s fault. And once again, the problem is the problem, however we got there.

What matters now is how we move forward. If we need higher taxes to pay for our commitments, we need higher taxes. We do not need higher taxes just because Bush cut them. If we need to cut spending, defense and entitlements are the place to start immaterial of who spent what on whom and why.

Democrats and Republicans don’t get their own separate economies. We’re all in his foxhole together. If Bush fucked things up beyond all recognition, Obama chose to become Presidet under those circumstances and has chosen to do nothing to right the ship so far. He hasn’t knocked as many holes in the hull, yes. But then again, he hasn’t had as much time to. If the Democrats had won in 2010, we might — God help us — be talking about Stimulus IV: the Search for More Debt. And that graph would be even more irrelevant.

How we got here is interesting in an academic and political sense. But right now, I’m interested in how we get out.

Disheartening study

RealClearPolitics has a very interesting, albeit disappointing to me, article about politicians, the public, the debt crisis, and how the participants of this study feel it needs to be solved. As usual, what we have here is a debate between what the left thinks the public wants and what the right does, as the article starts off discussing. What’s obvious to me from the study that the article is based on is the fact that most people are not able to grasp the fact that we are where we are today because of ourselves. We are the enablers that have caused government to grow out of control. But more importantly, the fact that polls taken in a vacuum will skew reality.

Americans are reportedly childish about the debt crisis. The public says the budget deficit is a serious issue. So serious that Americans will let other people sacrifice. Rich people. We know the enemy of U.S. debt, and it’s us. You, dear reader, are framed as a hypocrite. But is that true?

Last week’s Washington Post carried a familiar headline: “Poll Shows Americans oppose entitlement cuts to deal with debt problem.” Bloomberg News led a December article: “Americans want Congress to bring down a federal budget deficit that many believe is ‘dangerously out of control,’ only under two conditions: minimize the pain and make the rich pay.” Politico recently reached for Shakespeare with its conclusion: “the fault lies not in our stars but in ourselves.”

But the fault may actually lie in misreading the stars (data) and how our political stars (lawmakers and pundits) misread us. Americans appear willing to make hard choices, according to a largely unnoticed but landmark study. Given the chance, the public cuts much of the deficit and saves Social Security.

I agree that based on my own experience it looks like most sane people actually want balanced budgets, an end to the deficit spending, a reduction of the debt, and are willing to accept cuts to get there. But way too many also want freebees, paid by others. And the real greedy and envious ones have no problem saying they want everyone that makes more than they do to give as much as they can get away with stealing, in the name of social justice or some such nonsense, of course. And while we can blame the politicians for our disastrous state, we need to keep in mind that they only did what too many people wanted, and that was obviously a free ride.

But the problem with those making the case that cuts are not what most people want based on these disconnected surveys, is obviously that they disconnect the needs to get things balanced with the need to give up some of our sacred cows. Check it out.

The conventional wisdom is wrong not because the evidence is wrong. Polls capture a gap between how seriously Americans view the debt problem and how seriously they take it. The right questions were asked. But they were asked in the wrong way. A budget requires choosing between the most tolerable of unwanted sacrifices. Think Otto Von Bismarck’s maxim that “politics is the art of the possible.” Conventional polls pose budget questions in isolation. Budget politics is reduced to what’s preferable rather than what’s possible among imperfect alternatives.

“It’s like you are saying, would you like to have some cake? Yes. Would you like to eat your cake? Yes. Ah, they want to have their cake and eat it too!” said political psychologist Steven Kull, director of the Program for Public Consultation at the University of Maryland, which conducted the study. “The public is capable of dealing with the budget in a rational fashion,” Kull continued. “When you ask one-off questions they can only react in a visceral way. No, it’s not attractive to cut spending. No, it’s not attractive to raise taxes. Yes, you want to balance the budget. You haven’t asked them to make tradeoffs.”

Exactly! In a vacuum practically everyone will opt to keep the free ride for themselves. Why not? Let others make the sacrifices! Don’t take my shit! But that’s a big problem in getting a real feel for what’s acceptable, and most of us understand this. When you can not make these choices of what to cut and who to fleece in a vacuum, the game changes. Well, it changes for most of us sane enough to understand that just confiscating even more of the wealth of others, in order to keep the gravy train rolling, isn’t going to solve the problems, just postpone them, and then for a very short while. In the end, the spending has to be rolled back, or we run off the tracks into the ravine. So lets move on here.

Kull’s study asked a random sample of Americans to do precisely that. They presented adults with the discretionary budget shortfall of $625 billion by 2015, as well as shortfalls in Social Security and Medicare. Participants chose from a range of realistic options using a computer application.

Now we have something more realistic to work with, although that $625 billion shortfall isn’t close to what we see now, unless the shortfalls in SS and Medicare they mention above added another $1 trillion to the total numbers, which I doubt was the case. Take a test ride of that application yourself and play along. It’s interesting when you are being told there are consequences to the decisions you make and you are not going to meet your objective if you aren’t serious.

Anyway, let’s look at what they have gotten so far from the people that took this test ride and discuss.

The majority made Social Security solvent. They acomplished that by raising the income limit subject to the payroll tax and increasing the retirement age to at least age 68; majorities agreed to similar tweaks of Medicare eligibility and benefits.

Absolutely not surprised by these actions/results. Most Americans now understand SS enough to see it for the Ponzi scheme it is, and they know that our government has been robbing and mismanaging it to the point that it is on the verge of imploding. I wish more of them understood that these fixes that left SS in the hands of government bureaucrats are still going to expose SS to future abuse and had simply privatized the thing for anyone under the age of 50, but at least it shows most Americans understand SS as it exists right now, is an disaster waiting to happen.

The average respondent reduced the discretionary budget deficit by 70 percent. One third of deficit reductions came from cuts to government programs. Two-thirds came from increased taxes and adjustments to the tax code.

This information really bothered me. The cuts are way too little to be serious, and it proves that way too many have become totally dependant on the nanny state. That so many opted to feed the politicians by allowing them to jack up taxes again, tells me they have not been paying close attention. As soon as the politicians get more income they will jack up spending. That’s the way it has always been, and I see no reason that these hyenas will change their spots now.

I wonder what the taxes people were Ok with were. Are we talking about just fleecing the rich again? I am disgusted that so many feel they have the right to confiscate other people’s money to pay for their spending. I wish I could do the same to pay credit cards. Then I could really go on a decent spending spree.

“People’s reaction to that package may be different than their reaction to each element individually,” said Michael Dimock, associate director for research at the Pew Research Center. “One element of opposition to specific proposals is the sense of unfairness. The package of solutions may give a sense of shared sacrifices that they don’t see when asked about cutting Social Security and Medicare.”

Indeed, when respondents were forced to consider the budget’s give-and-take, even partisans confronted sacred cows. Most Republicans, including tea party sympathizers, raised some taxes. Most Democrats cut government programs and increased the retirement age.

While this is all good, the amount of people that went for more taxes bothers me, unless said tax obligations are going to be spread to everyone. We already have way too few people paying taxes: more than half of the population doesn’t pay. Maybe when everyone has to pay, they will suddenly decide cuts are better. Taxes as a means of wealth redistribution are a disgusting concept, and the result, the fact that so many believe the money of others should be shared so they can keep getting a free ride, shows it.

The average respondent made three quarters of the cuts in defense, followed by trims to intelligence and the military operations in Afghanistan and Iraq.

Yeah, sure. Cut deep in what government is actually tasked with doing in the constitution and can levy taxes for. And pretend that if we just can walk away from these wars. It’s not like this will have consequences or something. Not surprised many people chose to do this. Isolationism and the fact that the western world’s freedom rides on us being able to fight for it isn’t important until said freedom comes to a screeching halt.

Wait until congress gets to fighting over whose pet project gets hammered too. Not to mention the drastic decline in those high paying – and tax paying of course – military industry jobs that will evaporate, and all the other peripheral jobs that will disappear as a consequence of those cuts. I have always known most people aren’t bright enough to see that unlike the fortunes wasted on the welfare state that this was actually giving Americans a value add. Oh, well.

Smaller cuts were made to programs such as veterans’ benefits, the highway system, space exploration, and subsidies for large farms. Those cuts were slightly offset by some increases that even tea party sympathizers favored: investing more in job training, pollution control, energy conservation, humanitarian assistance, education and small farms.

Yuck. That’s all I have to say.

The majority firmly opposed instituting a national sales tax or valued added tax.

I could go with a sales tax, if we did away with income tax. But I am glad that the VAT is a none starter.

But majorities favored increasing the tax rate for capital gains and restoring the tax on stock dividends to 20 percent, where it stood prior to the Bush-era tax cuts. Americans backed closing the loophole that allows private investment fund managers to have a significant part of their income taxed at only 15 percent, which enables an ultra-rich sector to avoid the tax burden borne by most Americans. The majority also favored a tax on large banks and increased corporate taxes. Most would also repeal tax deductions for the oil and gas industry.

What? No taxes on the demcorats favorite companies? What about GE? And when the economy dips a second time because people move their money elsewhere to avoid these new taxes? Heh, pretend there are no consequences and move along. Is everyone is pissed at the oil & gas industries making profit but me? I happen to have stock in my 401K that’s rocking because they are making profits. WTF? Don’t be surprised when we see a whole bunch of special regulations exempting this or that friend of some demcorat from these taxes either.

Americans have long favored abolishing the Bush tax cuts for the highest earners.

Which Americans? The ones that don’t pay taxes? Like the 51% that are tax exempt and the liberal elite that just “forget” to pay their taxes? Maybe they are talking about John Kerry and his yacht?

But the public would actually make the tax code even more progressive to bring the budget more in balance. The plurality raised taxes 5 percent on those with annual incomes of between $75,000 and $100,000. The majority raised them for earnings between $100,000 and a half million dollars. They raised it 10 percent for earnings that exceed $500,000.

What about the bottom earners? Make them pay taxes too. Bet you they suddenly will grow a sever aversion to government confiscation of their wealth, and all this pro tax increase talk will evaporate in a flash.

Most instructive was the altruism exhibited by all income brackets. Wealthier and middle class Americans did not raise taxes on lower classes. A plurality of upper middle class Americans was willing to accept increasing taxes on themselves. Higher earners most opposed increasing taxes on lower incomes and chose to bear higher taxes to balance the budget.

Sorry, but this is obviously one of our biggest problems. Too many people do not have to pay into the pot, and hence have no stake in the excessive spending or taxation schemes that feed this monster. This isn’t altruism, this is suicidal stupidity. If taxes have to go up, make it do so on everyone. In fact get with the flat tax already.

“People are not simply acting in their self-interest,” Kull said. “You don’t see tyranny of the majority here.”

Nah, just a lot of stupid people that don’t realize that as soon as they give government more money, it will simply decide to spend it and more anyway, as it has done in the past. Brilliant!

There were also signs of shared sacrifice. The majority supported increasing the alcohol tax and taxing sugary drinks like soda. They would limit the child tax credit to children younger than age 14 beginning in 2015. They found it acceptable to reduce the amount of interest 10 percent that can be deducted on all mortgages (a concession that would hit the middle class) and cap the amount that can be deducted to $25,000 (a concession even high earners found “tolerable”).

This is why we are in the mess we are today. All these silly taxes on special interest, and the political industries that sprout up around creating loopholes for some at the expense of others.

Anyway, there is one other thing I want to address:

Independents and Democrats slashed the deficit most. Why? The average Republican and tea party sympathizer were less willing to raise taxes and cut defense. The least fiscally conservative group was, paradoxically, conservatives.

I was not surprised by this result. If the tea partiers and republicans think like me, they are smart enough to have realized that the moment we allow government to raise taxes to cover the problems – and this is based on historical evidence, not just opinion – that they will not just lose all interest in meaningful cutting, but ramp up spending.

We shouldn’t ever commit to any kind of tax increases until we have gotten real and deep cuts. In my state of Connecticut for example, our new demcorat governor pushed a bill with huge tax increases and what seemed like harsh demands for union concessions, he claimed to want $1 billion, under the guise of shared sacrifice. The tax increases are happening, but we are finding out that the union concessions, short of a few token ones, are not, and the threats of layoffs if they don’t are nr just empty words.

Buyer beware. If we let them get tax increases, we can kiss any fiscal sanity, and certainly any chance for meaningful government cuts, goodbye. And most Americans seem unable to grasp that. I wonder what it takes to emmigrate to New Zealand.