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A Further Perspective
Weigel’s Static Reasoning
No amount of tax increase will prevent entitlements from bankrupting the country.
(Page 2 of 2)
There are many factors figuring into the various economic data, but the data show somewhat lower GDP growth and much higher unemployment correlating with the IMF’s suggested higher tax rates. And that’s because — let me put on my big surprise face — people do change their behavior when tax rates rise.
It bears mentioning that I said that there is no amount of tax increase that will keep entitlements from bankrupting America. Weigel says that the IMF report proves I’m wrong. But the IMF report calls for a 35% increase in tax revenue and still requires 35% cuts in entitlements to achieve “fiscal balance.” So Weigel is actually proving my point. There is no actually achievable tax increase that can save the nation from bankruptcy-by-redistribution without massive reductions in entitlement spending.
Beyond that, the IMF’s revenue assumptions are ridiculous. Yes, it is possible to extract much more tax revenue from an economy (though not without a VAT or national sales tax), but not without harming the citizens who have to live and work in that society through weaker growth and higher unemployment. Increasing revenue by 35% will require increasing tax rates substantially and introducing a crippling and impoverishing national sales tax.
Weigel completely fails to address my argument that tax hikes to fund bloating entitlement liabilities rest on a “fundamentally Marxist premise…the same premise a mugger might use to redistribute your income.” At the end of the day, ideas matter and I found it informative that Weigel refused to engage on that most basic idea about the proper role of government in America.
He then says that my point about the French opposing tax hikes and favoring spending cuts is irrelevant because French tax rates are already higher than ours. So what is his implication? That our government should raise taxes until tax hikes are as unpopular here as they are in France?
It is true that polls in the U.S. show less opposition to tax increases than the polls in France, but that’s in large part because almost half of the U.S. pays zero or nearly zero income tax. So you would expect half of the respondents in a poll to favor taking more of other people’s money… and they do just that.
If we had a national sales tax, however, which is the only way to get where the left wants to go in terms of tax revenue as a share of GDP, you can bet that the poll results would change dramatically when a question of raising a tax rate that impacts everyone were to arise. Indeed, a recent blog by Casey Mulligan at the NY Times shows that those in the lower end of the earnings scale in France pay far more of their income (in percentage terms) in taxes than do “poor” Americans. (Mulligan’s detailed discussion on the topic is an interesting read.) This makes perfect sense because despite the cries by Obama and friends to soak the rich, it is impossible to balance a bloated federal budget that way. The government has to reach into the pockets of the middle and lower economic classes — which is exactly what France does — and even then because of the nature of politicians, they will still run large budget deficits.
If my arguments were a strawman as David Weigel suggested, he should have easily been able to demolish them. Instead, he makes barely relevant points which strengthen my statement that tax increases cannot keep entitlements from bankrupting our nation while he neglects to touch the fundamental question of whether it is OK for government to play Robin Hood who, despite claims of righteous motives, was still a thief.
About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver’s NewsRadio 850 KOA at 11 AM on most Sundays. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.
Letter to the Editor View all comments (16) | Leave a comment
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RustyG| 4.21.11 @ 7:40AM
Good grief Ross. Do you think it's right to pick on poor Weigel? As an old coach I can tell you there is a reason that the Freshman play against the Freshman and the Varsity play against the Varsity.
If you are going to "play down" then at least let him have his old Journolist buddies to help him out.
Tomp| 4.21.11 @ 8:10AM
'Leftist reasoning' is an oxymoron.
http://pajamasmedia.com/blog/t.....-the-left/
cavan1| 4.21.11 @ 9:40AM
The S&P would maintain the triple-A rating if taxes were raised.
S&P would not view spending cuts as a plus.
Joe| 4.21.11 @ 4:01PM
wrong
CT Yankee| 4.21.11 @ 4:54PM
cavan1:
You really think so? Explain your reasoning.
figusja| 4.21.11 @ 10:44AM
The only question that arises after reading this article is. Will we be able to reverse any of this if Prez. Hussein implements any of this? I hope when a new POTUS takes office he or she will reverse all of the idiotic things that were started. Is this Pandora's box?
howard lohmuller| 4.21.11 @ 11:20AM
Mr. Kaminsky is right and the IMF is wrong if we are considering the economic argument. Holding present tax rates steady and reducing spending on entitlements from the Obama base line can bring borrowing and debt back down to manageable levels over a generation. Unfortunately the IMF more likely wants to win a political argument and is in line with the Left in Europe and the U.S. The Left wants to win the political argument. It is not trying to win the economic argument. The Left is aiming at gaining power rather than wealth. It therefore will accept a financial fiasco and declare victory.
The one factor that can save the U.S. from the fiasco facing us is the same as has always been, production. In particular, production of nuclear power, oil, natural gas and coal. The North American Continent and its waters have hundreds of years supply of energy resources worth trillions of dollars.
If we harvest the energy, we can produce 50% of our electricity from nuclear, 50% from natural gas. We can produce enough oil for domestic gasoline needs and export oil and coal. We could transform back to being a creditor nation rather than a debtor nation and get full employment.
To win the economic argument, however, the U.S. cannot rely on the compromise that may be struck on future spending and taxation. First the odds are against our two political parties reaching an agreement that will stop the country's slide in standard of living for the next generation. Second, the entrance of the U.S. into the oil export market would bring down the world price of oil and restrict the financial aid to terrorists.
The shift to energy production can be achieved while maintaining clean air and water and conserving land. This should be our primary plan for regaining our international and financial status. Hopefully our politicians will follow through with help in attaining our goals.
axbucxdu| 4.22.11 @ 10:45PM
Not a bad idea, as long as we're paid in gold or some other specie. FRNs are for foreign suckers.
james wilson| 4.21.11 @ 1:21PM
The good thing about tax increases is that they reduce the flow of money for the monster. The bad thing about lower taxes is that they raise more money for the monster.
Joe| 4.21.11 @ 4:03PM
By that logic, we need a Constitutional limit on spending as a % of GDP
So, Congress, will you send us the Amendment to vote on?
martin j smith| 4.21.11 @ 2:58PM
I think that the very word: "entitlement" is very interesting. It appears to mean that "one is entitled to something". Now it seems to me if as a citizen we are told, for example that if we are "paying" thru deductions for such things as Social Security or Medicare--then there are two things:
One is we are not getting it for nothing entirely and there are laws that basically are an understanding between government and citizen about how Social Security and medicare apply.
Both age age determined and payment thru ones employment.
Now we a situation where there re not enough people working,where many are retireing in a short period of time and where we have a government and "leader ?" who instead of expanding the economy and employment does the reverse !!!!!!!!!!!!!!!!!!!!!!!!!! The balance and the arrangement and conditions to maintain this "entitlement" are no longer what they were.
As a society it is obvious that something has to be done to correct this situation. Do we Tax people
so that say others who do not work or who do not
have a retirement plan have it or do we make changes in Social Security and medicare requirements which apply to everyone such as raising retirement ages or allowing for other kinds of retirement plans other than government plans.
The basic issue is this: If the vast majority of people are opposed to taxation for redistribution of income, then you do not have a "contract or"agreement" in the civil society. In point of fact you have a tyrant attempting to impose their will on the majority.
To those people who support Obama's policy I say to them: "Go to Hell" !!!!!!!!!!!!!!!!
What I think the vast majority of citizens want is a President who loves this nation who, will among other things support policies that expand our economy and with that increase employment so that stuff like social security and medicare can ultimately be successful in whatever way that works I am not interested in what the IMF thinks and what Europeans do.
LiveFreeOrDie| 4.21.11 @ 4:50PM
Anyone else think Weigel looks like a younger, shorter and fatter Charlie Sheen?
Oldefarte| 4.21.11 @ 5:03PM
Let me try to simply this argument, okay? First, MONEY/INCOME BELONGS TO THOSE WHO.....EARNED IT INITIALLY. It does not belong to the government, who did not earn it and only receives it DUE TO ITS CONFISCATION OF TAXIATION. Government is funded/financed by its taxpayers. Taxpayers work in various arenas and earn income for their respective labors. They create wealth/income. Government takes that wealth/income. That income/wealth rightfully/legally belongs to the individuals [or corporations, that are composed of individuals], not to government. Its the old adage of: WHICH COMES FIRST, THE CHICKEN OR THE EGG? Well, individual humans existed before their governments did, and these individual humans CREATED/ESTABLISHED THEIR GOVERNMENTS as instruments to carry out certain collective operations for all of their fellow individual humans as a whole. Government's purpose is [or should be] LIMITED to those collective operations only. Liberals [ie Democrats] have historically re-defined that limited role into an expansive one that goes beyond this limited collective role of government to encompass one where it is responsible for the total welfaric needs of indigents that avoid their individual responsibility to take care of their own personal needs and society as a whole/government is designated with that assigned responsibility. Government is now too large/big, cost its taxpayers too much of their earned income, and needs simply to be substantially reduced to the level that would correctly only take care of the original limited stated collective needs that it was intended to satisfy!!!!!!!!!
Johnny| 4.22.11 @ 6:38AM
Our constitution does provide the answer to this problem. We have the right to abolish any government that is detrimental to the citizenry of this country. That is the only solution to our woes that I can see. Our government has grown to excess and will not be trimmed down to a manageable size or relegated to the tasks it was originally assigned. REPLACE IT!
Jay Pitsby| 4.25.11 @ 10:23AM
It's a little like hunting dairy cattle with a high-powered rifle and scope: there's no sport in it but there is a perverse thrill from the sheer brutality. Hey, Weigle, say "Moooooooo!"
Creative Recreation | 8.10.11 @ 9:59PM
is good