Spectator alum Phil Klein makes a number of important points in this post, but the main one is this: “Tax increases aren’t required, but Republicans are being told they must accept them because they’re the price of doing business with Democrats.” But by 2035, federal spending’s share of GDP will be 13 points ahead of the postwar, Clinton-era peak in tax revenues as a percentage of GDP.
“From a purely technical standpoint, it’s possible to put the nation on a sustainable fiscal course without raising taxes,” Phil continues. “But it isn’t possible to increase taxes high enough to balance the long-term budget without cutting spending.” That’s because as even many Democratic budget officials have conceded, the tax increases that would be required to bring the budget into long-term balance would be so injurious to the economy that they would be unlikely to bring in the anticipated revenues. And major Democratic politicians aren’t proposing tax increases of anywhere near the magnitude necessary for balancing the budget.
Peter Orszag is no wild-eyed supply-sider. The truth is, even with top marginal tax rates as high as 91 percent, our current tax code has never raised revenues equivalent to more than 21 percent of GDP. There are political considerations in favor of raising taxes — in theory, bipartisan budget and entitlement reforms would prove more durable; a new Pew poll shows 60 percent of Americans would rather leave Social Security and Medicare alone than reduce the deficit — but these assume a.) that Democrats are really willing to give major spending cuts in exchange for relatively modest tax increases and b.) that tax increases on the middle class would prove anymore popular than entitlement reform.