Piper Says "Pay"

Conservative pundits weigh in on the Value Added Tax (VAT): WaPo rock stars George Will and Krauthammer, the WSJ, the CATO Institute for starters. All of this in spite of Press Secretary Gibbs' denial Monday.

What's the issue? Oh, the VAT is just that consumer tax that social democracies like those in Western Europe have adopted to finance entitlements (aka their "welfare states"). In theory, VATs are fairer than income taxes, because income taxes shift the burden to specific income classes: in America the top 1% of earners provide 40% of the income tax receipts, the top 5% provide 61%, while the bottom 50% provide a mere 3%. This distribution stretches the limits of the reasonableness of the "if you have more, you should pay more" idea, and as Will points out, it creates a perverse incentive for a very large number of people to remain phlegmatic about the expansion of government: "...the tax makes a substantial majority complacent about government's growth.".

But the problem with the VAT, in practice, is that it's not intended to replace or reduce income tax burdens, or to reduce income tax disparity between lower, middle and upper incomes. Basically, the VAT would be JAT ("Just Another Tax") for everyone--not just the rich folks--raising the cost of goods for consumers rich and poor (exemptions like food etc.). It's just more taxes for everyone, on top of the income taxes already owed.

Unfortunately, JAT may make sense today. The Europeans aren't stupid; eventually, taxing just the rich isn't adequate to pay for the benefits and entitlements given to all. Things just get more expensive, a kind of economic axiom that governments make their peace with (and try to disguise in election years) in order to provide entitlements and programs for everyone. Obama, and the rest of us, must soon make our peace with the cost of our own government.

Finding Logic in Politics, Part I

(1) Running up the deficit is bad (tenet of responsible government, as both Democrats and Republicans insist)
(2) Republicans ran up the deficit (fact)
(3) Democrats say: Republicans shouldn't lecture Democrats about running up the deficit (refer to (2))
(4) Democrats are now running up the deficit (fact)
(5) Republicans say: Democrats shouldn't be running up the deficit (refer to (1))

So it goes that both sides score political points that sound good on cable news, but given the bi-partisan acknowledgement that running a large (nay, massive) tab for future tax payers is bad, the parties are as usual tangled in their own webs. If the stimulus bill doesn't work (and by the way, with something as complicated as the modern global economy, no one knows what will work), the Democrats just voted themselves out of office two years in advance. Republicans, perhaps not from an appreciation of the unpredictability of complex systems per se, have sounded off in usual form about "pork", but in factual support of their opposition our deficit grows larger now on the Democrats' watch, and add to this, no one currently breathing air today has any clue if the latest bill will end the recession sooner, or prolong it by creating inflationary problems, or do nothing. No one knows. How could they? You'd have to be Laplace's Demon. And so it's a bold, swift move indeed.