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September 22, 2008
SHARED SACRIFICE: So one theme we've heard in criticizing President Bush is that, post 9/11, he didn't require "sacrifice from the American people." This is generally a euphemism for "higher taxes."
It seems likely that no matter who is elected President, we'll see higher taxes. But an awful lot of Americans don't pay income taxes, or pay only very small amounts -- and their numbers will grow under both the Obama and McCain tax plans. Raising top marginal rates won't affect them. So if we're to see shared sacrifice, what might that mean? It seems to me that shared sacrifice is not only about some people paying more to the federal government, but also about others taking less. And, yeah, that'll hurt, but that's what "sacrifice" is about, right?
There's some evidence that Obama, at least, is quietly moving toward raising the Social Security retirement age. This is inevitable, and the sooner it happens the better. Adjustments should also be based on the cost of living, rather than wages, which would help keep increases under control.
We should also cut back generally on spending for entitlements -- say a 10% across-the-board cut, to start. Economic subsidies ("corporate welfare" and farm subsidies, for example) should be cut even deeper. In fact, a 10% across-the-board cut in nondefense federal spending, in both entitlement and discretionary programs, would be a good place to start. This seems unthinkable, but states with budget problems make big across-the-board cuts all the time. (In Tennessee, Phil Bredesen is talking about a 3 percent across-the-board cut, but Tennessee's budget problems aren't nearly as bad).
The fact is, the coming entitlements crash is as big a threat as global terrorism, and one that requires a lot more in the way of "shared sacrifice." We're not seeing much talk from either party about that, but if we are, in fact, seeing a new seriousness on economic matters, and not just a sham seriousness for the election runup, then that will change. But it's clear that the federal government can't spend as much as it's committed to spending, and can't raise taxes enough to make up the difference without killing the economy. And the economic bailout-and-regulation talk now doesn't make me think that we'll see enough economic growth over the next five or ten years for this problem to fix itself, which was never likely and seems less so now.
In the meantime, though, we're looking at the largest Social Security COLA in 25 years. That'll help . . . .
On a related note, I think we should rethink this business of having lots of Americans who don't pay income tax. As the Tax Foundation comments: "It is time for a serious public discussion of whether it is desirable to have so many Americans disconnected from the cost of government and what the consequences are of using the tax system as a vehicle for social policy."
Personally, I'd like to see everyone pay at least some income tax, and I'd like to see the amount of tax paid, by everyone, go up or down every year in tandem with federal spending. That would encourage fiscal discipline directly. It would also make it harder for politicians to promise everybody a free lunch, but hey -- why shouldn't they sacrifice something, too?