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Roger’s Rules

Phony Cuts/Real Taxes

July 27th, 2011 - 7:38 am

One of the many depressing things about the “debt ceiling” circus now playing in Washington is the patent asymmetry between the two sides of the debate: the cuts vs. the taxes (aka “revenue enhancements” and other mendacious equivocations designed to conceal an unpleasant reality).

When it comes to cuts, virtual reality rules. When it comes to taxes, it is cash on the barrel, none of this “I’ll gladly pay you Tuesday for a hamburger today.”

Let’s start with the “cuts” our masters are proposing. Here’s a real-life example: “We’ll cut a trillion dollars — a trillion dollars, ladies and gentleman! — by the simple expedient of saving on the cost of the Iraq and Afghanistan wars over the next ten years. How’s that for fiscal responsibility?” That’s what the putative cutters in Congress said. Now let’s wheel out a chart showing what the Congressional Budget Office projected the wars would cost, adjusted for inflation, vs. the “savings” we might realize by ceasing to pour our national treasure into those hell holes for another decade. Chris Edwards at the Cato Institute has the handy graphic:

The problem, as Mr. Edwards observes, is that “nobody expects war spending to continue rising like that. Rather, spending is supposed to fall in coming years as troops are withdrawn.” That blue line is not a cut in any normal sense of the word, it is simply a more realistic estimate of what we are likely to be spending. Writing in June of this year, Mr. Edwards admitted that he was “getting very suspicious that party leaders will deliver phony ‘cuts,’ not actual terminations in programs or reductions in entitlements.”

His suspicions, as these last weeks have demonstrated beyond cavil, were well founded: it’s all phony cuts. Looking for “actual terminations in programs or reductions in entitlements”? Forget about it, mon brave. There aren’t any.

When it comes to taxes, however, there is none of this smoke and mirrors. Sure, our masters in Washington have submitted the word “taxes” to the office of circumlocution, and so they have an entire lexicon of obfuscating words to deploy in addition to the dread T word. But where the proposed “cuts” are merely virtual cuts, the new taxes are real: the $100 you were going to get yesterday has suddenly been whittled down to — what? $90, $85?

Who knows what clever new ways to fleece the serfs of this mighty nation our masters in Washington are even now devising. Doubtless there will be some candid increases in the marginal rates of the income tax. But let’s not forget the many other strategies of “revenue enhancement” that the mismangers in Washington have at their disposal, from inflation to a variety of stealth- and semi-stealth taxes, e.g., the 3.8 percent federal sales tax on a wide range of investment income, including home sales above $500,000. Not everyone is aware of that provision, which was snuck into the ObamaCare legislation and which goes into effect in 2013. “We have to pass the bill,” said Nancy Pelosi, “so that you can find out what is in it.” Surprise! Not “trick or treat,” just “trick.”

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