The Future Isn’t Free

David Leonhardt, Washington bureau chief for The New York Times, has published an extended essay on Kindle, Here’s The Deal.

The deal, says Leonhardt, is that Americans want more government than they are willing to pay for and he presented some ways to fix the resulting long-term debt problems (you’ll have to cough up $1.99 to find out what they are, though).

Now, Leonhardt, who is a mathematician by training, has won a Pulitzer Prize for commentary, so who am I to say that his notion that Americans don’t want to pay for all the government they desire is, well, sort of obvious. But it is.

Since the time of Ronald Reagan and the advent of voodoo economics, Americans have become accustomed to having big-government benefits and paying for them with small-government taxes, which, of course, means deficits, deficits, deficits.

The Democrats temporarily restrained the voodoo-practicing Republican witch doctors in 1993, with the Deficit Reduction Act, which raised taxes and contributed to subsequent surpluses. But the voodoo came back when George W. Bush, who was designated president by Republicans on the Supreme Court late in 2000, went on a tax-cutting and spending binge.

And these days the voodoo, though not quite as prevalent as before, is still with us, as Democrats are willing to raise taxes only on the wealthy, which is a noble deed indeed (since they have plenty more to give), but, given political reality, it is just not plausible those taxes can be raised enough to significantly narrow the budget gap without more and deeper budget cuts.

Leonhardt, in his little Kindle ebook, wrote:

Obama’s stance that taxes should rise only on incomes above $250,000 is almost certainly not sustainable in the long run.

He points out that in 2012, federal revenue—including all forms of taxation—represented only 15.8% of GDP, compared to 20.6% in 2000, when the budget was in surplus. (According to the Heritage Foundation, total federal spending for 2012 was 22.9%, so do the math and the problem becomes clear.)

And Leonhardt writes:

…most Americans have paid far less in total taxes in recent years than they would have paid 30 years ago had they been earning the same inflation-adjusted income. For instance, a household making $52,000, which was roughly the median income in 2010, paid 27.7 percent of its income in taxes on average that year…In 1980, a family with the equivalent income would have paid a total rate of 30.5%.

Additionally, the author reminds us that,

By any measure, taxes are lower in this country than in most other rich countries. Here, tax revenue of all forms—federal, state and local—equals about 25 percent of GDP. In Austria, Denmark, Finland, France, Norway and Sweden, the level is at least 40 percent…It is 36 percent in Germany, 35 percent in Britain, 31 percent in Canada and 30 percent in Switzerland.

Remember all that when you hear a conservative talk about how overtaxed we are as Americans.

Look, I’m not one of those folks you see on TV all the time who irritatingly blathers on about how we are on our way to becoming Greece or advances austerity as a cure for our budgetary problems. And I definitely think more revenue is needed from rich. (Leonardt: “The amount of each dollar that the affluent pay in taxes has actually fallen in recent decades.”)

My only point here is that some time in the future—after the economy has shaken off all the effects of the Great Recession—all Americans who earn a middle class and above income in this country need to face the fact that they are getting way more government than their tax dollars are paying for. No one, not even the most wild-eyed liberal economist, believes that we can continue on the path we are on forever.

When Democrats signed off on a fiscal-cliff-averting budget deal with Republicans at the beginning of this year, a deal that made permanent most of the Bush tax cuts, I was critical of it and ended my criticism with this:

...let us hope that what Democrats have done—setting in stone tax cuts that have partly contributed to our fiscal problems—will not someday hinder them as they attempt to protect vital government programs from those who mean to drag the country back into the 18th century.

Democrats can’t protect those programs just with taxes on the wealthy, although obviously more needs to be done to reduce what Leonhardt calls the,

thicket of deductions, credits and loopholes that lead people to change their behavior and waste time trying to avoid too large a tax bill.

Leaders on our side need to be ready to tell the people, even middle class people, that if they want a 21st-century American civilization that still attracts the best and the brightest in the world, they need to be willing to pay for it or it will go away.

2 Comments

  1. Robert J Roberts

     /  February 8, 2013

    But, but, but . . . I don’t want to hear this. It makes me uncomfortable to think that I might have to actually pay for what I get. I like the gravy train. What I want is more benefits and lower taxes. And you’re telling me I can’t have that? I may have a tantrum.

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