Fiscally perverse, politically rational

We’ve voted for Democrat spending and Republican taxes, but the opposite is what’s coming, one way or ‘nother.

George Will this past Wednesday, in Our decadent democracy:

This state cannot be funded by taxing “the rich.” Or even by higher income taxes on the middle class. Income taxes cannot fund the government liberals want, and they dare not seek the consumption and energy taxes their entitlement architecture requires. Hence, although Republicans are complicit, Democrats are ardent in embracing decadent democracy. This consists not just of infantilism — refusing to will the means for the ends one has willed — but also of willing an immoral means: conscripting the wealth of future generations.

As economists Glenn Hubbard and Tim Kane explain in National Affairs quarterly, the U.S. political system “cannot govern the entitlement state” that “exists largely to provide material benefits to individuals.” Piling up unsustainable entitlement promises — particularly, enactment of Medicare in 1965 and the enrichment of Social Security benefits in 1972 — has been improvident for the nation but rational for the political class. The promised expenditures, far in excess of revenue, would come due “beyond the horizon of political consequences.”

“Our politicians,” say Hubbard and Kane, “are acting rationally” but “politically rational behavior is now fiscally perverse.” Both parties are responding to powerful electoral incentives to neither raise taxes nor cut spending. Hence, “the clash over raising the debt limit that gripped Washington during the summer of 2011 was just the beginning, not the end, of our fiscal woes.”

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5 Responses to Fiscally perverse, politically rational

  1. Paul Marks says:

    This meme (spread by the entire “mainstream” media) about “neither raise taxes” as well as high spending is wrong, flat wrong.

    Taxes just went up – and not just on “the rich” (i.e. small business enterprises – not the real rich, who have their money overseas). The “fiscal cliff” deal included a rise in the pay roll tax. And then there are all the new Obamacare taxes……..

    I am reminded of the Economist magazine whose meme in relation to California (and everywhere else) is this same “Republicans will not raise taxes, Democrats will not cut spending” stuff.

    Taxes in California have gone UP AND UP, they are amongst the HIGHEST in the United States.

    There is no unwillingness-to- tax “problem” (at either State or Federal level).

    There is a GOVERNMENT SPENDING PROBLEM.

    Not “on the one hand, but on the other hand….”

    No – there is a government spending problem, PERIOD.

  2. Paul Marks says:

    John – if Federal government spending is lower in 2013 than in 2012 then you may call me “Susan” (and I will answer to the name).

    Beware the LIES of the “mainstream” media – “cuts” turn out to be “cuts in the increase”, i.e, INCREASED government spending.

    • John says:

      When I say “coming” I don’t mean (necessarily) 2013. But real actual cuts are coming – the unfunded liabilities are just too large. It’s only a question of whether it’s the polity or the bond markets that do the cutting. Rationing of health care is a cut too.

      It’s now a matter of how much of the fix is cuts and how much is taxes. I’d prefer 100% the former but it’ll be both. SS is easy to “cut” (fix) via tweaks in the eligiblity and COLA. I’d go further, with actual personal accounts & etc., but that’s a pipe dream. MC and soon Obamacare are a disaster. We’ll probably end up rationing end-of-life care. Makes me sick. All the other public pensions are a mess too. The polity will never agree to all the taxes required, and will insist on some kind of cutting. If the bond market doesn’t beat them to it.

  3. Paul Marks says:

    There will be no overall cut in government spending whilst Barack Obama is in the Whitehouse – he would rather population starved to death, than reduce the overall size of government.

    And I am not using a figure of speech.

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