Very good article, but once again the article requires Republicans to be honest that the our present day budget deficit is largely the result of Bush's tax cuts, Bush's wars, and the Bush's unfunded prescription drug program. Republicans will never stop pandering to the anti-tax folks who preach a starve the beast nihilism where the path to freedom is to bankrupt the government.
http://www.time.com/time/nation/article/0,8599,1959029,00.html
Given those realities, any talk of new tax cuts to solve the economic crisis, an idea supported by many Republicans, is fiscal fantasy. But so too is Obama's campaign pledge of tax cuts for all households earning less than $250,000 per year. That promise is impossible to honor if the government is going to maintain a shred of fiscal responsibility. We can and should claw back about 0.4% of GDP in revenue from taxpayers who make more than $250,000, as Obama has proposed. But even with rollbacks of tax cuts for the rich, the fiscal gap will remain enormous.
The hard truth is that even if the military budget is eventually trimmed by 2% to 3% of GDP, the Bush Administration's tax cuts for the rich are ended, all earmarks are eliminated and entitlement programs are reformed, the deficit will remain large and public services in many areas will remain threadbare. There is no way to close the deficit merely by cutting waste, fraud and abuse and levying higher taxes on the rich. Inevitably we will have to raise tax collections as a share of national income in ways that will also hit the middle class. Fortunately, there are methods of doing this that will protect the economy, help the poor and those with urgent needs and spur economic competitiveness by putting America back in the forefront of science, technology and clean and reliable energy.
We need a new political consensus. No doubt the Republicans are just waiting for Obama to reverse his campaign promise on taxes so that they can pounce, just as Democrats did when George H.W. Bush broke his "Read my lips," no-new-taxes promise. Such is politics, where the first rule is to pander to antitax sentiment. But if we carry on down that road, we will end up with a much deeper fiscal crisis — the kind where the dollar collapses, foreigners stop buying Treasury bills and public services fall apart while inflation soars. Instead, we might, just might, begin to coalesce around a shared set of ideas, putting aside our ideological blinkers and forging compromises on common ground. The essence of the compromise, I believe, would be for Republicans to accept collecting higher tax revenue as a share of GDP, with the money to be directed mainly at education, training, poverty relief, infrastructure and deficit cutting, while Democrats discard the tax-only-the-rich approach and look instead to broad-based taxes and low marginal tax rates.
Both sides could agree, for example, on a value-added tax (VAT) — a sort of national sales tax — combined with closing loopholes and reducing some marginal tax rates, including the corporate tax rate. Democrats traditionally champion tax progressivity. But they should learn from the European social democrats, who know that it's more important to be progressive on the spending side — in education, poverty relief and public services — than to focus tax policy only on the rich. Low corporate tax rates, meanwhile, help maintain global competitiveness and retain jobs. The Scandinavian countries of Denmark, Norway and Sweden, for example, avoid levying crushing taxes on businesses in order to keep their economies competitive. They establish fairness not so much by progressive tax regimes as through spending on health, education, training and child care. That has the effect of boosting the well-being of lower-income families alongside the middle class.
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