Eliminating the Deficit and Where to Go

The Tax Policy Center Blog has two posts on the deficit. The first deals with things within the personal side of the income tax using the official scorekeepers, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). The second deals with the corporate income tax.

I think both of these are very good posts, and I do think that the deficit itself is a long-term problem, although short term we probably should run a few up. See Brad DeLong's blog post on how the Keynsian view is the evidence-based view.

However, the deficit is a long-term problem, regardless if we decide to add everyone onto insurance.

The notion one should get from the two Tax Policy Center bloggers is that the issue is not so simple. It will require tradeoffs, hard choices, and ultimately, a lot more taxes for everyone, everywhere across the board.

This harps then back to one of my favorite themes. Taxes are not inherently bad. I myself paid them, and yes, while I would have liked more money, I did tend to think that my taxes were low (I'm a weirdo, what can I say). However, it was not that, it was a pride I took as a citizen of rather decent means near the median income for a family of four (which I think is around $40,000-$50,000) to help pay for the government, which I did not always agree with what they did (read wars) but still supported it as a patriotic duty.

Unfortunately that is gone. The sense of me first as I have often said spells fiscal doom.

So what can be done. Well, it seems from the estimates in the blog posts, you may have to push down on many points, and some of these points just do not make sense for what they yield and actually run against fairness. The main example is the administrations whacky idea to eliminate deductions for certain multinationals, which actually does help level the playing field it seems and would create an administrative nightmare to close. Others like carried interest tax may not actually raise a lot of money and have a complex implementation, but it at least serves some level of fairness.

But, like so many complicated problems, there is no magic bullet to the fiscal crisis. You cannot end earmarks, which is fewer than 1% of the budget. The bureaucracy is not as bloated as we like to believe, and even then, the money is not there. Medicare and Medicaid requires structural reform in delivery. And then there's the entire tax code that needs to push in all of these areas and perhaps get even more creative, like a national VAT.