As the “fiscal cliff” drama heads toward its climax between Thanksgiving and Christmas, each party is in the grip of a dead idea on taxes that warps the conversation. That means that no matter who “wins” this showdown, the parties’ antique thinking guarantees that any deal they strike will be merely the first of much bigger future adjustments as the baby boomers retire. To see why, it’s useful to think of the United States’ tax debate as being trapped between the cobwebs cluttering Grover Norquist’s mind and those clouding Gov. Jerry Brown’s.
Norquist’s dead idea is that we can fund the federal government in an aging United States without higher taxes. Republicans love to say federal taxes should be what they’ve always been in the post World War II period — around 18 or 19 percent of GDP. That’s why they want spending to come down from today’s recession-inflated 24 percent of GDP toward post-war norms of around 20 percent. (Revenue has fallen off a true fiscal cliff to 15 percent of GDP, thanks to the sluggish economy). Balance the budget around 19 percent of GDP, Republicans say, and call it a day.
A senior fellow at the Center for American Progress and the host of the new podcast “This...Is Interesting,” Miller writes a weekly column for The Post.
The flaw in this reasoning is that we’re on the verge of doubling the number of seniors on Social Security and Medicare. Ronald Reagan ran government at 22 percent of GDP when the United States’ population was much younger. Even after we take steps to slow the growth of our health and pension programs (which we must), it’s impossible to fund the boomers retirement at historic levels of taxation and balance the budget without decimating government activities devoted to non-elderly purposes — including the R&D and infrastructure that help propel future growth.
Sorry Grover — in an aging America, federal spending, and taxes, are destined to rise.
The Norquist-Paul Ryan reaction is to deny math and demography. They want to use this “historical norm” tax limitation and our aging population to force big cuts in the rest of what government does. But their equally powerful motivation is political: they desperately want to preserve the tax issue as the chief way voters can distinguish what Republicans stand for.
After all, if Republicans don’t stand for lower taxes, what contrast do they have with Democrats? How can they contest elections? Ever since 1980, when Reagan put tax cuts at the heart of the GOP agenda, the party’s had a great ride on the issue. But the aging of the population means this centerpiece of Republican economic “thinking” is now totally divorced from reality.
If Republicans can’t run on tax cuts, they’ll actually have to come up with other policies to improve Americans’ lives. As we’ve seen in their flailing since the election, the party is so out of practice at doing this that they’re not sure where to begin. But despite Norquist’s death rattles, the GOP ultimately has no choice.
Democrats have a dead idea on taxes, too: the notion that we can put our fiscal house in order only by raising taxes on top earners. Obama ran hard on this myth, but the prizewinner this year is Gov. Jerry Brown, whose Proposition 30 raises marginal income tax rates on top earners in California to a whopping 13.3 percent, the highest in the nation.