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Grover Norquist Is Living in Candyland or Daniels is Right About the Need for a VAT
National Review ^ | 10/18/2010 | Kevin D. Williamson.

Posted on 10/18/2010 2:27:21 PM PDT by curiosity

So it turns out that the cure for “epistemic closure” is great quantities of crystal meth. The things you learn from Grover Norquist.

In case you missed it, Norquist came down like a runaway gravel truck on Indiana governor Mitch Daniels, a favorite around these parts. Governor Daniels’s offense was declaring himself open to the possibility that a value-added tax might be an acceptable part of a wide-ranging reform of the federal tax system. Norquist replied, in a Politico interview:

“This is outside the bounds of acceptable modern Republican thought, and it is only the zone of extremely left-wing Democrats who publicly talk about those things because all Democrats pretending to be moderates wouldn’t touch it with a 10-foot poll. Absent some explanation, such as large quantities of crystal meth, this is disqualifying. This is beyond the pale.”

Here’s the problem: The deficit is, by my always-suspect English-major math, about 36.3 percent of federal spending ($1.29 trillion deficit out of $3.55 trillion spending). For comparison: Defense accounts for about 18 percent of federal spending. So you could cut out the entire national-security budget, and another Pentagon-sized chunk of non-military spending, and not quite close that deficit. You could cut the Pentagon to $0.00 and eliminate Social Security entirely and just barely get there.

Even great heaping quantities of crystal meth would not be enough to convince me that is going to happen.

Don’t get me wrong: In a perfect world, Exchequer would love to see the budget balanced and some tax cuts enabled through spending reductions alone. Exchequer would also like to be dating Marisa Miller, driving a Morgan Aero, and running a four-minute mile, developments that are about as plausible as Congress’s cutting 36.3 percent of federal spending. Not going to happen.

So, our choices are this: 1. Hold out for the best-case scenario, in which a newly elected Speaker Boehner gives President Obama the complete works of Milton Friedman and everybody agrees to cutting federal spending by more than a third. 2. Keep running deficits and piling up debt. 3. Raise taxes. My preferences, in order, go: 1, 3, 2. And No. 2 is not really acceptable.

Like it or not, taxes are going up: If not today, then in the near future. Even once the deficit is under control, that debt is still going to have to be paid down, lest debt service alone overwhelm the federal budget, necessitating even more tax hikes. If Grover Norquist thinks there’s a tax-free way out of this mess that is both politically and economically realistic, he is living in a fantasy. There’s an old joke that goes: Neurotics build castles in the sky; psychotics live in them. And Grover Norquist seeks tax protection for them.

Norquist’s outfit, Americans for Tax Reform, does a lot of good things. (And so has Grover Norquist, over the years.) But here’s how it describes itself:

Americans for Tax Reform (ATR) opposes all tax increases as a matter of principle.

That’s not a campaign against Big Government — it’s a campaign against math. As ye spend, so shall ye tax. Denying that is not a principle — it’s a tantrum. ATR’s pledge reads:

“I _____ pledge to the taxpayers of the __________ district, of the state of __________, and to all the people of this state, that I will oppose and vote against any and all efforts to increase taxes.”

And here is how it should read:

“I _____ pledge to the taxpayers of the __________ district, of the state of __________, and to all the people of this state, that I will oppose and vote against any and all efforts to increase spending.”

Spending is the issue, not taxes. Spending is the virus, taxes are the symptom. Norquistism, by focusing on the taxing side of the ledger rather than on the spending side, has for decades enabled Republican spending shenanigans of the sort that helped put the party in the minority and ruined its reputation for fiscal sobriety; it is of a piece with naïve supply-siderism. The Bush-era deficits, and the subsequent discrediting of Republicans’ fiscal conservatism, are the product.

Give me the grown-up despair of Mitch Daniels any day over the happy-talk daydream that says we’re getting out of this mess without paying for it.


TOPICS: Business/Economy; Constitution/Conservatism; Editorial; Government
KEYWORDS: atr; grovernorquist; mitchdaniels; norquist; spending; taxes; vat
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Comment #21 Removed by Moderator

To: ALPAPilot
The underling premise of both the article and your post is that tax rates and revenue are directly proportional.

Not true. Please show me either where I or the author of the piece makes that assumption.

Why doesn’t McDonald’s or Burger King raise their price for a Big Mac or Whopper?

Because their prices are already set at the profit-maximizing level. Taxes are not currently at their revenue-maximizing level.

Both the price-revenue curve and the taxrate-revenue curve intersect the x-axis twice. Their is a maximum amount of tax revenue that can be taken out of an economy.

Agreed. However, we're nowhere near that point yet.

22 posted on 10/18/2010 3:14:41 PM PDT by curiosity
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To: Logophile
Poppycock. If tax rate are raised, the depressing effect on economic activity is likely to bankrupt us even faster.

Yes, there's a tradeoff. If you increase tax rates, you increase the government's revenue share of GDP, you also create distortions and disincentives to work, which in turn made GDP lower than it otherwise would be. The revenue-maximizing tax rate is neither zero nor 100%

There are also different ways to collect taxes, and some have stronger incentive effects than others.

The VAT just happens to be one of the most efficient ways in collecting taxes, in that it distorts incentives a lot less than other types of taxes (i.e. an income tax).

So what you could do is implement a VAT of, say 10%, and the slash income taxes to around 15%. The overall tax burden would be higher, but because your are placing less of the tax on income, the deadweight efficiency loss would be lower. Both revenue and GDP would go up.

23 posted on 10/18/2010 3:25:57 PM PDT by curiosity
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To: curiosity
Even if you are right about the VAT (I have my doubts), what makes you think the additional revenues will be used to balance the budget or pay down the debt?
24 posted on 10/18/2010 3:30:47 PM PDT by Logophile
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To: marron
You will never balance this budget by raising taxes, you will actually reduce revenue because you will kill an already struggling economy.

Depends on how you do it, and where on the Laffer curve you're at. You seem to think we're on the downward sloping part of the curve no matter what kind of new taxes are imposed. What makes you think that?

You balance this budget by expanding the economy, and by getting the government out of things it doesn't belong in.

I agree that expanding the economy and shrinking government are good things to do, but if you do the math, you will find that it will not be nearly enough to make the government solvent.

25 posted on 10/18/2010 3:30:53 PM PDT by curiosity
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To: curiosity

Left out of the entire discussion here is that Norquist is a closet Islamist, married to a Muslim woman. He took money from a pro Hamas organization.

His entire “conservative leader” life is a huge sham. He is a stealth economic Jihadist.

Google Norquist and Spencer, Norquist and Malkin, Norquist and Gaffney and you’ll find enough to support what I’m saying.


26 posted on 10/18/2010 3:40:23 PM PDT by HonestConservative (http://holdingahammer.com/)
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To: Logophile
Even if you are right about the VAT (I have my doubts), what makes you think the additional revenues will be used to balance the budget or pay down the debt?

A VAT would have to be part of a large entitlement reform package. That is, I'd only support it if it were adopted in conjunction with some fundamental structural reforms of Social Security, Medicare and Medicade.

This will not be easy, I grant you, but it will be necessary. Otherwise, we're going bankrupt.

And BTW, I'm not insisting there has to be a VAT. There are other types of consumption taxes that might be better.

All I'm saying is that we need to be realistic about the fact that the Federal government is going to have to find some new sorces of revenue if we are to avoid becoming Greece. And yes, spending cuts should be the priority, but the reality is that we're never going to solve the problem with spending cuts alone.

27 posted on 10/18/2010 3:46:29 PM PDT by curiosity
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To: HonestConservative
Left out of the entire discussion here is that Norquist is a closet Islamist, married to a Muslim woman. He took money from a pro Hamas organization.

This is a thread about tax policy, not Norquist's alleged Islmaist views.

28 posted on 10/18/2010 3:58:23 PM PDT by curiosity
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To: curiosity

Understood. However the credibility of the source should be considered.

Mr. Norquist is used here as the source of the argument.

No attempt is made here to side track the discussion, only to point out that the man’s motives are suspect, so that creates suspicion as to HIS position.


29 posted on 10/18/2010 4:02:56 PM PDT by HonestConservative (http://holdingahammer.com/)
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To: curiosity

“So what you could do is implement a VAT of, say 10%, and the slash income taxes to around 15%.”

Why not come up with a 3rd and a 4th way to gather up federal taxes?

—Income tax

—VAT

—Method #3

—Method #4

You are the economist. Explain why 3 and 4 work well, too.

And then tell me the politicos can be trusted to keep the overall rates down, and the burden low.

Mr. Economist, please display the OVERALL rate of taxation on Americans since WWII.

It will show a big increase. And yet with the increase, we cannot (actually will not) balance the budget.

Clearly higher taxes does NOT balance budgets. Lower spending and growing economies does.


30 posted on 10/18/2010 4:03:46 PM PDT by truth_seeker
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To: curiosity
A VAT would have to be part of a large entitlement reform package. That is, I'd only support it if it were adopted in conjunction with some fundamental structural reforms of Social Security, Medicare and Medicade.

Enact the reforms first; then we can talk.

The sad truth is, Congress will not enact "fundamental structural reforms" of these so-called entitlement programs until they are forced to. So long as they can borrow money or raise taxes, they will continue to spend.

This will not be easy, I grant you, but it will be necessary. Otherwise, we're going bankrupt.

Then we should prepare for the bankruptcy of the United States government.

31 posted on 10/18/2010 4:07:45 PM PDT by Logophile
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To: curiosity

People need to know the whole story about Norquist.

Otherwise he sounds like a nice guy.

Which he is not.


32 posted on 10/18/2010 4:25:47 PM PDT by Presbyterian Reporter
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To: Logophile
Enact the reforms first; then we can talk.

I agree with you. Or, at the very least, we can dangle the possibility of VAT as a bargaining chip to get those reforms.

Then we should prepare for the bankruptcy of the United States government.

Wow. Are you seriously advocating a default on US Treasury securities? Think about it before you advocate it. If you thought the 2008 financial crisis was bad, you ain't seen nothing.

A US sovereign default would lead to complete and total global economic collapse and, most probably, the end of civilization. You'd wake up in the world of Mad Max.

33 posted on 10/18/2010 4:28:11 PM PDT by curiosity
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To: Presbyterian Reporter
People need to know the whole story about Norquist. Otherwise he sounds like a nice guy. Which he is not.

The character of Mr. Norquist is not relevant to this discussion.

34 posted on 10/18/2010 4:29:26 PM PDT by curiosity
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To: curiosity
Eventually, conservatives are going to have to come to terms with the fact that America will go bankrupt unless taxes go up.

Merda del toro. You assume that the current ridiculous levels of government bureaucracy are something we can't live without.

35 posted on 10/18/2010 4:36:09 PM PDT by denydenydeny ("Tolerance becomes a crime when applied to evil." Thomas Mann)
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To: curiosity

Nice to hear of your ability to compartmentalize


36 posted on 10/18/2010 4:45:52 PM PDT by Presbyterian Reporter
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To: curiosity
END THE WAR AND END THE FED!

How many trillion did i just free up?

37 posted on 10/18/2010 4:56:01 PM PDT by jd777
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To: Presbyterian Reporter
Nice to hear of your ability to compartmentalize

The an argument stands or falls on its own merits, and its validity is independent of the character of the person making it. You may call that "compartmentalizing," but it's also basic logic.

38 posted on 10/18/2010 4:59:09 PM PDT by curiosity
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To: Presbyterian Reporter
Nice to hear of your ability to compartmentalize

An argument stands or falls on its own merits, and its validity is independent of the character of the person making it. You may call that "compartmentalizing," but it's also basic logic.

39 posted on 10/18/2010 4:59:25 PM PDT by curiosity
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To: denydenydeny
You assume that the current ridiculous levels of government bureaucracy are something we can't live without.

Hate to break this to you, but government bureaucracy isn't what's going to bankrupt us.

40 posted on 10/18/2010 5:01:47 PM PDT by curiosity
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