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Tuesday, April 13, 2010

The #VAT Commission

Grabbed this post from The Wall Street Journal click here for original

A couple of trillion dollars in new deficit spending later, President Obama yesterday signed an executive order creating a Bipartisan National Commission on Fiscal Responsibility and Reform.

Yes, that's really what he called it. And you wonder why Americans are cynical about politics?

Having proposed peacetime records for spending as a share of the economy—more than 25% of GDP this year and next—Mr. Obama now promises to make "the tough choices necessary to solve our fiscal problems." And what might those choices be? "Everything's on the table. That's how this thing's going to work," Mr. Obama said.

By "everything," Mr. Obama means in particular tax increases. The President vowed in 2008 that he wouldn't raise taxes on anyone earning less than $250,000 a year, but that's looking to be as forlorn a hope as peace in Palestine.

Mr. Obama's own recent budget proposal estimates that deficits will exceed $8.5 trillion over the next decade—even including revenues from the huge tax increases scheduled for next year and other new levies that aren't likely to pass. So the President and Democrats are desperately seeking political, and especially Republican, cover to go where the big money is by taxing the middle class. The commission is a bid for that cover.

His choices as co-chairmen are a pair of old Beltway hands who are likely to oblige. Erskine Bowles is a long-time investment banker who was Bill Clinton's White House chief of staff and sat on the board of GM from 2005 until it slid into bankruptcy last year. At least he has experience with rotten balance sheets.

Alan Simpson is a former Republican Senator from Wyoming who was among the bigger GOP skeptics of tax cutting. We'll give him credit for daring to challenge AARP on entitlements during his career, but our guess is that he'll accept tax increases if Democrats agree to cut Medicare and Social Security benefits for future retirees who make more than median incomes.

The rest of the 18 commission members will be named by the four House and Senate leaders from both parties (three each) and four more by Mr. Obama. This means Democrats are likely to outnumber Republicans 10-8, which further tilts the commission toward those who want to take federal taxes from the modern average of about 18.5% of GDP to 25% or more. The real name for this exercise should be the VAT Commission, as in the value-added tax it is likely to propose.

Our advice to GOP leaders is that they select the most antitax members they can find in the hope that they will file a dissenting report. If Mr. Obama really wants to balance the budget, he and the Democrats who run all of Washington with large majorities can show their sincerity by starting to reduce spending now.
Printed in The Wall Street Journal, page A14

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