{"id":335643,"date":"2010-02-18T10:10:36","date_gmt":"2010-02-18T15:10:36","guid":{"rendered":"tag:business.theatlantic.com,2010:\/\/3.36159"},"modified":"2010-02-18T11:42:50","modified_gmt":"2010-02-18T16:42:50","slug":"is-there-a-secret-consensus-on-debt-reform","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/335643","title":{"rendered":"Is There a Secret Consensus on Debt Reform?"},"content":{"rendered":"

While more fiscal stimulus is needed to juice the weak private sector, U.S. public debt is on pace to reach 100 percent of GDP in a little over a decade. At some point in the next five years, most analysts agree, we will need a serious debt reduction plan. What would an honest fiscal reform plan look like? Greg Mankiw draws up a five-step plan for conservative debt reform<\/a>:<\/p>\n

1. Substantial cuts in spending<\/em>. Ensure that the
\ncommission is as much about shrinking government as raising revenue. My
\npersonal favorite would be to raise the age of eligibility for Social
\nSecurity and Medicare. Do it gradually but substantially. Then index it
\nto life expectancy, as it should have been from the beginning.<\/em>
<\/em><\/p><\/blockquote>\n

2. Increased use of Pigovian taxes<\/em>. Candidate Obama pledged
\n100 percent auctions under any cap-and-trade bill, but President Obama
\ncaved on this issue. He should renew his pledge as part of the fiscal
\nfix. A simpler carbon tax is even better.<\/p>\n

3. Use of consumption taxes rather than income taxes<\/em>. A VAT
\nis, as I have said, the best of a bunch of bad alternatives.
\nConservatives hate the VAT, more for political than economic reasons.
\nThey should be willing to swallow a VAT as long as they get enough
\nother things from the deal.<\/p>\n

4. Cuts in the top personal income and corporate tax rates<\/em>.
\nMake sure the VAT is big enough to fund reductions in the most
\ndistortionary taxes around. Put the top individual and corporate tax
\nrate at, say, 25 percent.<\/p>\n

5. Permanent elimination of the estate tax<\/em>. It is gone right
\nnow, but most people I know are not quite ready to die. Conservatives
\nhate the estate tax even more than they hate the idea of the VAT. If
\nthe elimination of the estate tax was coupled with the addition of the
\nVAT, the entire deal might be more palatable to them.<\/p><\/blockquote>\n

Suggestions (4) and (5) will find few liberal friends, but (1), (2) and (3) would be perfectly acceptable to many self-described liberals in journalism and academia. And yet Mankiw writes:<\/p>\n

The answer [to fiscal reform] for liberals is easy: They want to raise taxes to fund the
\nexisting, and even an expanded, social safety net, while politically
\ninsulating the Democrats as much as possible from the charge of being
\nthe “tax and spend” party.<\/p><\/blockquote>\n

This is unfair.
\nI have not recently found any serious liberal policy thinkers who say
\nthe only solution to the debt is to raise taxes ad infinitum to keep up with unreformed entitlement inflation. If I do find one, I promise to call him crazy. <\/p>\n

Instead,
\nI’ve found people like John Podesta, president of the Center for
\nAmerican Progress (liberal enough for ya?) who told a budget reform
\nconference on Tuesday that he supports: (1) a consumption tax like a
\nVAT; (2) Medicare cuts and reform on the delivery end to pull its
\ninflation curve down; (3) a goal to have a dollar of tax revenue
\nsupport each dollar of federal spending, not including interest on the
\ndebt, by 2014, which could require (4) a freeze on certain parts of the
\nbudget, including security programs like homeland security and defense.
\nThat is a liberal plan to reduce the deficit, and it involves spending
\ncuts, entitlement reform and tax increases, on the consumption side.
\nThe first three steps of the Mankiw plan involve … yep … spending cuts, entitlement reform,
\nand tax increases, on the consumption side. <\/p>\n

On many issues, sensible conservative and liberal policy
\nthinkers say they “agree to disagree.” But on the broad outlines of fiscal reform, it’s like they disagree that they agree. Liberal writers can say “there are no conservatives for raising taxes!” and conservative writers can say “there are no liberals for reforming entitlements!” but saying so doesn’t make it so. The political prospect of budget reform is dismal. We all acknowledge that. But it’s increasingly clear to me that most good budget reform plans across the political spectrum share the same three pillars: spending cuts, entitlement reform, and tax increases, preferably on the consumption side.<\/p>\n

So let’s start there.


\n

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While more fiscal stimulus is needed to juice the weak private sector, U.S. public debt is on pace to reach 100 percent of GDP in a little over a decade. At some point in the next five years, most analysts agree, we will need a serious debt reduction plan. What would an honest fiscal reform […]<\/p>\n","protected":false},"author":1534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-335643","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/335643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=335643"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/335643\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=335643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=335643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=335643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}