Published: Nov. 30, 2012
America not paying its fair share
by Mark Steyn
You cannot simultaneously enjoy American-sized taxes and European-sized government. One or the other has got to go.
Last year, our plucky heroine, the wholesome apple-cheeked American republic, was trapped in an express elevator hurtling out of control toward the debt ceiling. Would she crash into it? Or would she make some miraculous escape?
Dr. Jekyll and Mr Hyde
Senate Majority Leader Harry Reid, D-Nev., right, and Sen. Charles Schumer, D-N.Y., finish a news conference after Senate Democratic leaders met with Treasury Secretary Timothy Geithner on the fiscal cliff negotiations, at the Capitol in Washington, Thursday, Nov. 29, 2012. "We're still waiting for a serious offer from Republicans," said Reid. The “fiscal cliff” is a combination of tax increases and spending cuts worth about $670 billion that will take effect at the start of next year unless Congress and the White House agree to postpone or replace them.
Sequestration sounds like castration, only more so: it would chop off everything in sight. It would be so savage in its dismemberment of poor helpless America that the Congressional Budget Office estimates that, over the course of a decade, the sequestration cuts would reduce the federal debt by $153 billion. Sorry, I meant to put on my Dr. Evil voice for that: ONE HUNDRED AND FIFTY THREE BILLION DOLLARS!!! Which is about what the United States government currently borrows every month. No sane person could willingly countenance brutally saving a month's worth of debt over the course of a decade.
So now we have the latest cliffhanger: the Fiscal Cliff, below which lies a bottomless abyss of sequestration, tax-cut extension expiries, Alternative Minimum Tax adjustments, new Obamacare taxes, the expiry of the deferment of the Medicare Sustainable Growth Rate, as well as the expiry of the deferment of the implementation of the adjustment of the correction of the extension of the reduction to the proposed increase of the Alternative Minimum Growth Sustainability Reduction Rate. They don't call it a yawning chasm for nothing.
As America hangs by its fingernails, wiggling its toesies over the vertiginous plummet to oblivion, what can save her now? An Even More Super Committee? A bipartisan agreement in which Republicans agree to cave, and Democrats agree not to laugh at them too much? That could be just the kind of farsighted reach-across-the-aisle compromise that rescues the nation until next week's thrill-packed episode when America's strapped into the driver's seat of a runaway Chevy Volt careering round the hairpin bends on full charge, or trapped in an abandoned subdivision overrun by foreclosure zombies.
I suppose it's possible to take this recurring melodrama seriously, but there's no reason to. The problem facing the United States government is that it spends over a trillion dollars a year that it doesn't have. If you want to make that number go away, you need either to reduce spending or increase revenue. With the best will in the world, you can't interpret the election result as a spectacular victory for less spending. Indeed, if nothing else, the unfortunate events of Nov. 6 should have performed the useful task of disabusing us poor conservatives that America is any kind of "center-right nation." A few months ago, I dined with a (pardon my English) French intellectual who, apropos Mitt Romney's stump-speech warnings that we were on a one-way ticket to Continental-sized dependency, chortled to me, "Americans love Big Government as much as Europeans. The only difference is that Americans refuse to admit it."
My Gallic charmer is on to something. According to the most recent (2009) OECD statistics: Government expenditures per person in France, $18,866.00; in the United States, $19,266.00. That's adjusted for purchasing-power parity, and, yes, no comparison is perfect, but did you ever think the difference between America and the cheese-eating surrender monkeys would come down to quibbling over the fine print? In that sense, the federal debt might be better understood as an American Self-Delusion Index, measuring the ever-widening gap between the national mythology (a republic of limited government and self-reliant citizens) and the reality (a 21st century cradle-to-grave nanny state in which, as the Democrats' Convention boasted, "government is the only thing we do together.").
Generally speaking, functioning societies make good-faith efforts to raise what they spend, subject to fluctuations in economic fortune: Government spending in Australia is 33.1 percent of GDP, and tax revenues are 27.1 percent. Likewise, government spending in Norway is 46.4 percent, and revenues are 41 percent – a shortfall but in the ballpark. Government spending in the United States is 42.2 percent, but revenues are 24 percent – the widest spending/taxing gulf in any major economy.
So all the agonizing over our annual trillion-plus deficits overlooks the obvious solution: Given that we're spending like Norwegians, why don't we just pay Norwegian tax rates?
No danger of that. If (in Milton Himmelfarb's famous formulation) Jews earn like Episcopalians but vote like Puerto Ricans, Americans are taxed like Puerto Ricans but vote like Scandinavians. We already have a more severely redistributive taxation system than Europe, in which the wealthiest 20 percent of Americans pay 70 percent of income tax while the poorest 20 percent shoulder just three-fifths of 1 percent. By comparison, the Norwegian tax burden is relatively equitably distributed. Yet Obama now wishes "the rich" to pay their "fair share" – presumably 80 percent or 90 percent. After all, as Warren Buffett pointed out in The New York Times this week, the Forbes 400 richest Americans have a combined wealth of $1.7 trillion. That sounds like a lot, and once upon a time it was. But today, if you confiscated every penny the Forbes 400 have, it would be enough to cover just over one year's federal deficit. And after that you're back to square one. It's not that "the rich" aren't paying their "fair share," it's that America isn't. A majority of the electorate has voted itself a size of government it's not willing to pay for.
A couple of years back, Andrew Biggs of the American Enterprise Institute calculated that, if Washington were to increase every single tax by 30 percent, it would be enough to balance the books – in 25 years. If you were to raise taxes by 50 percent, it would be enough to fund our entitlement liabilities – just our current ones, not our future liabilities, which would require further increases. This is the scale of course correction needed.
If you don't want that, you need to cut spending – like Harry Reid's been doing. "Now remember, we've already done more than a billion dollars' worth of cuts," he bragged the other day. "So we need to get some credit for that."
Wow! A billion dollars' worth of cuts! Washington borrows $188 million every hour. So, if Reid took over five hours to negotiate those "cuts," it was a complete waste of time. So are most of the "plans." In fact, any "debt reduction plan" that doesn't address at least $1.3 trillion a year is, in fact, a debt-increase plan.
So, given that the ruling party will not permit spending cuts, what should Republicans do? If I were John Boehner, I'd say: "Clearly there's no mandate for small government in the election results. So, if you milquetoast pantywaist sad-sack excuses for the sorriest bunch of so-called Americans who ever lived want to vote for Swede-sized statism, it's time to pony up."
OK, he might want to focus-group it first. But that fundamental dishonesty is the heart of the crisis. You cannot simultaneously enjoy American-sized taxes and European-sized government. One or the other has to go.