Peter Orszag: Sorry, America, you are way undertaxed

November 13, 2010

Former Obama budget chief Peter Orszag says the Bowles-Simpson deficit reduction plan — which would raise the U.S. tax burden to its highest level in history as a percentage of GPP — doesn’t go far enough:

Once you move beyond Social Security reform, the other components of the proposals are well-intentioned in general but, as could be expected when many proposals are put forward, some of them are problematic in detail. The revenue cap is one of those; I wouldn’t favor it personally, although getting up to 21 percent of GDP in revenue would be a lot better than the current path we are on. We’re at about 15 percent now, but that will increase as the economy recovers.

This is left-of-center dogma: Since deep spending cuts are — we all know, right? —  politically impossible, taxes need to go up dramatically.  Yet, to cite one small piece of counter evidence,  a Washington state plan to raise taxes on the top 1 percent failed by two-to-one last week. Why do liberals assume raising taxes is easier than cutting spending? Maybe because they know Democrats will not cut social insurance spending. Even Orszag is amazed that they criticized the Social Security portion of Bowles-Simpson:

And on Social Security in particular, the reaction from the left seems off to me. If you look at the specific Social Security proposals in the co-chairs’ set of recommendations, they include a change that makes the benefits formula more progressive; they include a change that makes the payroll tax more progressive; they include changes to make the index used to measure cost of living increases more accurate. Most importantly, the proposals don’t include private accounts as part of social security, which, four of five years ago, had been the single most important thing that progressives were fighting against. The proposal now offers an opportunity to lock that in, because in ten, or fifteen, or twenty years, assuming there’s not a reform now, those issues may well be back on the table. Private accounts as part of Social Security are definitively dead for now, so I don’t fully understand why the left is not eager to lock in that victory.

Orzsag and the Brooking Institution and the Center for American Progress and Matt Miller and David Leonhardt and Ezra Klein and the Democratic Party seem to have missed the Tea Party revolt against Big Government over the past year. It’s like they had two 2009s and are moving straight on to 2011.


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Posted by Peter Orszag: Sorry, America, you are way undertaxed | One Stop Everything News | Report as abusive

key word is found in the first sentence:

FORMER Obama Budget Director….

why is he the former budget director again? Oh right, he lost his job in 2 years, quite an accomlishment – he barely made it a year and a half…

Posted by BHOlied | Report as abusive

Democrats did not miss the tea party revolt, we are now preparing to balance the budget on the backs of old rich people. They all vote GOP anyway. Let’s cut their SS and Medicare benefits now before the tea party hypocrisy becomes obvious to them. I’m sure all those elderly GOP voters are willing to sacrifice for the sake of a balanced budget. Heck, we might even be able to help some poor old people by throwing all the rich ones off Medicare and SS. Bring it on!

Posted by silliness | Report as abusive

Funny country, the USA!

Cut my taxes–they are too high!
Stop spending more–we already have too much government spending!

If you look closely at the two statements, a smart person would realize quickly that the two will produce the debt burden–not tax burden–that exists.

God forbid, many social-democratic countries have high taxes and high spending. This has led to less poverty, income inequality, lack of saving(remember, if you live at or below poverty lines saving money is not possible).

The US has some stark choices to make:
1) increase safety nets and increase taxes
2) remove the black hole of HMO’s and military contractors
3) rebuild their manufacturing industry

Lets remember that the Big three-M, Ford, Chrysler–created manufacturing in Canada because of universal health care, which was helping–not hindering–business.

There are many fiscal conservatives who are congenitally incapable and blind to how economic forces work…unless their bluster is designed to allow de-industrialization,off-shore manufacturing, and other unpatriotic shenanigans to pad the profit line of those who benefit.

In closing, the US has 12-24 months to begin righting the ship before it gets foreclosed by other economic power houses

Posted by Wolfram | Report as abusive