Americans Don't Need Higher Taxes. But They Do Need an Honest Appraisal of their Choices.

The title of Ezra Klein’s latest Washington Post column announces that “Yesterday’s tax revenues can’t support tomorrow’s America.” The piece makes the case that tax revenues will have to increase from their historical average of about 18 percent of GDP in order to support higher health costs and an aging population.

But you could just as easily make the argument in reverse: An honest look at the history of America’s federal revenues strongly suggests we can’t afford the same level of health and retirement benefits into the future. To put it another way: Historical tax revenues can’t support projected increases in entitlement spending.

The core of Klein’s case is that the growing senior population and the rising cost of health care means that continuing to provide entitlement benefits roughly equivalent to today’s will require greater revenue:

Projected deficits are driven by two factors: health-care costs and old people. The coming years will bring more of both. Today, the elderly make up 13 percent of the U.S. population. By 2050, they’re expected to be 20 percent. There’s no way that the tax receipts of the 1980s will support the demographics of the 2020s or 2030s. Anyone who says otherwise isn’t taking the numbers seriously, or is planning cuts to Social Security and Medicare that dwarf anything that has been openly discussed in Washington.

Out on the basic outlook, Klein and I agree on quite a bit: What the nation is doing now with regards to tax revenues and entitlements is not sustainable in the long term. But Klein thinks that overall tax revenue levels will have to rise, because the alternative would be cutting Medicare and Social Security far more than any legislator is actually talking about.

Yet the same is more or less true when it comes to taxes: Continuing to provide entitlement benefits at today’s levels will require far higher levels of taxation than most of today’s elected officials are willing to admit. 

This is what the Congressional Budget Office has been telling people for a long time. Leaving entitlement benefits at roughly their current levels would require raising federal revenues “significantly above their average share of GDP” since World War II. Yes, it’s “possible to keep the policies for those large benefit programs unchanged,” the budget office says, “but only by raising taxes substantially, relative to current policies, for a broad segment of the population.”

Klein is right that politicians haven’t been keen to discuss the kind of entitlement cuts that would be necessary to put the budget on a sustainable path. But neither has the political class embraced the kind of broad tax hikes—tax hikes that would have a noticeable effect on large swaths of the middle class—that would be necessary either.

Right now there's not much appetite for a major overhaul of the entitlement system. But there isn't a lot of support for a large tax hike on the middle class either. 

The real problem here is that the public isn’t getting the sort of honest appraisal it deserves. Republicans tend to focus on tweaks to the entitlement system that won’t produce big savings. Democrats heavily emphasize tax hikes on the wealthy that won’t come close to providing the sort of fiscal course correction the federal government needs. But neither side talks seriously about the fundamental budgetary challenges the country faces—or the kinds of policy solutions that addressing those challenges might require.

Yet what the CBO has made clear over and over again is that what we need are big changes, the kind that won't be easy: “Making policy changes that are large enough to shrink the debt relative to the size of the economy—or even to keep the debt from growing—will be a formidable task.” Right now it’s a task that neither party is up to. And that goes a long way toward explaining why we're our current impasse. We don't necessarily need higher taxes to resolve our budget woes. But we do need politicians willing to level with the public about the scope of the policy changes that will eventually need to be made.  

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  • some guy||

    Dammit Suderman! I already vomited on my monitor once this morning when I read that drivel. Now you're making me repeat the experience!

    It's fine if you want to comment on Klein's idiocy, but please, for the love of God, don't quote him!

  • Sevo||

    Q: When is a conclusion substituted presumed to be a premise?
    A: Whenever Klein writes something.

  • Fist of Etiquette||

    But Klein thinks that overall tax revenue levels will have to rise...

    Raising taxes doesn't mean you're going to bring in more tax revenue. And anyway, I'm guessing Klein is arguing from the "we can't sustain entitlements with current taxes" problem from the tax side of things because he foresees a huge downside to cutting entitlements and little or no downside to raising taxes.

  • juris imprudent||

    Ah, but even poor, stupid Ezra realizes that taxing the income of the rich only gets you so far, and that ain't far enough. No, we must have a VAT and maybe a carbon tax - neither of which he bothers to mention are highly regressive (for which obviously further govt income intervention must happen to ameliorate the inequality).

  • Enjoy Every Sandwich||

    I figure before too long they'll also get around to raiding private pensions, 401(k)s, IRAs, etc.

    They don't seem to understand that this is going to end badly.

  • ant1sthenes||

    Hopefully it ends with a lot of progressives impaled on pikes as a warning to other would-be bandits.

  • Bill Dalasio||

    I'm more inclined toward tar and feathers. Or it's modern equivalent, kerosene soaked trash bags.

  • DreasMommy||

    I don't know- I think impalement makes a bigger statement. Scary as f*ck, if nothing else…

  • Johnimo||

    Yes, that's the reason Obama's pushing so hard for more taxes on the rich, simply as a symbol of his desire to punish them. Later, he can explain to everyone that the Government needs even more revenue. First, however, he must show how diligently he tried to get the rich to pay for everything.

  • ||

    Republicans tend to focus on tweaks to the entitlement system that won’t produce big savings.

    huh?

    Cry baby Boner did make a proposal to Obama and it had lots of stuff in it that were not entitlement tweaks.

    The other parts of the budget does have 100s of billion of spending in it. Plus there is the military budget the is way way way bloated for our needs.

    They could cut all that to the bone and it would produce big savings.

  • Brandon||

    Try writing that again in English. Or at least some recognizable language.

  • Art Vandelay||

    Be nice, he's Dothraki.

  • ||

    The Dothraki have no word for "welfare state".

  • Jerryskids||

    The real problem here is that the public isn’t getting the sort of honest appraisal it deserves. Republicans tend to focus on tweaks to the entitlement system that won’t produce big savings. Democrats heavily emphasize tax hikes on the wealthy that won’t come close to providing the sort of fiscal course correction the federal government needs. But neither side talks seriously about the fundamental budgetary challenges the country faces—or the kinds of policy solutions that addressing those challenges might require.

    I think Corning is saying this, just not quite so elegantly. And I suspect Corning doesn't realize that this is what he is saying.

    But I think the real problem here is that you expect politicians to address long-term fundamental budgetary problems. 'Long-term' to a politician is anything beyond the next election. It is true that minor tweaking here and there isn't going to address the problem for more than the next few years - but the next few years is all politicians care about.

    (Suderman's wishing and hoping things were otherwise isn't a serious addressing of the issue, either. Serious reform predicated on politicians ceasing to act like politicians is just as serious as serious reform predicated on the existence of magical pixies riding flying unicorns.)

  • Jerryskids||

    Or to put it another way: It's all well and good to talk about what is 'right and good and fair and proper', but you aren't going to get very far expecting people to do the right thing for altruistic reasons. It's a much safer bet that people call 'right and good and fair and proper' that which it pays them to do so. (That's how you wind up with virtually everyone agreeing that we should cut 'wasteful' government spending - with the proviso that whatever government spending benefits them personally is, by definition, not wasteful.)

    If you want politicians to seriously address long-term fundamental budgetary problems, you are going to have to go beyond proposing what is merely sensible and propose something that is profitable.

  • R C Dean||

    The current political class is far too weak to do what needs doing to balance the budget. Even if we run off the fiscal cliff and don't touch the spending cuts and tax increases (and don't get a recession), we're still looking at, what, a $600BB deficit next year?

    Let's all just admit it: The federal budget will never by balanced voluntarily. It will, someday, be balanced, but not before the government loses its ability to sell Treasuries because nobody is buying. And that day will come, because our debt is compounding.

    The Fed has been buying 2/3 or more of Treasuries for years now, so we are already monetizing at an appalling level, and have already lost the ability to sell 2/3 or more of the debt the government needs to sell. We're closer than people think.

    The end game will be when the dollar finally collapses under monetization and loses its reserve currency status, and that too is inevitable with the Fed pumping out a trillion or more newly printed dollars a year, with no plans to stop. How can there be any other resolution to monetization/debasement on this scale?

    After that, whatever the government is will have little to no ability to sell debt to anyone, so its budget will be balanced. But not, I suspect, before.

  • Tulpa Doom||

    It will, someday, be balanced, but not before the government loses its ability to sell Treasuries because nobody is buying.

    And then China will swoop in and make an offer to Washington politicians to bail them out if they sell the other 320 million Americans into slavery in exchange for a comfortable retirement for themselves.

  • Paul.||

    Either that or they hold up the next shipment of iPhones for lack of payment. That'll get the liberals attention.

  • VG Zaytsev||

    The end game will be when the dollar finally collapses under monetization and loses its reserve currency status, and that too is inevitable ...

    Yep.

    It's too easy for politicians to spend money created out of nothing to ever voluntarily stop. Even if Obama completely caved to the republican demands we'd be back to trillion + dollar deficits within a couple of years.

  • Tulpa Doom||

    “Yesterday’s tax revenues can’t support tomorrow’s America.”

    BARF. 75 years ago Ezra Klein would have been goose-stepping.

  • BarryD||

    How do you know he isn't, now?

  • Brandon||

    And, the comments:

    simon341
    10:39 AM MST
    Get a sense of humor. By the way our single payer system wouldn't end our healthcare system because we don't have A system. We have two different single payers, one NHS, and a Swiss system now because of the ACA. What blowhards like you and Ross need to realize is that the government is an insurance company. If we can't find the taxes to fund it we turn to the private sector for exactly the same options but without the benefit of risk pooling and much more administrative fees. It's not that hard. Nonetheless, anti tax conservatives are a dying breed, especially with immigration. Sayanora.

  • An0nB0t||

    "What blowhards like you and Ross need to realize is that the government is an insurance company."

    Sometimes an eye toward historical truth is all we need to put things into perspective. Who, after all, can help but cry when they witness DC's monolithic Insurance War Monument for the first time? So many innocent lives lost for so noble a cause.

    Makes you think.

  • iggy||

    This entire argument is pointless because the U.S. government doesn't take in 'only' 18% of GDP. That's how much the federal government takes in. Progressives love to point out that European countries get closer to 30% of GDP in revenues, whereas the U.S. gets about 20%. The problem is, those numbers only take federal revenue into account. Unlike Europe, a lot of our spending and revenue come from state and local governments as opposed to federal governments.

    http://www.usgovernmentrevenue.....le=Revenue as percent of GDP

    According to this chart, total government revenue was about 32% of American GDP as of 2010. That's actually higher than most European countries. Revenue is not a problem.

  • XM||

    "government is an insurance company"

    The government is so not the insurance company, which is like the point in "single payer" system in place like Korea and Japan.

    If we need tax funds, then we would almost have to tax the middle class and the lower income group that pays nothing in tax. As observed by Reason writers, the lower income folks over the world pays more in taxes or cost of living expenses compared to us, who perennially expect the wealthy to fund for everything.

    I have lots of fun hearing stories about Americans who think Korea and Japan is some technological, trippy wonderland, and actually goes there and find some backward ass things about the place. Single payer will be EPIC FAIL in this country and a lawyer's dream. Not the same government, not the same way hospitals are expected to approach patients, not the same payments.

  • Romulus Augustus||

    Politicians, and their stupid supporters, will just keep saying that so and so isn't paying his "fair share."

  • Virginian||

    That's leftism in a nutshell: "Reality isn't fitting our theory....time to ALTER REALITY! FOR THE CHILDREN!"

  • The Immaculate Trouser||

    "Republicans tend to focus on tweaks to the entitlement system that won’t produce big savings."

    I would disagree with this at least in part. While most Republicans don't support changes to entitlements *at all*, those that do support changes typically support a framework that makes it *very* easy to lower the amount that we spend on those programs. The suggested Premium Support program for Medicare, for example, either partially or completely voucherizes the program and is scalable to a degree that other reforms (capitated system, bundled payments, etc) are not. Switching to voucherized programs, means-testing entitlements, and raising the eligibility age would significantly reduce -- if not outright eliminate -- our deficit almost overnight.

  • Nuked||

    Isn't this what Gary Johnson did with Medicaid in NM?

  • sweettea71||

    Means testing? So you want me to pay in, but not collect? Sounds like a great plan...for you.

    How about we each pay for our own retirement and health care?

  • Hyperion||

    Ezra Klein is one of the most punchable of all punchable doucebags.

    I think during this evenings commute home from the city I had an epiphany, and I have finally come to grips with the way that the proglodytes think. It makes perfect sense that they want, need, a big centralized entity to make every decision for them, because they are totally freaking stoopid.

    The part I have a problem with is that they also want that same personal decision making power forced upon the rest of us. And it's because if we make our own decisions, it might provide us with certain advantages over them, which would be unfair. So I understand why they think that way also. It's just that I hate it. I don't want to be equal with these ignoramuses, because I fucking hate them, every one of them, I really do. I want them far, far, away from me.

    The only solution is for progressives and Libertarians to go their separate ways, to establish their own countries. Notice I didn't capitalize progressive like I did Libertarian. That's because I fucking hate them.

  • iggy||

    This is a good point. Whenever someone is anti-gun, he always seems like someone I wouldn't trust with a gun. When someone doesn't think people can handle their own retirement planning, it always seems to be someone who can't do basic math. And when an individual argues that parents can't effectively teach their own children, that person is almost always too stupid to understand sixth grade science.

    Maybe progressives are just so dumb that they project their own stupidity onto the rest of society and assume that the rest of the world needs a nanny to watch over them too.

  • Hyperion||

    The way I look at it, is that you can either free things up so that the best and brightest and most ambitious can raise everyone up to a higher level, or you can let the bottom dwellers drag everyone else down into a pit of despair. The latter is the direction that we are headed in, sadly.

  • Flatulent Monkey||

    I think that some combination of cowardice and laziness is more apt.

    Progs are otherwise able beings that are scared of many things.. but mostly they are scared of the potential negative outcomes of their decisions so they want decisions made for them. They are lazy in that they think that success/positive outcomes should be easily attainable. The rest is a mass of flimsy rationalizations and deafening cognitive dissonance.

  • Tulpa Doom||

    Whenever someone is anti-gun, he always seems like someone I wouldn't trust with a gun.

    A large part of that is that it requires a lot of training and practice to safely handle and use a gun, which an anti-gun person is unlikely to have for obvious reasons. They seem to think all you have to do is point it at the bad guy and pull the trigger and he dies, an attitude reinforced by Hollywood and TV routinely showing people shooting like expert marksmen with apparently no training.

  • Sevo||

    As a yute, in the midwest, it was damn difficult to shoot a squirrel with a .22. My aim wasn't the problem; the problem was that, as a yute in the midwest, I (and we) were taught not to shoot in the direction of the homes. Shoot toward areas where there is a mile of un-populated space.
    The squirrels who hung out on *that* side of the tree lived and bred. The ones who hung out on the other side (and there were few of them when I was hunting) didn't live long enough to breed.
    So, you see, good hunting practice led to successful squirrel populations. And frustrated kids.

  • Tulpa Doom||

    Sounds like you needed a tree stand.

  • mad libertarian guy||

    Nope. All he needed was for someone to walk to the other side of the tree while he waited on the good side to shoot the squirrels as they came around.

  • RickC||

    Smaller shotgun, like a 20 gage would have eliminated most of the problem. Even in the more spacious area I grew up in you still had to think about houses being down range. A 308 round meant for a deer (not mine), and fired from over a mile away once punched through a neighbor's house just above the side entrance door.

  • Redmanfms||

    A large part of that is that it requires a lot of training and practice to safely handle and use a gun...

    Bullshit. Gun safety and manipulation (model specific) can be taught in an afternoon. 3-4 hours tops and you will have somebody who can load, fire, unload, and field-strip their own weapon, on top of knowing the "no shits" of firearms safety. Will they be Frank Proctor, Rob Leatham, or Eric Grauffel? No, but they'll certainly be able to operate a firearm with a reasonable degree of competence. Certainly competent enough to put a dick in the dirt at in-house distances.

  • Tulpa Doom||

    It's way too easy to label your opponents stupid and accuse them of ulterior motives, however comforting it may be.

  • Brutus||

    In this case, I think "stupid" encompasses "unwise." There are a great many progs that have high IQs and are well educated, but foolish to a degree that makes them functionally stupid.

  • mad libertarian guy||

    That's because progs have made the ultimate mistake: they confuse education with intelligence.

  • Heroic Mulatto||

    The part I have a problem with is that they also want that same personal decision making power forced upon the rest of us. And it's because if we make our own decisions, it might provide us with certain advantages over them, which would be unfair.

    I believe this is what Rand was getting at when she coined the phrase "the hatred of the good for being good".

  • The_Choctaw||

    "The only solution is for progressives and Libertarians to go their separate ways, to establish their own countries." You first. Get the fuck out.

  • Calidissident||

    Love it or Leave it!

  • An0nB0t||

    Idea for novel: 100,000,000 progressives who venture out to seastead. What could go wrong?

  • Tulpa Doom||

    OK, I'm sure there's something wrong with this proposal but I'm not sure I can figure it out.

    Thanks to an odd loophole in current law, the U.S. Treasury is technically allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases.

    Under this scenario, the U.S. Mint would produce (say) a pair of trillion-dollar platinum coins. The president orders the coins to be deposited at the Federal Reserve. The Fed then moves this money into Treasury’s accounts. And just like that, Treasury suddenly has an extra $2 trillion to pay off its obligations for the next two years — without needing to issue new debt. The ceiling is no longer an issue.
  • Gannicus||

    This sounds like the set up to a movie. After the trillion dollar coins are minted and are on the way to be deposited, a daring strike made by a highly trained assault team, led by a now disgraced General Petraeus, steal the coins. Petraeus then attempts to sell them for nuclear weapons, so that he can form his own country where he is free to pursue love with his former mistress. But Obama doesn't plan to let that happen. Personally leading Seal Team Six, the Great Obama parachutes into the area where the deal is being made and pulls the trigger himself on Petraeus. He is then named the God King and presented a golden throne by a nude Nancy Pelosi at the Democratic convention in 2016.

  • Spiny Norman||

    Which is more horrifying: Obama the God King or Nude Nancy Pelosi? Discuss.

  • Sevo||

    Spiny Norman| 12.7.12 @ 11:13PM |#
    "Which is more horrifying: Obama the God King or Nude Nancy Pelosi? Discuss."

    ARRRRRRRRRRRRRRRRRRRRRRRRGH!

  • juris imprudent||

    I'm sorry, but my brain seemed to be consumed by thoughts of suicide - was there something you wanted to discuss?

  • Tulpa Doom||

    Upon further consideration, I think the problem would be that unlike funding govt spending with debt, which takes dollars out of the economy (to purchase T-Bills) before spending them, this proposal would leave the other dollars formerly used to purchase T-bills in the economy, together with the govt-spent dollars. So it would cause inflation, something that 2 quoted economists in the article claim would not be the case.

  • The Bearded Hobbit||

    Didn't Mark Twain write something like this?

    ... Hobbit

  • VG Zaytsev||

    OK, I'm sure there's something wrong with this proposal but I'm not sure I can figure it out.

    The thing that's "wrong" with the proposal is that it's totally unnecessary.

    The fed is already monetizing at least 2/3s of new debt. They can, and will, continue to do that and more from here on out.

  • Tulpa Doom||

    Yeah, but that still counts against the debt ceiling. The Fed can't buy debt that the Treasury can't issue.

  • VG Zaytsev||

    It's all kabuki theater dude.

    If congress ever tried to make the debt ceiling real by not extending it, the fed could just 'forgive' some portion of the federal debt that it owns. There's no legal barrier to them doing so and it would take all of 3 seconds to execute.

    No need to produce mythical coins.

  • ETremens||

    "Out on the basic outlook, Klein and I agree on quite a bit"

    I stopped reading here, on the implementation of Reason's "be-nice-to-assclowns" policy.

  • juris imprudent||

    You see, you don't have to worry about being invited to the cool cocktail parties.

  • waaminn||

    OK wow, lets kick it on up a notch or two!

    www.AnonTyme.tk

  • Rick Santorum||

    LET THE BOOMERS STARVE

  • anon||

    Government is an insurance company...

    Dude, my insurance company has never stolen my paycheck to pay someone to shoot my dog while they were breaking & entering my property to steal pot and lock me up for no crime whatsoever.

    You *really* need to consider Allstate or something.

  • Rick Santorum||

    stolen my paycheck

    Taxation is a necessary evil of civilized society. Deal with it, nerd.

  • Tulpa Doom||

    Remember how the eeeeeeevil Tea Partiers are just terrible because they refuse to compromise, unlike the nice moderate Republicans of the past?

    "If we're serious about reducing our deficit while still investing in things like education and research that are important to growing our economy - and if we're serious about protecting middle-class families - then we're also going to have to ask the wealthiest Americans to pay higher tax rates," he says. "That's one principle I won't compromise on.

    Who said this? Hint: not a Tea Partier.

  • Rick Santorum||

    if we're serious about protecting middle-class families

    Says the President who is running up deficits by pissing away tax dollars on boondoggles at home and abroad.

  • Mike M.||

    Thanks to Europe, we now know that really socking it to the middle class with a heavy tax burden kills your long term economic growth.

    And anyone who reads the news once in a while knows that they STILL can't afford their bloated welfare states, even with the massive levels of taxation they have.

  • Tulpa Doom||

    One thing Europe does better than us is spread the tax burden into the lower brackets as well.

    Having our somewhat smaller welfare state funded by only the top 53% is ridiculous.

  • Rick Santorum||

    But...but they're so progressive!

  • Johnimo||

    Yeah, I can just hardly wait to see how eagerly the left accepts the new "war on women" waged by the progressives. A five dollar per gallon tax on gasoline and a 23% VAT should just about cover it all.

  • johnl||

    Why can't libertarians learn to love the great insurance company? Paying SS and Medicare is going to completely break the treasury. Why is that bad? The empire, all our social engineering schemes, and our economic engineering schemes, they will all have to go, all of them, to pay for SS. What's not to love?

  • Epicdelusion||

    Paul Ryan is a dork. Did he really think his ideas were going to float in today's America?

  • Phill||

    All my former college mates and friends at the university are fond of the best writing service that focuses on the evolution of any theme or idea in example essays for free up there suggested by educators worldwide. Learning new material as much as keeping in mind gained experience may require huge personal brain resources of both the undergraduates and postgraduates. It comes as a rule that new information is learned through discussions.

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