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Are conservatives beginning to admit the need for new taxes?

Kevin Hassett's review of Bruce Bartlett's new book critiquing the relevance of supply-side economics is an extraordinary document. The review appears in the National Review, and Hassett is a well-known conservative economist. Somewhat predictably, his review starts out straining to attack Bartlett. After quickly recapping Bartlett's journey as a harsh conservative critic of George W. Bush, Hassett puts him swiftly in place. "There is perhaps no man so praiseworthy in 'elite' circles as the prodigal conservative who has 'seen the light,' " writes Hassett, leaning heavily on scare quotes. "Bartlett has been practically blinded by it, and has, accordingly, become a media darling." Oh, snap!

But Hassett's effort at a takedown crashes quickly on the shoals of Bartlett's actual argument, which Hassett finds himself unable to reject quite so flippantly:

The problem is that the supply-side formula requires lower taxes and smaller government. You cannot, Bartlett correctly argues, have one without the other. In the U.S., government spending has advanced steadily under both Democratic and Republican administrations. The difference between Republicans and Democrats appears to be that Republicans, who oppose higher taxes in almost every form, pursue policies that end up being unsustainable.

As bad as it is today, when one looks ahead to an America that shortly will have the same age distribution that Florida has now, one can only conclude that it is going to get much worse. The health bills of our senior citizens alone may well exceed the current size of government in a few decades. Bartlett starts a difficult conversation. If we cannot constrain the growth of government, are we going to try to run a Ponzi scheme, or are we going to pay for it? If we choose the latter, how are we going to raise the money? Bartlett's answers are well researched, drawing on a massive literature.

On this, Hassett and I agree. And I'll take the opportunity to say Democrats have been little better than Republicans. President Obama's most damaging campaign promise was his inane pledge to preserve tax rates on people making under $250,000 a year. His attacks on John McCain's effort to tax health-care benefits limited his options when he became president and realized that that was exactly what needed to be done, leaving Democrats proposing a roundabout excise tax on expensive insurance plans, which is, at base, a less progressive policy. (Taxing health benefits allows the tax to vary with the worker's income, while the excise tax is a flat rate.)

Put it all together and America is in a much harder situation than it was in the early-90s, when George H.W. Bush raised taxes to help cut the deficit, and Bill Clinton quickly followed his lead. The tax conversation wasn't free of demagoguery then, but assorted grown-ups were at least willing to ignore it. Not so now.

By Ezra Klein  |  November 23, 2009; 11:36 AM ET
Categories:  Taxes  
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Comments

Dick Cheney- " Reagan proved deficits don't matter."

At least for the short term they haven't mattered politically. Ronald Reagan essentially practiced Keynesian economics by lowering taxes and increasing spending with his massive military build-up. Reagan convinced Americans they can have it all, put everything on the credit card, and not have to pay it off. And Americans still believe it.

Posted by: cmpnwtr | November 23, 2009 12:18 PM | Report abuse

Addendum: And Americans guarantee their government provided benefits and services by voting for Democrats, and guarantee they won't have to pay for them with a sustainable taxation by voting for Republicans.

Posted by: cmpnwtr | November 23, 2009 12:20 PM | Report abuse

The need for new taxes is like the need for water after setting something on fire.

Posted by: slantedview | November 23, 2009 12:21 PM | Report abuse

Eventually services will be cut because government will have been starved for revenue?

I suppose the Republican strategy of hobbling government worked.

No we will all reap the benefits of that philosophy.

Posted by: wwsnyc | November 23, 2009 12:30 PM | Report abuse

I realize this was in a different context, but previously you had argued that the excise tax was progressive because it redistributed wage gains among lower-paid employees. Another way to put it would be that the employer tax exclusion is among our most regressive tax policies, and reforming it would be a very progressive thing to do, if we had the leadership to manage the disappointment of certain constituencies.

Posted by: chinesebandits | November 23, 2009 3:13 PM | Report abuse

It is progressive, but less progressive than using marginal rates.

Posted by: Ezra Klein | November 23, 2009 5:22 PM | Report abuse

"...but less progressive than marginal rates."

That's the understatement of the century.

Posted by: bmull | November 23, 2009 10:12 PM | Report abuse

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