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Why conservatives should start worrying if Republicans don't learn to love taxes

In his excellent book "The New American Economy," Bruce Bartlett counsels his fellow conservatives to get serious about raising taxes:

The reality is that even before spending exploded to deal with the economic crisis, the government was set to grow by about 50 percent of GDP over the next generation just to pay for Social Security and Medicare benefits under current law. When the crunch comes and the need for a major increase in revenue becomes overwhelming, I expect that Republicans will refuse to participate in the process. If Democrats have to raise taxes with no bipartisan support, then they will have no choice but to cater to the demand of their party's most liberal wing. This will mean higher rates on businesses and entrepreneurs, and soak-the-rich policies that would make Franklin D. Roosevelt blush.

You see this in health-care reform: Harry Reid is looking at a payroll tax hike on the rich, and the House is looking at a straight surtax on the rich paired with a new mandate on employers. But if five Senate Republicans and 15 House Republicans had been willing to trade their votes in exchange for funding mechanisms they preferred (a tax on employer-sponsored health-care plans, for instance), Baucus, backed by Reid and the White House, would have rushed to write it into the bill, and there'd be nothing the AFL-CIO could do to stop it.

That said, I think Bruce underplays the possibility that Democrats will have to raise taxes but will only have 56 votes, and not 60, and so we'll just get a fiscal crisis. And thus does America follow California...

By Ezra Klein  |  November 16, 2009; 10:04 AM ET
Categories:  Taxes  
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Comments

If push ever gets to shove - it will do with 51 votes or even a 50 / 50 tie with the VP passing the bills from the Senate.

What are the alternatives?

Posted by: gary4books | November 16, 2009 10:21 AM | Report abuse

This isn't anything new. Conservatives have been holding the fiscal viability of our country hostage for decades in order to push through unaffordable tax cuts. Things are merely coming to a head now.

Posted by: pneogy | November 16, 2009 10:29 AM | Report abuse

what we see here is that bartlett is an honest conservative, concerned about the right-wing populist yahoos that dominate the gop.

too bad the actual number of honest conservatives is so tiny i comparison to the actual number of right-wing populist yahoos.

Posted by: howard16 | November 16, 2009 10:32 AM | Report abuse

If there are 56 Democrats all willing to vote for a tax increase, it will get done. Reconciliation was designed to deal with exactly this sort of fiscal crisis when the budget is held hostage to a minority party's nihilistic filibuster. I wouldn't discount the possibility that Democrats won't have 50 votes even if they have a majority and are facing a fiscal crisis, though.

Posted by: snaxattack | November 16, 2009 10:33 AM | Report abuse

i'm fine with a tax hike on the rich but why (in the interest of fiscal sanity and the preservation of our economy) can we not do both? Why can't we tax the rich appropriately and also tax high end health plans that Republicans and sensible Democrats alike agree raises costs?

On State of the Union with John King, Senators Conrad and Gregg both said that the CBO told them that high benefit health plans was one of the main drivers of costs and a tax on them would help reduce cost. When pressed on why Senator Reid wouldn't accept it (with a nod to Trumka) the Senators deferred to the President and Senator Reid.

Its because Trumka and his union buddies are too short-sighted to see that unions don't benefit from Cadillac plans. If any layperson ever saw what a $5 copay reduction does to reduce the cost of premiums it would make you completely irate as to the overspending in healthcare. They'd (union members) benefit more from better wages that the lesser plans could foster. Same idea Ezra has been pushing for some time about not being able to see the cost of healthcare in lesser wages (although like most on here i don't agree that its a 1/1 comparison.)

Posted by: visionbrkr | November 16, 2009 10:39 AM | Report abuse

When I was at the Foreign Service Institute in the mid-70's (sort of a holding tank for new diplomats waiting for a first assignment) we did an exercise called the Negotiation Game. Two opposing teams had to come to agreement on a problem resolution; each member of the team had a schedule of points he would receive if the final solution included certain specific provisions. All the members had the same list of provisions, but the points for each provisions varied depending on what your role on the team was (Economic Home Office Director, Agricultural Negotiating Team member, etc.)We didn't know each other's point schedule, but we did know that the ground rule was that if we did not eventually reach an agreement, everyone on both teams would wind up with zero points.

When the exercise was over, we found out that the point structure was set up so that it was basically impossible to reach agreement unless one member of each team agreed to 'take it in the neck', and achieve none of his individual goals;he would only receive base points that the whole group got for reaching an agreement.

At this point it seems most members of Congress have determined that zero points for the entire 'team' (aka, the country) are preferable to giving in on their own individual priorities. Unfortunately, it means that we are the ones who are going to be 'taking it in the neck.'

Posted by: exgovgirl | November 16, 2009 10:56 AM | Report abuse

Let not your hearts be troubled, just like we had the alleged "free market conservative" president sign a massive government invasion into the financial markets with the bailouts, when the fiscal crisis comes, some future GOP president and maybe even Congress will be forced by the bond market to raise taxes.

One of the cruelest things to happen to a political ideology is to have it collide with reality.

Posted by: zeppelin003 | November 16, 2009 10:58 AM | Report abuse

Bartlett is right, but aren't tax increases to cut the deficit precisely what Budget Reconciliation was designed tpo deasl with? Why do the Dems need more than 51 votes for tax increases (other than for political cover)?

Would that we had reconciliation in California, as the no-taxers grind our once mighty educational sytstem into the dust.

Posted by: Mimikatz | November 16, 2009 11:14 AM | Report abuse

Lest readers think I am an idiot, I meant to say that spending will rise by 50% IN TERMS of GDP; i.e., from about 20% of GDP to about 30% of GDP.

Posted by: bartlettb | November 16, 2009 11:23 AM | Report abuse

" If any layperson ever saw what a $5 copay reduction does to reduce the cost of premiums it would make you completely irate as to the overspending in healthcare"

I would certainly be interested in seeing that kind of data -- which have been curiously absent from public discussion thusfar.

The fundamental problem with the current Senate proposal to tax certain insurance plans is that it uses premiums as a proxy for coverage or benefit value. The report linked at the top of Eza's page here explains the problem with that approach:

" As a result, legislative proposals that limit certain tax advantages based on premium amounts rather than benefit values, for example, could have a disparate impact on those with coverage in smaller firms, in high-cost areas, and/or with enrollees who are sicker than average"

We also need to ask why there is no plan to apply the "Cadillac" designation universally. Medicare Advantage payment rates across the nation would all qualify as "Cadillac" (even with a 14% cut). Why is okay for seniors to have very low co-pays but not for the primary bread-winner of a family of four? Do the data actually indicate that working adults are more prone to over use than seniors?

Posted by: Athena_news | November 16, 2009 11:29 AM | Report abuse

athena_news,

i have a client that just signed up for their annual healthcare renewal. We use software called "healthconnect" as the rates in NJ are modified community rating. A law firm here in NJ. I went back to their plans and looked up a standard POS (point of service) plan and used Aetna as an option. I ran identical plans one with a $20 doctor copay and another with a $30 copay. That $10 differential raises their cost on that specific plan from $848 to $1009 on a single rate. That means that for it to make more sense to be on the lower copay plan you would need to see a doctor 16 times in the course of one month alone. I'm sorry I can't believe anyone does that.

That's how asinine cadillac plans are. And you're right, no one knows about it. Worse yet none seem to care. If union members knew what wool was being pulled over their eyes by their union bosses all over the issue of control there'd be riots in the streets.


Again I ask, why can't we do both in the interest of fiscal sanity?

Posted by: visionbrkr | November 16, 2009 11:43 AM | Report abuse

"At this point it seems most members of Congress have determined that zero points for the entire 'team' (aka, the country) are preferable to giving in on their own individual priorities." Interesting, exgovgirl. But Ezra is misrepresenting the point of view of conservatives. They consider the alternative of no bill passing at all to be very much better for the country in the long run, than any of the various bills being suggested. And if not that, at least that the bill should have as little in it as possible. Because they consider that what is being done will hurt health care here, and kill a lot of people, and help to bankrupt the country.
So it wouldn't make sense for them to cooperate in order to get this concession or that. Maybe if the Democrats had seventy votes in the Senate, and were sure to get what they want anyhow. Certainly not where they might not have sixty.

Posted by: MikeR4 | November 16, 2009 11:57 AM | Report abuse

Honestly, Bruce Bartlett. I'm glad to see you trying to open conservative minds, but as political prognostication this is remarkably unpersuasive:

"If Democrats have to raise taxes with no bipartisan support, then they will have no choice but to cater to the demand of their party's most liberal wing."

You mean just like in 2009, when Democrats had to pass health care and financial re-regulation with no bipartisan support and had no choice but to cater to the demand of the party's most liberal wing?

Has he heard of blue dogs? Joe Lieberman?? The filibuster??? Why, some people have actually suggested that big donors and well-heeled industries have some influence in the Democratic party.

California sounds more likely.

Posted by: Sophomore | November 16, 2009 12:08 PM | Report abuse

zepp, I imagine a Republican *administration* would likely be willing to raise taxes, but I doubt a Republican *Congress* would. The difference is that economic policy in the White House is, on average, created with more input from professionals and is developed with the recognition that a president is judged by outcomes more than Congressmen are.

Bartlett's book is an important contribution. The notion that tax increases are politically toxic is, I think, very damaging to the long-term prospects of America. If politicians don't have the courage to discuss tax increases in public, it falls on the unelected opinion-makers to change the terms of public debate.

Posted by: jeffwacker | November 16, 2009 12:35 PM | Report abuse

The dynamic described by Ezra is why a lot of Americans cannot get behind the current health care proposals. I, for one, would love to support expanded coverage. But without reforms to reduce cost growth in health care, I am pretty sure that expanding coverage is not affordable. And I have little confidence that our political leaders will make the tough choices needed to pay for the subsidies with taxes, not debt. We have already placed too much debt on our children and grand-children. For me, at least, I will not support anything that increases that debt.

Posted by: mfreeman3377 | November 16, 2009 1:05 PM | Report abuse

I should have noted as well what mfreeman said. Conservatives think that universal health care to the government's list of powers is a really bad idea. But there are a whole lot of independents who think that it's a good idea in theory. But they don't trust you. They think you're so anxious to pass health care reform that you're lying to them. Stuff like this:
http://www.washingtonexaminer.com/politics/Dems_-slick-fix_-_210-billion-of-fiscal-restraint-8523304-69917072.html
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/14/AR2009111402278.html

Posted by: MikeR4 | November 16, 2009 1:55 PM | Report abuse

it's almost like no one has ever heard of the idea spending cuts? Why won't some centrist Democrat urge his fellow democrats to "get serious" about spending reduction? Pehaps the next Republican Congress and President will vote to pass spending cuts on a strictly partisian basis if Democrats don't get on board? one can dream....

Posted by: MBP2 | November 16, 2009 3:18 PM | Report abuse

MBP2, you're hoping the GOP will make spending cuts its signature issue? Have you been watching the past eight years?

It was the Republican party that came up with the $500 billion Medicare Part D program, and made it more costly than it needed to be by preventing the government from bargaining with the drug companies over prices. Today it is the GOP that is telling seniors it will prevent *any* cuts in Medicare spending.

Where do you think the Republican majority would dare to make cuts? There are three truly large pots of money - Social Security, Medicare/Medicaid, and defense spending, which together make up about 2/3 of all federal spending. Over the past eight years Republicans have fought to *increase* spending in each of these areas. Which ones will they now promise to cut?


Posted by: Sophomore | November 16, 2009 4:02 PM | Report abuse

"

The dynamic described by Ezra is why a lot of Americans cannot get behind the current health care proposals. I, for one, would love to support expanded coverage. But without reforms to reduce cost growth in health care, I am pretty sure that expanding coverage is not affordable. And I have little confidence that our political leaders will make the tough choices needed to pay for the subsidies with taxes, not debt. We have already placed too much debt on our children and grand-children. For me, at least, I will not support anything that increases that debt.

Posted by: mfreeman3377 "


-
I think is point of view expressed by mfreem is the most decisive point of view, partly because it is held by a huge 30-40% of the electorate.

The tiny-government-is-best viewpoint on the other hand I think is held by a small minority of 7-15%.

We should ignore that 7-15% I think, and pay attention to that 30-40%.

Posted by: HalHorvath | November 16, 2009 4:26 PM | Report abuse

"Over the past eight years Republicans have fought to *increase* spending in each of these areas."

They have also fought for billion dollar oil industry subsidies, because oil companies are so much more in need of money than we hard-working idiots being robbed and cheated by GOP wastefulness. The GOP has been surprisingly consistent in its fiscal policies, more consistent than most commentators are willing to give credit: their concern has always been to take our money and give it to the rich and they have been extremely successful with that. Anything else - the joke called "small government" etc. - is pure propaganda and it always was.

Posted by: carbonneutral | November 16, 2009 4:33 PM | Report abuse

Sophomore - That was an attempt at sarcasm. That's why i said, "one can dream..." But let's not forget the story behind Medicare Part D. Yes, Bush proposed it and didn't pay for it. But Dems criticism wasnt that he didn't pay for it. Their criticism was that it wasn't comprehensive enough (ie it didn't cost enough.) Dems were against the donut hole - the feature that actually helps keep taxpayer costs under control. If i remember correctly Kennedy's version of Part D was scored by the CBO to cost $800 billion over 10 years. And lastly let's not forget that the private sector has brought Part D costs in below CBO estimates.

Repubs won't promise to cut anything...yet. I still hope for a return to true fiscal conservatism. But Medicare is ripe for spending cuts as is defense...and frankly education as well.

Posted by: mbp3 | November 16, 2009 10:55 PM | Report abuse

"I think Bruce underplays the possibility that Democrats will have to raise taxes but will only have 56 votes, and not 60, and so we'll just get a fiscal crisis."

Ezra,

Unless my memory and research on reconciliation is really off, raising taxes to lower the deficit is tailor made for reconciliation, and thus it would only require 50 votes plus the V.P.

With raising taxes on the wealthy, this would be a very positive way to raise revenue, with the historically low rates they pay after a generation of Republican dominance. To see the merits of this approach, I recommend these two brief articles:

http://www.robert-h-frank.com/PDFs/WP.1.24.99.pdf

http://economistsview.typepad.com/economistsview/2008/08/tax-cuts-and-go.html

Posted by: RichardHSerlin | November 17, 2009 5:22 AM | Report abuse

Of course as ususal Mr. Klein comes from the left wing point of view that to bring the federal government's massive Obama deficit under control, that the only answer is of course tax increases. No mention of any spending cuts because, except for defense spending, to a liberal all federal spending is sacrosant. Federal spending has been increasing at several times the rate of inflation for years, even unfortunately during the time when the Republicans controlled all branches of government. That's one of the reason's they don't control the government any more. We are, despite what you hear from liberals, already heavily taxed. If you take into account all the various federal, state and local taxes and fees we are more heavily taxed than we have ever been. You also have to count corporate income taxes, second highest in the industrial world, oil and gas excise taxes, import tariffs, etc., because they all get passed on to the consumer. The average household gets well into April before they pay off their taxes now. Can you imagine? The government takes on average 25% of your wages now. Of course from the liberal perspective you should feel lucky that they let you keep any of your hard earned dollars.

The way to get our fiscal house in order is to make the government live within it's means. That means spending has got to be cut and that includes those third rails of politics Social Security, Medicare and Medicade. Social Security, Medicare and Medicade consume such a massive amount of federal spending now and will grow at such an unsustainable rates in the future they have got to be addressed if you want to get government spending under control. One other thing to consider is the fallacy that by taxing the "wealthy" you can eliminate the Obama deficit and pay for the gigantic tax payer funded government run Obamacare. The top 1% of earners in this country already pay over 34% of the taxes, the top 5% pay over 54% and the top 10% pay over 65%. The top 50% pay over 96% of the taxes in this country which means almost half the income earners in this country pay no federal income taxes. You should also take into account that if you continue to raises taxes on the most productive members of society that they will eventually take their marbles and go play somewhere else which in this global marketplace we live in today is not very hard. So where will that leave the least productive members of society who depend on the taxes of the wealthy to subsidize their various goverment handouts? Be careful you don't shoot the golden goose.

Posted by: RobT1 | November 17, 2009 9:22 AM | Report abuse

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