Deficit Commission: Wrong Target, Wrong Approach

Legislation being considered on Capitol Hill would create a supposed deficit reduction commission. If politicians were bound by truth-in-advertising, this proposal would be called a tax increase commission. It creates a mechanism that will – at best – replicate the 1982 and 1990 budget summits, both of which were fiscal disasters from the perspective of those who favor limited government. The inevitable result of a “bipartisan” process is a 50/50 deal of “spending cuts” and “tax increases,” but the spending cuts are off the “baseline” (which assumes spending goes up), so even if the changes are real (and they rarely are), they are merely reductions in increases. The tax increases, meanwhile, are real and come on top of all the revenue growth built into current law. Moreover, many of the so-called spending cuts are actually increases in revenue (the “offsetting receipts” charade). Last but not least, this legislation is a stalking horse for VAT (that’s what all the talk about an “antiquated” tax system that needs to be “modernized” is all about).

What’s remarkable about this proposal is how Democrats are almost transparent in their desire to lure Republicans into committing political suicide. As demonstrated by the 1982 and 1990 budget deals, everything is examined through the prism of distribution tables once a budget summit or commission commences and the GOP inevitably comes across as the bad guys who try to protect the rich at the expense of the poor. Of course, if Republicans are really stupid enough to travel down this path, they’ll deserve exactly what happens. But some people in Washington are aware that the proposed commission is a recipe for a major tax hike. The Financial Times cites Cato’s Chris Edwards in its report:

The push for a bipartisan commission to deal with the fiscal challenges facing the US gained momentum on Wednesday as 27 senators sponsored revised legislation that would create such a task force. The bill, introduced by Democrat Kent Conrad and Republican Judd Gregg, both fiscal hawks, would charge an 18-member group of serving legislators and administration officials with coming up with a plan to solve what they called “the nation’s long-term fiscal imbalance”. …In a sign that the concept of such a commission is gaining ground politically, anti-tax activists immediately attacked the proposal, saying it would lead to tax increases. Grover Norquist, head of Americans for Tax Reform, published an open letter saying the “commission is unacceptable from a taxpayer perspective” because “it would lead to a guaranteed tax increase”. …Chris Edwards, director of tax policy at the small-government Cato Institute, said a commission was likely to put too much emphasis on tax increases when “long-term projections reveal a spending catastrophe, not a revenue challenge”.

One final comment. It is utterly absurd to categorize Senator Kent Conrad as a fisal hawk. This term supposedly suggests a member who actively pursues deficit reduction. Yet according to the vote rating of the National Taxpayers Union, Conrad’s most recent rating is an F. Which is the same grade he got the previous year, and the year before that, and the year before that. Indeed, Conrad “earned” failing grades in 14 out of 17 years, and got a D in the other three years.