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The piece that I published this morning has already attracted a lot of attention, for which I am grateful, but seems to have generated some confusion, which is best avoided. Let me therefore see if I can clarify at least some of the issues.
The first point is that I am not writing on a blank slate. The policies that got us into this situation are not those that I have ever supported. Indeed, for years I have taken the position that the well would run dry on the entitlement frontier, that regulation would stifle production, and that public institutions would start to crumble with each new expansion in government power.
But unfortunately, we are not dealing with the blank slate. The question that we have to face is what to do now in order to control the situation. On this issue, the first point is that the villain of the piece is the increased level of government control over the economy. This is expressed not only in the direct use of public funds for various projects but also in the scope of regulation over the private sector. The sum of these activities has to be reduced before the level of federal excesses weighs down too heavily on the economy.
Thus I agree with Professor Paul Rahe that the last thing that we want is for a higher share of the GDP to go to the federal government. It is just for that reason that I would raise taxes (and flatten them as well) if that were a means to the end of a smaller federal government, which it can be only if there are spending cuts, which in turn can reduce the amount of borrowing, which is an implicit tax on the future.
I also agree that we should not in principle think about closing loopholes as a quid pro quo for lowering tax rates. The point is that closing these loopholes is probably a good thing, even if there are no tax reductions, given the sectoral distortions that they create on the economy. But that is small potatoes relative to the larger question of runaway expenditures. The corporate jet issue, about which I wrote some weeks ago, is a tiny issue relative to the larger question that we face. No satisfactory solution can be reached therefore, unless there is a systematic overhaul of the entitlement programs, which must be done regardless of what happens to taxes or debt finance.
To put the point in the most explicit terms, the overall size of government is too large. It is a decidedly second order question whether we fund government by taxation, by borrowing (with future taxes needed) or with inflation. Anything that brings down the overall level of spending is what is needed. If higher taxes are that lever, it is a prudential judgment that they should be accepted, not a statement of high principle that we like high taxes for their own sake.
So Scott Reusser is right when he says: “[A]bandoning the Norquist pledge is wise, but only in some future context of tax reform, not in our current context of spending cuts. And Bryan Stephens is right when he writes: “We cannot keep raising taxes to fund this madness. We have to spend less.” The real question is how to get there, and with strong Democratic insistence that entitlement programs have to be kept out of the mix, it is a hard task indeed.