True. I just hope part of that work includes some reflection about what appeared to be a serious “narrative deficit” between Republicans and Democrats these last two presidential elections.

From what I’m hearing a majority of the voters in the exit polls supported most of the Republican positions, but favored Obama based on the belief that he “cared” more for them than Romney.

You’re definitely spot on about the need to get our policy straight, and be able to articulate that policy coherently. But I suspect our challenges lie equally in the elusive realm of “public perception”.

That’s the problem with extrapolating from a closed system of risk assumptions, reality always turns out to be more complicated. But hey, maybe this time it’s different.

http://www.nationalreview.com/articles/334890/moving-editors

Nonsense. Most seniors pay zero income or payroll taxes on their Social Security benefits. The effect of the FairTax would be to slap a 30% sales tax on whatever they purchase with their benefit checks. They would also pay that 30% as they spent down their accumulated savings. Assuming revenue neutrality, moving to a sales tax makes the Social Security system neither more nor less sustainable though it does shift the tax burden in important ways.

Here is an analysis on the distributional effects of the FairTax. Short answer: even with a demogrant, the middle-income tier loses. http://www.taxpolicycenter.org/briefing-book/improve/retail/burden.cfm

So John. Just out of curiosity how much spending IS too much spending? Is there a limit beyond which it isn’t prudent to add to our debt? Or, according to you, Krugman and company, should we just go all in and spend regardless of the debt we acrue?

Simplicity is important, but undefinable and therefore, unattainable. As soon as some one finds a way to minimize their tax obligations through the novel or unanticipated use of the law and its found to be legal by the Courts,
the chattering classes will all rush to the microphone to exclaim indignity about this “loophole”. This is what gave us the alternative minimum tax (AMT)-it was literally designed for a handful of people-and now affects millions.

The other aspect of high rates people don’t understand is that it increases the value of a deduction. So if the tax rate goes up from say, 30 to 35%, there’s more incentive to petition Congress for exemptions or deductions-each one adding to complexity making you a more eager supplicant to the federal master. Complexity also ensures a division among the citizenry, preventing a reaction against oppressive government.

Because the tax code is arbitrary and there’s no agreement or measurements of desireable aspects of the code (equity, simplicity, effectiveness, etc) and change (think the 1986 Act) is fragile.

Not only is there no way to get to a better tax code, there’s not even an incentive. Being able to “sell” deductions and exemptions is one of the best arrows in a politician’s quiver (not to mention the ability to spend the proceeds on conspicuous “bread and circuses” in one’s district or state).

Forget revising the code, because every revision is one election from erasure. (Ponnuru is right about the “fair tax”.)

The only way to fix the tax code is to abolish it. (i understand the likelihood of that is nil) The Sixteeth Amendment is, in my estimation a soon to be century old disaster. If the principal tax entity was the state, then the power to enact arbitrary tax laws would be limited-because noxious or undesireable tax laws would be limited by the potential of taxpayers to vote with their feet.

I just want to put deficit spending on the table if we are talking about the federal government.

Folks can debate pet tax structures, but it isn’t clear to me that the best and fairest tax is to simply spend without taxing provided we are not bellow the full employment level.

So I agree with Brian…just in the opposite direction! We are taxing too much and not spending enough. The problem is what Krugman says it is…not enough spending. The timming of this deficit debate was highly off.

Brian’s #2. False…sort of.

“We all agree that we tax stuff like cigarettes to control people’s behavior and suppress stuff we don’t like.”

True, the tax code can nudge behavior. But it is hugely important to realize that cigarettes are but an option one can spend money upon. By taxing cigarettes you can shift consumer behavior to substitutes.

“but then a huge chunk of people believe that taxing income has absolutely no such impact.”

False, albeit the philosophy of the tax code starts by asking: What is Income?

If folks believed that taxing income has no such impact there wouldn’t be the debate there is on all these pet tax programs.

Albeit Income as it is currently defined by the IRS is certainly less of something that can be avoided. I am not 100% on what the substitute for cigarettes are…(pornography, booze, running a marathon-nike shoes?) But as it turns out the substitute for “income” is poverty? lesuire?(requires income).

My argument against a 30% sales tax would largely focus on all the ways it would shift consumer behavior. If you go to Wal-Mart for example, it is almost certain that such a 30% sales tax would be enforced.

But what about small business that is already frustrated with those stupid bank fees on credit card machines? Might they not go to cash, and once in cash, might they not decide to do barter?

30% sales tax might really be an anti-Wal Mart “Front Porch/farmers market” tax. Because the consumer might substitute taxed goods for untaxed goods. Large corporations would enforce it… but the key objection I have to the “fair tax” is enforceability. Lets remmember how porous our borders are(the boarder patrol also works to enforce trademark) … but a high sales tax would contribute to these difficulties! Lets not get all King George and forget the original intent of the tea party! A substitute for goods subject to a high sales tax is almost certainly smuggling, barter, (internet sales?), i.e. goods moving under a different venue (not subject to the high sales tax).

So Jim Bennet you are trading the easy collectability of the federal income tax and the FICA tax…for something that would require a much larger boots on the ground bureaucracy to enforce…

All good laws…and the tax code is a law…requires some capacity to enforce it. Interestingly enough my Keynesian view of deficit spending is essentially that it is a “tax” that requires no bureacracy to enforce.

In my view spending more and taxing less just increases the supply of money, the increase in the amount of money acts as a sort of tax. In so far as goods become more expensive and purchasing power decreases, you have essentially taxed the people without taxing them.

In this sense also when you tax and take money out of the economy…(Taxes just regulate the quantity of money) you fight inflation, because the quantity of money chasing a similar number of goods decreases (ceteris paribus).

The reason the Fiscal Cliff is stupid… congress decided arbitrarily that it wanted to take money out of the economy, so it could play its analytical game of ballanced budgets.

The truth of the matter is that you are “taxed” either way…when taxes are low and spending is high, eventually the growth in the quantity of goods(and employment to produce such goods) is outstripped by the growth in the supply of money and you have inflation. This inflation is then a tax… or something that reduces your purchasing power.

Income 50k
Tax 2k

price of new car: 48k

Income 50k
Tax 25k

price of new car: 25k

If you have something like the above example for a market basket of goods, then in truth you are somewhat indifferent to the high budget deficit vs. ballanced budget debate. In a tie a lot of americans would prefer the ballanced budget, just out of general idyosincracy in a tie I prefer the higher deficit, because the distortion effects of enforcement that come from taxing via inflation in my opinion are superior to the distortion effects of actual enforcement(i.e. the fair tax).

What both Krugman and I think is that unemployment is too high and inflation too low to be overly concerned with raising taxes or cutting spending.

In other words we think that increased taxes and reduced government spending will not increase the size of the pie and leave you with enough additional purchasing power to get you a larger market basket. We do believe that increased government spending and reduced taxes at this junction will increase the size of the pie such that it will outrun your decrease in purchasing power and get you a larger market basket. In addition it will be pro-middle class by fighting unemployment.