Almost everyone (except Warren Buffett) agrees that higher taxes are a bad thing, and the GOP candidates are all singing from the same hymn book about not imposing higher tax rates. Under normal circumstances, this might work. Tyler Cowen explains why these aren’t normal times and how “no new taxes” isn’t a serious way to deal with America’s financial problems:
Consider the example more closely. Cutting $10 in spending for every $1 in tax increases would result in $9 in net tax reduction. That’s because lower spending today means lower taxes tomorrow, and limiting the future path of government spending does limit future taxes, as Milton Friedman, the late Nobel laureate and conservative icon, so clearly explained. Promising never to raise taxes, without reaching a deal on spending, really means a high and rising commitment to future taxes.
Furthermore, this refusal to contemplate a tax increase — which I’d characterize as an extreme Republican stance — has brought what seems to be an extreme Democratic response: President Obama’s latest budget plan is moving away from entitlement reform and embracing multiple tax increases on the wealthy. We may be left with no good fiscal options.
The problems with a no-new-taxes stance run deeper. Because it’s unlikely that spending cuts alone can balance the budget, politicians who espouse extreme antitax views often end up denying the scope of our long-run fiscal problems.
[. . .]
The more cynical interpretation of the Republican candidates’ stance on taxes is that they are signaling loyalty to a cause, or simply marketing themselves to voters, rather than acting in good faith. It could be that candidates are more worried about having to publicly endorse tax increases than they are about the tax increases themselves. If that’s true, it is all the more reason to watch out for our pocketbooks; it means that the candidates are protecting themselves rather than the taxpayers.
The final lesson is this: Many professed fiscal conservatives still find it necessary to pander to voter illusions that only a modicum of fiscal adjustment is needed. That’s an indication of how far we are from true fiscal conservatism, but also a sign of how much it is needed.
