NYTimes: Nation’s Mood at Lowest Level, 04/22/11

The NYTimes reports polling that reveals we are a depressed nation.  With good reason.  We are worried about getting jobs, worried about the decline in our net worth with the decline in real estate values, worried over our three wars, worried about the country going broke.  And, we are worried because we are conflicted about what to do.  According to the NYTimes/CBS poll, 70% say the U.S. is on the wrong track and 63% oppose raising the debt limit, but 61% say Medicare is worth the cost.

Deficit spending is at frightening levels, and yet according to the bipartisan Committee for a Responsible Federal Budget the Republican plan will increase the debt by 40% ($5.5 trillion) over the next ten years.   That is a smaller debt increase than the Obama plan (50%, or $7 trillion), but still a huge, unsustainable increase.  Our leaders are not realistic and neither are the people they represent.

Americans want their Medicare and Social Security benefits, but do not want to pay for them.  The recent Washington Post/ABC poll shows that 65% prefer Medicare to continue as the current defined benefit program over Rep. Ryan’s defined premium voucher concept; and, 60% of the remaining 35% who favor the Ryan voucher concept would oppose it if it means paying more to get increases in benefits; that translates to 80% who would oppose the Ryan voucher plan if it will cost more. Catch-22.

Allowing the Bush income tax cuts to expire on those earning over $250,000 would raise only $56 billion in 2013 (only .4% of the current $14 trillion debt).  This step should be taken, but the scope of the problem is so huge that there must be more paid by all taxpayers.  The best way to do this would be with a value added tax, which is guaranteed to be very unpopular.

No one wants a tax increase, and no one wants a new tax base either.  Wherefore, even though a VAT makes more sense than income taxes for a variety of reasons, there is no current political support for a VAT.  So, is there any way to market the concept?  Yes.  Begin with a revenue neutral VAT replacement, in part, of both the corporate income tax and the payroll tax.  Then, when future increases will come – and they must come after all politically possible tax cuts are made and after the tax cuts on the $250,000 are allowed to expire in 2013 – the VAT option will be in place to use instead of raising income taxes.