America's Tax Policy

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SEPTEMBER 10, 2007

America's Tax Policy

This is the sixth part of the debate. See also Part 1, Part 2, Part 3, Part 4, and Part 5.

Dear Jon,

We are discussing your book and all these questions are for me.

Oh, well. My book entitled Leave Us Alone (HarperCollins) will be out January 15 and explains the next 25 years of American politics.

But until then.

First. Your book argues that conservatives and supply-siders have fooled a nation that wants more spending paid for by more taxes into voting for candidates--and now you explain, initiatives--that do the opposite. I believe that voters do in fact wish for smaller, less generous and therefore less intrusive and less expensive government. This is a fight I am willing to have all day. Democrats tend to hide the costs (taxes) they wish to impose. Mark Warner was elected governor of Virginia promising to never raise taxes. He lied his way into office. Clinton was only going to "tax the rich" and then tried to raise a BTU tax on all energy. Bush ran on tax cuts and delivered. Only those filibustered--like abolishing the death tax--did not get done.

My team can campaign and govern saying and doing the same thing. Yours cannot.

If statism was popular it would fly under its own flag.

Second. The conservative movement wishes to reduce the cost of government as a percentage of the economy in half over one generation: 25 years.

By destroying the Soviet Union Reagan made it possible to reduce defense spending from six percent of GDP to three percent. And he did that in less than ten years. (True, there has been some recent Bush backsliding but I read that Petraeus will have this thing wrapped up soon and we can get defense back down from four to three percent of GDP.) Dick Armey's base-closing commission idea has closed many military bases and saved billions and is a model for reforming other area of government sprawl.

Our goal is not to cut major spending programs, but to reform them to where they absorb a smaller percentage of the economy. Medicaid, food stamps, housing subsidies and all other income-targeted "welfare" should be blockgranted to the states and the grant should be indexed to inflation. Welfare reform, stage two.

I am ready for the argument from the left about how this won't work ... they can reprint all their assertions about how the GOP's welfare reform, stage one, would have millions of impoverished children out on the street. (That is the one Clinton vetoed twice, but later signed because Dick Morris told him Paris was worth a Mass, and now claims as his own.)

Fifty states would compete to provide these "services" most effectively and as with welfare reform would move citizens from dependence to independence as they were no longer getting paid by the feds to trap folks into lifelong dependence.

Social Security is a good example and you misread why Bush failed. The proposal to allow all younger Americans the option of moving to a defined contribution pension plan where their FICA taxes would go into a portable, individually controlled personal account like a 401K was and remains popular--with the young. Bush promised to not raise taxes to pay for the present Ponzi scheme and to not cut benefits for those at or near retirement. Commitments he appeared to walk away from in lusting after imaginary Democratic Senators who just might vote for Social Security reform. Bush's failure was that he didn't count very well. It takes 60 Senators to break a filibuster and the party of trial lawyers, union bosses, and tax-eating bureaucrats is a dead man walking when every American saves ten percent of his or her salary in a mutual fund. Every part of the Democratic coalition feeds off the companies that make up mutual funds. There is no Democratic policy prescription that will make your mutual fund worth more. They all make them worth less. The Republicans, meanwhile, stay up at night inventing new ways to increase market cap--it's what we do. Abolish capital gains taxes. Cut corporate tax rates. Expensing. Send the trial lawyers to Gitmo.

It is politically wise of the Democrats to oppose reforming Social Security so every American controls his/her own retirement assets. They are not suicidal. Why did Bush think they would act against their own interests?

Once it became clear there were only 55 Republican senators, Bush should have forced a vote on the concept of personal accounts, lost and explained that we need 60 Senators to give younger Americans real retirement wealth ... and moved onto something doable, like passing expensing to replace long depreciation schedules.

A number of countries have begun this process of reforming Social Security and it is annoying to be behind, but better late than never.

Education is half of the cost of state and local government. Simple reform: Take everything we spend in offerings to the education gods and divide it by the number of kids and attach that sum to each child. Let schools, public, private, parochial, Wiccan, compete for parent-controlled dollars. Private schools, not the ones my liberal friends went to, but real private schools, cost half what the government spends per child ... over time competition will reduce the cost of education and increase productivity. That is what competition does and what the present government monopoly can never do. A monopoly and only a monopoly would keep education from changing or improving or using technology that didn't exist when Socrates was annoying people in Athens.

In 25 years greater competition and giving decisions to individuals rather than the state will both increase quality and reduce cost. Like computers ... unless they were controlled, built and designed by the government and then they too would operate like the post office.

Third. As for Clinton not trying to change the rules to stay in power, let's see. What was the first bill out of the box? Oh, yes. Motor Voter: the bill that makes voter fraud easier. Dems voted down requirements to remove dead people from the rolls. They voted down allowing voter registration at military recruitment places--wrong kinds of voters. They voted to allow voter registration in places where government goodies--welfare, etc.--were handed out ... those were the right kinds of new voters. It didn't save them in 1994, but it got them a governor in Washington state and some other useful stuff. And the Dems did push for statehood for D.C. ... they didn't win. And they are now working on giving votes in the House to folks who aren't technically in states. And felon voting is big in Iowa and a top Democratic demand today. And they used the federal treasury to send cash to the big city political machines--this was when we called this stuff midnight basketball rather than earmarks. And they pushed for campaign finance reform to restrict the First Amendment--the GOP filibustered. Failing is not the same thing as not trying. Give the guy a break ... Clinton only had two years to change the rules because the voters went for all those tax-cutting supply-siders. You wrote about that in your book.

Grover G. Norquist

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