Andrew Sullivan’s Backdoor Employment Tax Increase
Andrew Sullivan accused Kevin Drum of changing the subject as he changes his tune:
My whole point is to put middle-class entitlements on the table and to cut them substantially. Even though you may disagree with it, that’s not a free lunch, and it’s deeply unfair to claim it is. It’s also designed to protect the really needy. It’s interesting, though, that the big government left is so hostile to small government conservatives.
I hope that I was not hostile when I wrote:
if we decide to cut Social Security benefits in order to privative Social Security, wouldn’t that also imply that we would be reducing payroll contributions? If so, these joint reductions do nothing to reduce the General Fund deficit. Of course, we could cut benefits and keep payroll contributions at their current levels, which should be seen as a backdoor employment tax increase.
Let me make this simple for Mr. Sullivan. Some of us on the left realize that middle-class workers want a government run defined benefits program, which is why we on the left applauded the 1983 Social Security commission appointed by Ronald Reagan. This program raised payroll contributions in order to finance our Social Security benefits. If conservatives like Robert Barro wish to reverse this and give back our payroll contributions and scrap the Social Security program, we on the left might disagree but we applaud the intellectual honesty of Dr. Barro for saying there is no free lunch. WHICH MEANS (just in case Mr. Sullivan has not yet figured this out) that this joint reduction in benefits and payroll taxes will not reduce the General Fund deficit by a single penny.
Now if Mr. Sullivan wants to retain those high payroll taxes and slash Social Security benefits, could he bother to have the intellectual integrity to realize that his proposal represents a huge backdoor employment tax increase. Or am I asking too much? Maybe he has not figured out the simple point.
Update: Michael Darda tries to convince his readers that taxes have increased but not as quickly as spending:
The latest Treasury data show that tax receipts continued to expand at a rapid 14.1 percent annual pace during the last 12 months through February … Since 2001, federal government spending has risen at a 6.6 percent pace, more than two times the 3.1 percent annual average that prevailed from 1993 to 2000. If federal spending had simply compounded by 3.1 percent per annum since 2001 – matching the 1993-2000 average – the fiscal budget would actually have been in surplus by $143 billion in February 2006.
AB readers – fire away at this spin! And when you are done – check out how Darda attacks Rubinomics using Keynesian economics that Darda fails to really grasp.
Update II: Forgive me, but I have to put Darda’s spin about higher taxes in a little context. In 2005, nominal taxes were only 3.6% higher than they were in 2000. Let’s compare this to a few other percentage increases over the same period:
Nominal GDP: 27.2% (taxes as a share of GDP FELL).
GDP deflator: 12.2% (taxes fell in real terms).
Did I mention the fact that the population grew, which implies constant dollar (real) taxes per capita fell rather dramatically.
Since I’m assuming Michael Darda understands the concept real per capita, why would he write such utterly misrepresenting nonsense in the first place? After all, does he assume that the readers of the National Review are THAT stupid? I know, I know – we’ve been over this before.