Matt Steinglass reviews a proposal from Simon Johnson and James Kwak to put our fiscal house in order:
First, introduce a value-added tax and lower the ceiling on the mortgage interest deduction from $1m to something more reasonable….Second, carbon pricing, either a carbon tax or cap-and-trade….Third, introduce a Financial Activities Tax, which could raise 0.5% to 1% of GDP.
….And finally—here’s the tough one—entitlement reform. As Messrs Johnson and Kwak say, Social Security needs to be tweaked a bit as it goes from 4.8% to 6.2% of GDP with the aging of the population. Medicare and Medicaid, on the other hand, need major reform to figure out how to stop paying for medical care that doesn’t make people healthier, while reducing costs on what we do buy. This is a book-length issue on its own and all we can do is note the necessity of doing it.
So, that last one seems like a doozy, but the other three look entirely reasonable. There’s no reason why a rational political system shouldn’t be able to tackle such reforms in a non-ideological and collaborative fashion. Nothing of that sort has happened in my lifetime, so far as I can remember, but there’s a first time for everything.
Hold on. I’m a big fat tax-and-spend liberal, but even I have a hard time swallowing this. Adding three big new taxes and slashing the home mortgage deduction is “eminently doable” but tackling Medicare reform is a “doozy”? Seems like there’s a pretty big thumb on the scale here.