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Morning Jay: Why Won't the GOP Agree to a Tax Increase?

6:00 AM, Jul 6, 2011 • By JAY COST
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It’s worth pointing out that this is the baseline, i.e. the outcome if all the laws currently on the books are allowed to remain as they are. If, on the other hand, we allow the Bush tax cuts to become permanent, we permanently patch the Alternative Minimum Tax, and so on, then the federal government would collect an average of about 18.4 percent of GDP in revenues over the next seventy years, or about what the average has been over the last forty years.

Of course, keeping revenue stable while letting spending surge would create a Greek-style catastrophe, as annual interest payments on the national debt would exceed forty percent of GDP by 2080. How do we avoid that? Almost all factions within the GOP are united around the same answer: keep taxes where they have been for forty years, restrain discretionary spending, and reform entitlements. This is why the GOP has taken the position it has in these negotiations.

Final point. Take a closer look at the federal outlays line in the above graph and consider that, according to the CBO, 116 percent of the increase between 2011 and 2085 comes from “Medicare, Medicaid, CHIP, and Exchange Subsidies.” Spending outside federal health entitlements will effectively be cut (as a share of GDP) over the next seventy years. It’s health spending alone that keeps us rolling on down the road to serfdom. In other words: The Democrats just enacted comprehensive reform of the health care system, and still the federal government is on pace to redistribute better than one out of every three dollars our grandchildren earn.

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