Posts Tagged ‘Mitch Daniels’

Governor Mitch Daniels of Indiana has triggered a spat among policy wonks with his recent comments expressing sympathy for a value-added tax (VAT). Kevin Williamson of National Review is arguing that a VAT will probably be necessary because there is no hope of restraining spending. Ryan Ellis of Americans for Tax Reform jumped on Williamson for his “apostasy,” arguing that a VAT would be bad news for taxpayers. From a policy perspective, I’m very much against a VAT because it will finance bigger government, as explained in this video.

That being said, Kevin Williamson makes a good point when he says that some supply-siders have neglected the spending side of the fiscal ledger. And it certainly is true that Republicans don’t seem very interested in curtailing the growth of government. But does this mean, as Williamson argues, but that our choices are limited to 1) a 36 percent spending cut, 2) catastrophic deficits and debt, or 3) a European-style value-added tax.

I actually think it would be a great idea to reduce the budget by 36 percent. That would bring the burden of federal spending back down to where it was in 2003. Notwithstanding the screams from various interest groups that this would generate, nobody was starving in the streets when the budget was $2.3 trillion rather than today’s $3.5 trillion. But Kevin is unfortunately correct in noting that this type of fiscal reform won’t happen.

Kevin is wrong, however, in saying that we therefore have to choose between either Greek-style deficits or a VAT. According to the Congressional Budget Office, tax revenues over the next 10 years will increase by an average of about 7.3 percent each year – and that’s assuming the tax cuts are made permanent and the AMT is adjusted for inflation. Reducing red ink simply requires that politicians exercise a tiny bit of restraint so that spending grows by a lesser amount. This video walks through the numbers and shows how quickly the budget could be balanced with varying levels of spending discipline.

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I’m mystified that some conservatives and libertarians are sympathetic to the idea that Mitch Daniels, the governor of Indiana, might be a good candidate in 2012. The main challenge for our nation is the growing burden of government, so it seems that this would disqualify anybody who served as Budget Director for President George W. Bush.

It’s possible, to be sure, that Daniels didn’t want the no-bureaucrat-left-behind education bill, the corrupt farm bill, the pork-filled transporation bill, or any of the other big-spending bills that became law during the early years of the Bush Administration. But there certainly is no evidence that he used his position as Director of OMB to resist these terrible ideas. And he certainly hasn’t gone out of his way to disavow any of the fiscal excesses that occurred during his tenure.

Indeed, it’s quite likely that Governor Daniels is a supporter of big government, just like President Bush. Is there any other explanation that fits? And if you need any additional evidence, Daniels has indicated that he is open to a value-added tax (and energy taxes as well). A VAT would be a fiscal catastrophe for America, paving the way for European-style statism. Here’s an excerpt from Politico.

Indiana Gov. Mitch Daniels opened the door Thursday to supporting both a value added tax and a tariff on imported oil, bold proposals that could cause trouble for him with conservatives as he flirts with a long-shot bid for the presidency.  …The so-called VAT, common in European economies which have stagnated, is a toxic acronym to fiscally conservative activists… Daniels also suggested support for increasing gasoline taxes. …These comments come on the heels of a September profile in Newsweek, in which Daniels said tax increases might be necessary… Daniels has previously clashed with Norquist over the former’s refusal to sign the “No New Taxes” pledge. …In a brief interview after his speech, Daniels downplayed the significance of his comments. He stressed that he would support a VAT “under only the right circumstances,” reiterating his desire for it to be paired with a flat income tax.
Governor Daniels doubtlessly would defend himself by reiterating his “under only the right circumstances” line from the article, but there are no “right circumstances” for a VAT other than getting rid of he 16th Amendment and replacing it with something so airtight that even Justice Sotomayor would be unable to rule that an income tax is constitutional. Suffice to say that this is not what Daniels has in mind.

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