Romney's Vision

Tax Cuts vs. Spending Cuts

I like lower taxes as much as the next guy. (Providing the next guy isn't Larry Kudlow of course.)

But if it is true that the Romney campaign is contemplating a big tax cut plan, I have to worry.

If the economy is recovering (as we all hope), we will soon have to move into an era of fiscal restraint and spending control. The restraints must squeeze especially tightly on healthcare spending—and not only for those now too young to care, but for the existing retiree population as well.

We hope the squeeze won't be too painful. There is a lot of waste in US healthcare spending. Yet the transition may be bumpy and will certainly be scary. How to gain public consent for what must happen next? There is only one way: Americans must be persuaded that sacrifices will be shared equitably.

If, on the other hand, Americans get the idea that Medicare and Medicaid are being squeezed—not to reduce the public debt—but to finance tax cuts for a wealthy few ... then forget it. It won't happen. We've seen this movie before, back in the 2000s and before that in the 1980s. If anything, cutting taxes while restraining Medicare will be even more difficult in the 2010s than in previous periods. Today, much more than back then, the Republican party is a coalition of the affluent and the elderly. If some members of the coalition are taking, other members of the coalition will demand a take too.

Paul Ryan recognized that fact of coalition politics, which is why he shifted the pain of Medicare restraint 10 or more years into the future, onto voters who currently are not so strongly Republican.

But we need to start finding economies in Medicare and Medicaid much sooner than that if we are to correct U.S. public finances in reasonable time. A big tax cut in 2013 will dash those hopes. It's irresponsible and unneeded: preserving the Bush tax cuts will be tax relief achievement enough.