Obama's fiscal commission: Critics' 'magic pony' arguments don't fly

Some critics attack Obama's fiscal commission as a Trojan horse for tax increases. But their 'magic pony' solutions are fanciful.

By , Guest blogger

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    President Obama spoke Thursday before signing an executive order creating the bipartisan National Commission on Fiscal Responsibility and Reform, as Vice President Biden (left) and co-chairs Erskine Bowles (second from right) and Alan Simpson looked on.
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For some reason there’s a recurring “equine” theme in the recent talk about how to achieve fiscal responsibility…

Apparently Larry Kudlow thinks the President’s fiscal commission is a clever trick of sorts to force (and sneak) tax increases onto unwitting Americans (uh, NO, Larry…I’ve said the commission’s first assignment should be to get all the issues and policy options “on the (open) table” with the American public)–for he’s suggesting we swap the “magic pony” of supply-side tax cuts for the “Trojan horse” of the commission:

Take, for example, Obama’s new deficit commission. It’s a bad idea. This commission is a fig leaf to cover up President Obama’s out-of-control budget. It’s a Trojan horse for tax hikes, especially a value-added tax that would engulf the middle class with up to a 15 percent tax rate on the sale of goods and services. Obama is getting ready to move his lips on the pledge not to raise middle-class taxes. Congressional Republicans must not let him do this…

Rather than tax hikes, I say stop the spending…

Why not stop the multiple taxes on all forms of saving and investing, including capital gains, dividends and inheritances? And why not eliminate the business tax on profits in favor of a sales tax on net revenues that would deduct all investment expenses? That would leave us with a single-rate consumption-based income tax that would grow this economy by 7 percent to 8 percent in the years ahead, just as the economy should grow after a deep recession.

Going back to the debt-to-GDP ratio, I want to grow the denominator (the economy) and reduce the demand for the numerator (spending and borrowing). That means a combination of supply-side tax cuts and firm spending limits.

(Never mind Larry’s odd self-contradiction of first criticizing the idea of a broad-based consumption tax (as an add on) and then coming back to recommend a broad-based consumption tax (as a replacement); yes, the key difference is whether it would actually raise enough revenue and reduce the deficit, or not…)

Recommended: Obama vs. Romney 101: 5 ways they differ on debt and deficits

And by the way, exactly who will ride Larry’s magic pony in his fantastic vision of how to get things right? Larry gleefully explains:

let’s especially use this Tea Party power to stop Democratic plans for another round of broad-based tax increases.

Thanks to Bruce Bartlett for directing me to Larry’s magic pony story, and for pointing to another stupid idea for an alternative to the fiscal commission–going ahead and defaulting on the debt. I think I’ll label that the “Mister Ed” option, because only someone as eccentric and naive as a “Wilbur” would listen to (even “hear”) such crazy ideas as those of Ed.

A horse is a horse, of course, of course. And no one can talk to a horse of course… Unless…

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