Wednesday, November 17, 2010

The Washington Lobotomy Factory is Working Overtime

Yesterday, I argued that somewhere in Washington is a lobotomy factory where all people in government go when they arrived in Washington. I am now convinced -- to the core of my being -- that is what occurs.

From the WSJ:

A panel of Democrats, Republicans, economists and other experts is set to say Wednesday that a complete overhaul of the U.S. tax code is the best way to address the nation's fiscal problems—a new and likely controversial idea aimed at tackling the growing deficit.

The report, co-authored by Democratic budget veteran Alice Rivlin and former Sen. Pete Domenici (R., N.M.), follows a separate proposal last week by the two chairmen of President Barack Obama's deficit commission. The many similarities between the two offer a window into the types of proposals that might win backing as Washington launches into what is likely to be a protracted debate on deficit cutting.

The most recent report, put together by a group called the Bipartisan Policy Center, will call for a one-year payroll-tax holiday in 2011 that it says will create between 2.5 million and 7 million jobs.

The plan would lower income and corporate tax rates and offset them with a 6.5% national sales or "consumption" tax as well as an excise tax on sugar drinks like soda.

The Bipartisan Policy Center was created in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell with the aim of finding solutions to major national issues.

Here's the deal.

The U.S is running a deficit. That means two things.

1.) Taxes have to increase.

2.) Spending has to drop. As I demonstrated last week, the real issue there is medical costs We need to find some way to lower medical spending. I have no idea what that entails,but that is the central issue going forward for the US deficit.

This magical thinking that a reworking of the tax code will solve the problem is utter crap. It's a nice idea, but the tax code is full of special interest giveaways. The only way to make simplification work is to eliminate every single giveaway and not let any return. Politically, in an age of massive lobbying by everybody and their dog, that is simply not going to happen.

So far, all we've gotten is really stupid solutions that effectively say, "we don't want to make hard decisions because we might not get re-elected."

This isn't that hard or complicated. However, it does require grown-up solutions to answers. And that is where we come up short. Washington is full of stupid people.