Inevitable Tax Increases
In the latest WSJ blogger celebrity death match, Max Sawicki says
Social Security and Medicare spending will increase faster than GDP, requiring increases in taxes, and there is not a damn thing anyone can do about it
Tyler Cowen responds,
I don’t think that I can spend Max’s money better than he can. I think even less that the votes of millions, filtered through special interest politics, can spend his money better. But that is what you must believe, if at the margin you wish to raise taxes.
Both Cowen and Sawicki agree that Social Security and Medicare are the key determinants of future tax rates. That makes their debate (you should read the whole thing) much more informed than most discussions of taxation.
Cowen argues for reductions in projected benefits in Social Security and Medicare, and Sawicki argues against such reductions. Neither sways the other.
This reminds me of an essay I once wrote on policy diversity.
I would love to live in the only major industrial country that uses vouchers for school funding, private accounts for retirement savings, and catastrophic insurance for subsidized health care.
My point is that Max Sawicki’s policy preferences, for heavy taxation and social welfare programs, are already in place in many developed countries. But my preferences, for a much smaller welfare state and lower taxation, are not. Since we cannot be certain that one side or the other has the better argument, why can’t we have some diversity? In my essay, I suggested breaking the United States into two countris: Miltonia and Hillaria. Perhaps the red state and blue state divide already provides a basis for this (I would have to move).
For Discussion. Which developed country comes closest to a free-market model?