Liberal Economist Krugman on “Real Solution” to Debt: “A Combination of Death Panels and Sales Taxes”

November 14, 2010

The initial proposal from the chairmen of President Obama’s debt commission have sparked a debate on how to deal with the ever growing national debt.

Nobel Prize winning liberal economist Paul Krugman, a man who thinks that the nearly $1 trillion Obama stimulus was too small, doesn’t like the proposal because to him it does not propose enough new taxes and does not get enough into rationing health care via death panels. On ABC’s This Week, Krugman uses the term made famous by Sarah Palin’s description of Obamacare when he talks about what the his “real solution” to the debt problem will have to be: “a combination of death panels and sales taxes.”

Well, at least we should applaud Krugman’s honesty about his goals and the goals of Obamacare.

While the commission’s initial proposal has some good points as evidenced by the instant opposition from the Left, it is fundamentally flawed in that it accepts too much of what the government currently does and tries to address the debt problem with a mix of spending cuts and tax increases. It suggests that government spending and tax collection should be 22 percent (and later 21 percent) of GPD, lower than Obama’s current spending, but well above the 18 percent average of the past fifty years.

Republican need to stand firm in reiterating that the fundamental problem is not the amount of taxes collected, but how much the government spends. First, we should bring spending back to at most 2008 pre-financial-crash levels. Then we should look at every government program and decide whether it is really something the federal government should be engaged in and eliminate program and the associated government bureaucracy completely. A significant accross-the-board wage cut for government employees to bring their compensation in line with wages in the private economy would be another straightforward step in rolling back the government Leviathan.

On Social Security and Medicare we need to look at long-term changes as contemplated in Rep. Paul Ryan’s plan. There should be no changes for current recipients or people close to retirement, but who can object, for example, to raising the retirement age to 69 or 70 by 2075 when average life expectancy will likely have advanced further into the mid-eighties or more?

To reduce health care costs, Obamacare needs to be repealed and replaced with sensible reforms that increase competition, create incentives to reduce costs and allow people to make rational decisions about the costs and benefits of their health care decisions. Similar reforms should eventually transform Medicare, the biggest future liability of the federal government.

The commission’s initial proposal contemplates major tax reform by eliminating most deductions and lowering tax rates. A constructive suggestion although eliminating some deductions like those on mortgage interest may be difficult to pass and could have catastrophic effects on the housing market that has not begun recovering from the 2008 crash.

Rather than contemplate tax hikes, any future tax reform (after eliminating the 2011 Obama tax increases also known as “extending the Bush tax cuts”) should look at the long-term economic benefits of reducing the tax burden on Americans rather than use the assumption made by the left that changes in tax rates do not affect economic activity. In the long-term, more tax revenue can be collected if the tax burden is reduced rather than increased.

Krugman’s frank admission of what he sees as the “real solution” points us at what should not be considered: new taxes and government death panels that decide whether you are worthy of receiving medical care or whether you have outlived your usefulness to a government that has become too powerful.

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