Volcker: Stiff new tax needed to cover spending at 25% of GDP

Anne Leary posts on the defeat in the House of the first YouCut program selected by the public to be cut from the federal budget. A 2.4 billion dollar welfare program was selected for cutting but Democrats in Congress preferred to keep the program. As Paul Volcker, head of Obama's Economic Recovery Advisory Board, notes in this Naked Emperor clip spending is currently up to 25% of GDP. There is obviously little stomach in this Democratic Congress to cut spending leaving little alternative but the adoption of a "stiff new tax" to close the gap in spending. Volcker lists a few alternatives such as a carbon tax, energy tax and the dreaded VAT.

Related: The grass is not always greener in a green economy. "Spain admits that the green economy as sold to Obama is a disaster"

Cooking the Country's Goose

Just days after the health care legislation became law of the land, predictions of the subsequent need for  the VAT tax found their way into the news.  Two weeks later, current White House Adviser and former Fed Chief Paul Volcker lets the cat out of the bag:

"The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.


Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax "was not as toxic an idea" as it has been in the past and also said a carbon or other energy-related tax may become necessary."


As Allahpundit points out, Volcker must have missed the memo not to discuss this until after the elections, preferably when Obama is tucked in safely for a second term.  It is possible we might hear news of the coming VAT tax from a "bipartisan" deficit reduction commission.  Such a commission would potentially give Obama the cover  George H. W. Bush didn't have the luxury to hide behind when he famously promised, "read my lips."  Never mind the fact Obama refused to take tax hikes off the table when creating the commission by executive order after it was rejected in a bipartisan vote in the Senate.  I guess he figures no one will really blame him for the inevitable recommendation of this commission where Republicans are outnumbered 2 to 1.

Even if the commission were made up entirely of Republicans, however, the passage of the health care legislation will require a VAT.  As Charles Krauthammer made clear there is little else such a commission can recommend.  All the easiest cuts to Medicare and tax increases have already gone to create the new health care entitlement.  Once this entitlement is able to work its' entitlement magic, creating an increased dependency on big  government beast, it then becomes necessary to feed the beast:

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama's triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan's strategy was to starve the (governmental) beast in order to shrink it: First, cut taxes -- then ultimately you have to reduce government spending.

Obama's strategy is exactly the opposite: Expand the beast, and then feed it. Spend first -- which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

Evidently Krauthammer hadn't anticipated Volcker adding another huge trough in the carbon tax.  Imagine the size of the beast that will be fed with these two huge troughs in addition to the already massive trough that is income tax.  Clearly Obama knew this when he demanded his health care legislation become law while having the sheer gall of presenting a budget that anyone with a sliver of intelligence knows is completely unsustainable:

There you have it, the strategy will be punt to the commission while blaming Bush all the way to the desired tax increases.  Barack the blameaholic just can't help it, he is powerless over the problems he was hired to solve.  Tiny Tim Geithner, the artful tax dodger himself, trots out most of the time-worn distortions of the Bush record in lieu of the visits from the Ghosts of Christmas Past and Present.   Thank Paul Volcker for this visit from the Ghost of Christmas Yet to Come.  I hope we're awake in November to fetch the goose from the oven.

Via Memeorandum
Thanks to Sister Toldjah for linking!

The Tax Man Cometh

Harvard economist Greg Mankiw looks into his crystal ball and sees the potential for European level tax rates in America's future. Though Mankiw sees some potential merit in aspects of the health care bill, he believes it will add significantly to our long-term fiscal problems. He wonders how long before the President comes clean with the American people that his spending programs require higher taxes:

The Obama administration's political philosophy is more egalitarian and more communitarian than mine. Their spending programs require much higher taxes than we have now and, indeed, much higher taxes than they have had the temerity to propose. Here is the question I have been wondering about: How long can the President wait before he comes clean with the American people and explains how high taxes needs to rise to pay for his vision of government?

I hope Mankiw is not holding his breath waiting for the Obama administration to come clean. He shirked the responsibility when he created the deficit reduction committee.

Charles Krauthammer sees the VAT tax in our future to solve the problem. Ed Morrissey notes this was debated while the bills were being written. Clearly it was scrapped knowing Americans would overwhelmingly reject a bill that was paid for with such a tax. Nevertheless, the day of reckoning is coming and with it higher taxes. Be prepared: