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Scattered Thoughts On David Frum, Paul Ryan and Yuval Levin

David Frum is taking on Yuval Levin and Paul Ryan in a multipart series of blog posts.  Several scattered thoughts on what Frum has written:

1.  Frum summary of Yuval Levin's ambitious article on reforming the welfare state, "compassionate conservatism is kaput."  This is a problem only if you assume that a marketing device is preferable to constructing a sustainable welfare state under current demographic conditions.  Taking care of the most vulnerable while not crushing the economy under taxation seems pretty compassionate to me.

2.  Frum writes that there would be huge resistance to sharp cuts in spending joined to "tax cut[s] for high-bracket taxpayers."  Well that depends.  You could somewhat cut the marginal tax rate for high earners and still produce more federal revenue depending on what you did with tax expenditures (that was in the Simpson-Bowles Plan but there are multiple ways to structure the tax code changes.)  This approach improves work and growth incentives while producing more revenue for the government.  Some high earners who are happy with their current balance of disposable income and leisure might object to such a change, but I don't think that is what Frum has in mind.  I should add that I'm talking about general principles and I don't entirely trust Ryan's instincts in this area.

3.  Frum writes, "I come to feel that the libertarian ideal championed these days by so many conservatives has become at least as drained as the social democratic idea."  If Frum were writing about Andrew Napolitano, then this comment would make sense.  Ryan's Path to Prosperity would maintain a multitrillion dollar federal government with enormous transfers to various segments of the population and a large defense establishment.  The federal government would still be spending 19% of GDP under Ryan's Plan.  This might be a smaller government than Frum would like (it is somewhat smaller than I find prudent) but it isn't libertarianism any more than Obamacare is communism.  Frum is being the Joe the Plumber of ex-conservatives.

4.  Frum is grateful that "now-substantial government/education/health/military sectors of the economy continued to provide some source of stable demand"  Well he needn't worry as the federal government will continue to have substantial military/health/etc. sectors under any conceivable legislative outcome of our current debates.  He would be wiser to worry whether the cost of those sectors will grow in such a way that the costs will lead to crushing taxation or a debt crisis.

5.  Frum writes of Yuval Levin's idea to means-test old age entitlement benefits "What is contemplated is the end of social insurance, at least as it applies to healthcare for retirees: a state to which all contribute on more or less equal terms and from which all draw benefits on more or less equal terms."  What is amazing is that Levin really is suggesting social insurance in which government aids the poorest and most vulnerable of the elderly while not taxing current workers to death in order to give money to old people will not need it.  Given current demographic conditions, we have certain choices. First, we could reorient our entitlements for future retirees so that those whose health holds up work a little longer and lifetime high earner retirees get somewhat less, or second, we could have some kind of huge tax increase and bureaucrat-directed health care cuts.  Now those tax increases could take the form of enormous marginal tax rate increases on high earners (though that probably won't be enough) and/or tax increases on the middle and working-class in order to supplement the retirements of healthy lifetime high earners who are in their middle 60s + some kind of centralized health care rationing for all. Then we can really talk about austerity.  

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Discussions - 2 Comments

Or we could do something really crazy, like maybe actually obeying the fundamental Law of our land, which would result in a national conversation on how to most equitably and compassionately end the grossly unConstitutional aspects of our current Federal gov't, which would result in a massive increase in business activity at all levels, with concomitant increases in wealth overall and reductions in poverty etc. While taxes would be grossly lower, Federal revenues might even increase, since wealth overall would be so much higher. Say bye-bye OSHA, EPA, labor laws, Medicare, SocSec, HUD, fed involvement in welfare, etc. Be still my heart.

And now back to reality. How fast do you want to hit the wall, then? Demo-mode (100 mph), or Republicannish (80 mph)? If we attempt to deal with the deficit with a 'combination of cuts and taxes', we die. Business continues to wither. Hello, third world living standards.
The only way to successfully survive and prosper will be to massively chop all the unConstitutional rules/regs that pour gravel into the wheels, differentially benefiting Big business vs small/medium, since the Bigs are better positioned to game the system. We show no signs of being even aware of the problem. This does not end well.

Doc, I gotta admit I had you (and other folks of various levels of prominence) in mind in point # 3.

You still can't escape the notion that, whatever its wisdom, the constitutional authority for the appropriations part of the tax and transfer state is plausibly drawn from the Hamiltonian (and implicitly Washingtonian) interpretation of the general welfare clause. There is a strong originalist case to be made that Social Security etc. are constitutional. You are welcome to make the case that we should, in policy, return not to 1929 but to 1801 (though not between 1789 and 1801.)

So yes, back to reality. I see no reason to expect that we will hit any economic wall or become the third world nation of your nightmares if we adopt the Ryan Plan, the Simpson-Bowles Plan or any number of imaginable intermediate policy options (or that if we do hit walls etc. it will e because of those economic policies.) The tax burden would be comparable to recent history and could, given some restructuring, make us more globally competitive. There are sound reasons to worry that we will not see such programs enacted and will instead see enormous tax increases and/ or a debt crisis (not necessarily in that order.) A center-right inflexibly oriented to a policy program of returning to 1801 (and none of that phooey Louisiana Purchase stuff either - where is THAT in the Constitution), is one of the more certain ways of ensuring that our current economic problems are badly handled.

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