Tax Increases and the Debt Limit Debate

For most of my life, I have opposed tax increases on the theory that the government already takes too much of the people's hard earned wealth. During the Bush administration, I started to waiver in that position. I saw the huge deficits as threats to our long term economic health, and thought that tax increases might be the necessary price for past profligacy. We see in the example of Greece today, where the results of excessive government largesse, along with Enron style accounting leads to. From today's Reuters article:

Greeks seething after two years of belt-tightening reacted in anger Thursday against a new round of tax rises and spending cuts worth some 3.8 billion euros which they said would again hit honest taxpayers hardest.

Of course they will. KT at the Scratching Post felt that higher taxes were inevitable because the math for achieving balanced budgets through spending cuts alone seems too daunting. So there I was, wavering on a lifetime political position. But then I stumbled across Hauser's Law, on which I have posted extensively and rediscovered my inner supply-sider.

Which brings me to the debt ceiling debate. Supposedly only Boehner, Obama, and Reid are left to negotiate the conditions under which the debt limit might be raised. Supposedly, John Kyl and Eric Cantor have left the negotiations, frustrated that the Democrats won't budge on the issue of tax increases. Not having followed the issue for a while, I was heartened to see that the Republicans are using the debt ceiling debate to leverage further budget cuts. My concern is that Boehner is now left as the only negotiator on the Republican side.

The principled position on increasing federal revenue is to maintain low marginal tax rates, with few, if any deductions. This has worked consistently in the past. Given the impact of Hauser's law and need for growth in the economy, no tax increase should be considered in this debate. So far, I believe that Boehner has played his weak hand with great skill, but this is his toughest test to date. I hope he hangs tough, the last thing we need are job killing tax increases.

However, nothing in my reading suggests that either party is ready to deal with entitlements. As Tea Partyers, we need to state our plans to deal with entitlements, because that's where most of the federal budget money goes. Some believe that if we just cut taxes and regulation, the economy would grow its way out of our crisis. While growth would ease the pain, it won't erase it completely, unless growth gets to record setting levels. The only way our economy can grow at the rates needed to maintain entitlements would require a massive influx of new immigrants to raise the labor participation rate of our aging work force. Are we in the Tea Party ready to endorse large numbers of engineers, scientists and technicians emigrating from the likes of China and India? I know I am, but I have seen little discussion of this approach elsewhere. Exit question, what should the official Tea Party position on Social Security, Medicare and Medicaid be?