President Obama is reported to be considering an Executive Order creating yet another commission to consider options for curtailing Washington’s deficit addiction. Even at a time when action is desperately needed, such an Executive Order is likely worse than doing nothing.
The Executive Order approach represents Congress’ latest embarrassing retreat in the fight against deficit spending. Conservative and moderate “Blue Dogs” in Congress have joined many of their Republican colleagues in refusing to support a $1.8 trillion hike in the debt ceiling unless they get a vote on a real deficit and debt commission with enforceable recommendations. As Representative Allen Boyd (D-FL), a real commission supporter and Blue Dog Democrat put it, “We don’t have the will in Congress to discipline ourselves. We have proven that over the years”.
Speaker Pelosi is having none of it, however. She’d rather make the Congress take two painful votes on a small debt limit hike now and a big one in the spring than admit failure. She reportedly believes a commission would cede too much responsibility. Ceding responsibility is the point when Congress is persistently and flagrantly irresponsible.
So the White House is considering an indecent figleaf as an alternative – a presidential commission, of which history is replete with failed examples. There are three simple reasons such a commission is likely worse than nothing:
- A One View Commission An Obama commission would likely be packed with people who think like Obama. Moderates and especially conservatives need not apply. What’s the point of the commission, then? Obama ran to lead, he should just do so and skip the middleman.
- A Toothless Commission A distinguishing feature between a useful and a useless deficit commission is whether Congress is required to vote on its recommendations. Unless Congress expressly legislates to the contrary at the outset, a presidential commission’s recommendations are little more than dust in the wind.
- A Do Nothing Commission A toothless presidential commission would be an unfortunate substitute for action, and it would continue to substitute for action until long after it finally reports. In the meanwhile real efforts at budget reform are put on hold and the problems get deeper and deeper.
Members of Congress asked to vote on the largest increase in the debt ceiling in history have good reason to be uncomfortable, and to demand some assured means of getting deficit spending under control. A good alternative is the bi-partisan Wolf-Cooper commission proposal that already enjoys over 100 co-sponsors. A presidential commission is the policy equivalent of a Senate filibuster, naught but a tale full of wonkish sound and fury signifying nothing.
P.J. O’Rourke once quipped about spending in Washington: “The budget grows because, like zygotes and suburban lawns, it was designed to do nothing else.” To help pay for their addiction to more spending, the left is now calling for a value-added tax or VAT.
Cato Senior Fellow Dan Mitchell, in conjunction with the Center for Freedom and Prosperity Foundation, has produced a video conclusively showing that the VAT will do nothing to stop deficits since governments that have adopted VATs have a proven track record of only raising spending even further after they pass. Watch:
Click here to view the embedded video.
Heritage’s own Curtis Dubay wrote on the VAT this July:
A VAT piled on top of current income and payroll taxes would suffer from the following additional problems:
Hidden Tax Increase. Sound tax policy requires that taxes be transparent to taxpayers. But taxpayers will not see the portion of the VAT paid by businesses unless Congress requires that businesses show the full VAT paid on receipts. Even then, however, taxpayers could be unaware of the total amount they pay because they are unlikely to keep their receipts and add up the total annually.
Economic Distortion. Taxes impose a cost on society above their explicit price because they reduce economic efficiency. Economists generally agree that VATs are more efficient than most of the taxes currently imposed on U.S. taxpayers. But that is only if they apply to all goods and services in an economy.
Due to political considerations, a VAT in addition to current taxes would likely exempt politically sensitive items like food, clothing, health care, and housing. This would drive the tax rate higher to achieve the same amount of revenue and impose new economic distortions. Industries that get an exemption will be more profitable, compared to taxable industries, than they would have been without the tax. This means more capital will flow to these industries. This will lower economic well-being because capital will not flow to its most efficient market-determined use.
More Economic Power to Washington. A VAT not levied on all goods and services would give Congress even more power over the economy. Industries would lobby heavily for exemptions from the VAT for the economic benefits described above. This would give Congress an even larger roll in picking winners and losers in the marketplace. Success would depend less on ingenuity