A couple of months ago my wife and I took a trip to Boston and New York and while there we had lunch with an old friend of mine whom I’ve known since fourth grade. My friend believes that taxes will and should go up on the wealthy. It seems pretty obvious that he is correct that they will go up but there is more of a conversation to be had about whether they should go up.
Several years ago as the scope of the US’ fiscal problems I made the obvious and un-unique observation that to actually fix things it would require sacrifice on the part of everyone, that it would hurt and I didn’t the the political will existed to do what needs to be done. Maybe some progress is happening on the political will front but that remains to be seen.
Karl Denninger posted the above chart recently that captures the scope of the problem. In their never ending coverage of the fiscal cliff CNBC has offered up that increasing taxes on the wealthy will solve the problem for about a week or two. That is not a reason by itself to not raise taxes but it would do very little.
In all likelihood a real fix will have to involve a lot of little things that by themselves are too small to matter. Per the above table there are only three big things to cut into that could by themselves make a difference. Are entitlements and defense really on the table?
Any program that endures cuts will adversely affect some constituency which is of course the meaning of everyone having to sacrifice something. Any action taken will have consequences to them; raising taxes will act as some sort of weight on demand. I would hope to hear a real acknowledgement of those consequences and that those likely consequences were taken into account in putting together the specific details of the, continuing the example, tax hikes.
My personal base case has been to expect getting means tested out of my social security check when the time comes but there certainly could be other things coming in addition to or instead of and if “fixing it” really is a priority for the country then we all need to understand this reality.