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The Alternate Fiscal Universe

Greg Mankiw thinks he’s really clever:

I have a plan to reduce the budget deficit.  The essence of the plan is the federal government writing me a check for $1 billion.  The plan will be financed by $3 billion of tax increases.  According to my back-of-the envelope calculations, giving me that $1 billion will reduce the budget deficit by $2 billion.

Now, you may be tempted to say that giving me that $1 billion will not really reduce the budget deficit.  Rather, you might say, it is the tax increases, which have nothing to do with my handout, that are reducing the budget deficit.  But if you are tempted by that kind of sloppy thinking, you have not been following the debate over healthcare reform.

I’m not going to attack this particular point about PPACA, because others have done it already.

I do think, however, it needs to be pointed out that this is indicative of the alternate universe in which most of the mainstream GOP resides.  In this alternate universe, tax increases are not a means to reduce the deficit.  They point this out as if it’s some sort of joke that you don’t get.  From Michele Bachmann’s “tax cuts shouldn’t be considered a deficit,” to CUTGO, to the new slash-and-burn budget plan straight out of Paul Ryan’s wet dream, it is clear that, in the mind of the modern GOP, the only path to a balanced budget is with spending cuts.

This is horribly unrealistic.

Any serious plan to take control of our budget situation must include an increase in our average tax rates.  And that’s no joke.

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