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Wednesday, June 13, 2007
Giving Up on the Hamilton Project
The Hamilton Project's new paper on tax reform is a mixed bag. The section on the tax gap is pretty good, and it makes some interesting points about how unpaid taxes seem to make the tax code more regressive. But the section on deficits- which leads the paper, reflecting the Hamiltonian philosophy of fiscal responsibility uber alles- is a disappointment.
The paper's authors just don't want to understand what's driving up health care costs. Instead, they sound the familiar refrain about cutting benefits:
To put this in perspective, achieving long-run fiscal balance would require an immediate and permanent 34 percent cut in all government spending, including Social Security, Medicare, and defense. Delaying these changes, or exempting some areas of government spending from cuts, would mean substantially larger reductions later to restore fiscal balance.
A massive reduction in services is not necessary to control health care costs. The government could make an effort root out the rampant inefficiencies that are the primary cause of rising costs. Really, it's that simple. This isn't rocket science.
So why they won't examine the issue? Since they've never explained, I'm left to speculate. I think the problem here is ideology.
The market-worshiping ideologues of the Hamilton Project won't seriously engage the question of how to solve the health care crisis because it requires doubting their most cherished assumptions. They believe that markets, and only markets, have the capacity to efficiently distribute goods and services. But the one thing that the health care crisis proves is that markets are extraordinarily bad at providing quality health care at efficient prices.
It is no longer clear why it is worth reading the Hamilton Project's output on deficits and the long-term fiscal issues, unless you already agree with them. Theirs is a closed system, impervious to reality, as they worship an illusion of their own conjuring.
UPDATE: Here's a paragraph from the paper that just about captures the Hamiltonian ideology:
First, progressive taxation is often more economically efficient than other solutions, because it leaves most economic decisions to participants in a competitive marketplace. Industrial policies and direct market interventions can try to change the before-tax distribution of income. But ultimately such policies harm the economy—for example, excessively high living-wage laws can result in large job losses for low-skilled workers. Progressive taxation first lets the competitive market economy maximize the total pie, and then uses instruments such as the EITC and the top marginal tax rate, in combination with a variety of other social policies, to help spread the gains thereby generated more widely (Bordoff forthcoming).
Posted by Matt Lewis
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