Taxing the rich

December 4, 2012

There’s been a lot of talk about taxing the rich — which is fine, unless they have me in mind. What’s missing, though, is any sense that the problem is largely one of spending. What Alan Blinder (Democrat) and Glenn Hubbard (Republican) wrote last year remains true:

Despite all the hullabaloo about the next 10 years … the truly alarming budget problems come later.

The main culprit behind the exploding [future government] deficit is increased health care spending, which CBO projects to rise from 5.6% of GDP now to 10.4% by 2035. There are two undisputed reasons for rising health care costs: the aging of the population (the minor part) and the rising relative cost of health care (the major part).

You can read the latest CBO budget outlook yourself; I esp like Fig B-1. What it says is that we either gain some measure of control over this spending, or we raise tax revenue — a lot! Taxing the rich won’t be enough. It might be appealing for other reasons, but it’s a red herring when it comes to our long-term budget problems.

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