The next president will be judged by the adequacy of his (or her) response to the two overriding challenges facing America today -- winning the war on terrorism and surmounting the fiscal consequences of the baby boomer retirements without suffocating tax increases.
The two fields of candidates couldn’t be further apart in how they would address them. This week, let’s examine the boomer’s imminent retirements; next week we’ll consider how they propose to win the war against terrorism.
The Democratic field follows its party’s penchant for class warfare. The formula is straightforward enough: Offer a majority of voters real or imaginary tax relief (imaginary is when you relieve taxpayers of a future increase in their tax burden that they’ve never actually had to face, such as the Alternative Minimum Tax) or new government benefits. Then pay for it by shifting more of the tax burden to the “rich.”
Virtually all of the new policy initiatives the Democratic candidates espouse are directed at middle- and lower middle-class voters. Rather than talk about the need to restrain entitlement growth, the Democratic field focuses instead on ways to broaden the government’s role in our daily lives -- increased access to government-designed health coverage (opening Medicare to displaced workers between the ages of 55 and 64, for example), and more government child care, student loans and mortgage insurance.
Republicans, in contrast, look first to the tax side. They would make the Bush tax cuts permanent and create a new one by repealing the AMT with no offsetting tax hikes. All speak fondly of restructuring our health system around patients, our educational system around parents, and giving individuals more opportunities to save for retirement. As the debate over expanding SCHIP has shown, no Republican wants to draw the middle class into the tender mercies of government programs, subsidies or guarantees.
What does all this mean?
Apparently, the Democratic field finds it acceptable to allow the nation’s current tax burden, now around the post-World War II average of 18.5% of GDP, to rise steadily to historically unprecedented levels -- as high as 23.5% of GDP within a few decades. The goal of Republican candidates appears to be to maintain that burden at its current level or, if possible, lower it. But under no circumstances do they believe it should rise.
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