A conservative gets real

Via Ezra Klein, a pretty good interview with Bruce Bartlett who has the too-rare distinction of being an intellectually honest and perfectly reasonable conservative. Here he is on the benefits of a VAT (value added tax):

I think the administration made a mistake approaching the funding of health-care reform how it did and I think Republicans made a mistake refusing to seriously debate the issue or its funding.

The value-added tax would be a very appropriate tax to use for this purpose. One reason is I am disturbed that we have a large percentage of the population that pay no income taxes. And I know many of those people pay payroll taxes. But income taxes fund the general government. According to a study by the Tax Policy Center, 47 percent pay no income tax, or have negative liability. And I think it's bad for democracy when people get into the position when a majority can vote benefits for themselves but not pay for it. And that should disturb liberals as much as conservatives.

The VAT would necessarily be a broad-based tax. It would be a way of getting people to pay for the benefits they themselves receive. People like Len Burman and Rahm Emmanuel's brother [Ezekiel Emmanuel, a health care adviser to Peter Orszag] have supported this for some time. Len argues that if people knew the VAT was dedicated to health-care reform, and the rate rose and fell automatically with the spending of the system, they would have an incentive to hold down taxes. They would have some positive reinforcement we do not now have with Medicare. I hope that's right. You know, every other major developed country has a VAT: The parties of the left in Europe made a deal a long time ago: If conservatives will let us have a welfare state, we'll fund it conservatively. And I think that's still a good deal.

He also makes a good point about how a VAT would give the government an additional tool to stimulate spending in a recession:

And thinking about this from another perspective, suppose we had a VAT right now and we wanted to stimulated consumption. Reducing the VAT rate temporarily would be a wonderful way to stimulate consumption. Suppose you had a 10 percent VAT and we said we weren't going to collect it for the next 10 months. People would buy like crazy. They'd buy toilet paper, they'd buy anything they could get their hands on that they knew they'd need in the future. We're depriving ourselves of a great stimulant tool by ignoring this.

I think I agree with a lot of this. Even if a VAT is regressive, realistically it's the only way you're going to get conservatives on board with funding a welfare state--and it's nice that it has other benefits too, like its ability to work as a stimulus tool, and the fact that it would properly align incentives with regard to keeping the costs of healthcare in check.

Moreover, just generally speaking, I think lots of people agree that at some point we're going to have to shift to a less demand-oriented economy (currently consumer spending accounts for 70% of GDP), so it makes sense to shift the tax burden away from income and more towards consumption.

On a separate point, I think this interview really brings into stark relief how damaging it is for the country that there is no intellectually honest opposition party that offers serious policy alternatives. I understand that conservatives don't want an expanded welfare state and that they view the obstruction of its expansion as a worthy cause, but at some point this behavior takes its toll on the ability of the government to operate: if you relentlessly increase spending while refusing to raise revenue in the long term, the federal government will eventually just stop working (see: California). That's an outcome nobody should want, regardless of ideology.