Those Damned European Ideas

In her most recent blog entry entitled "Another European Idea Coming To Hurt Our Economy", Congresswoman Cathy McMorris Rodgers expresses her disapproval with the idea of Value Added Tax (VAT) and tax increases in general.

Most European countries levy all of the dozens of taxes the US imposes on our workers and job creators; they do have one tax that the U.S. has successfully avoided so far. The Value Added Tax (VAT) is a stealth tax that while it often goes unnoticed by the consumer, it drives up the cost of every good and service that they buy.

I am neither for nor against VAT but I'm willing to discuss it as an option, especially in terms of balancing it with the current tax structures. Having lived in Europe a number of years, I can tell you that VAT is not a stealth tax that goes unnoticed by the consumer. Everybody knows why the prices are jacked up.

Economists caution that this tax could be making the trip across the Atlantic very soon. With our nation facing annual deficits of over $1 trillion for the foreseeable future, a massive new health care bill that we cannot afford, lower confidence in our Treasury Bond ratings, and a President and Congress completely unwilling to rein in spending, prospects of a massive tax hike are growing. One of the President’s main economic advisors, Paul Volcker, said as much in a recent speech.

What Volcker reflected is a realistic point of view. Sometimes you have to raise taxes. I remember a debate between Walter Mondale and Ronald Reagan--yeah, that was many years ago--in which Mondale said, “Mr. Reagan will raise taxes; and so will I. He won't tell you. I just did.” It was political suicide, but true. Reagan signed the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 as part of a deal with Congress to reduce spending by $3 for every $1 increase in taxes. Remarkably, the original bill that passed the House reduced taxes and the Republican-controlled Senate amended it to raise taxes. And the world did not end.

I think that tax hikes are a bad idea; and raising taxes at a time when 15 million Americans are out of work and there is continuing uncertainty about the economy’s future is an even worse idea. If President Obama and the Democrats in Congress want to take this next step towards becoming a high-tax, low-growth economy, they will do it over my tireless and vocal opposition.

As the effects of TEFRA showed, higher taxes don't automatically mean low growth. Just as the Bush-era lower taxes did not automatically result in high growth.

Recently, Congresswoman McMorris Rodgers announced her plans for re-election.

She said she wants to return for a fourth term to fight “reckless federal spending.” As a member of House Republican leadership, she has opposed the bailouts of banks and automakers, last year’s economic stimulus package and all versions of health care reform proposed by President Barack Obama or congressional Democrats.

It's important to recognize that what she characterizes as "reckless federal spending" includes more than what she lists. Her two moratoriums on accepting earmarks are more symbolic that substantive. Earmarks are a drop in the budget bucket compared to the entire budget. Our congresswoman would better serve us my considering the whole budgeting process instead of just the politically expedient.

As I mentioned at the beginning, her blog entry warning about VAT was entitled "Another European Idea Coming To Hurt Our Economy". (emphasis mine)

So what were the other European ideas that hurt our economy?