Something Feral

Digging up the flower-beds.


Friday, May 8, 2009

Naiveté, intractability, and the aftermath

One must spend money to make money, nes pa?
WASHINGTON (Reuters) - President Barack Obama proposed on Thursday nearly doubling funds to enforce U.S. tax laws next year, with an aim of more than quadrupling funding for tax compliance to $2.1 billion within five years.

The budget plan seeks $12.1 billion for the Internal Revenue Service, responsible for collecting and enforcing individual and corporate tax laws, for fiscal 2010, which begins October 1. That amounts to a roughly 5.2 percent increase over the IRS budget for 2009, which was $11.5 billion.

The budget proposal, which must be approved by Congress, includes a $890 million request to boost tax enforcement, including in the international arena, an increase of $400 million from 2009.
Brilliant; I suppose that we should start referring to the agents as "revenuers" for time-period parity.

However, according to the President of the Dallas Federal Reserve, this is all irritatingly pointless:
No combination of tax hikes and spending cuts, though, will change the total burden borne by current and future generations. For the existing unfunded liabilities to be covered in the end, someone must pay $99.2 trillion more or receive $99.2 trillion less than they have been currently promised. This is a cold, hard fact. The decision we must make is whether to shoulder a substantial portion of that burden today or compel future generations to bear its full weight.

Now that you are all thoroughly depressed, let me come back to monetary policy and the Fed.

It is only natural to cast about for a solution—any solution—to avoid the fiscal pain we know is necessary because we succumbed to complacency and put off dealing with this looming fiscal disaster. Throughout history, many nations, when confronted by sizable debts they were unable or unwilling to repay, have seized upon an apparently painless solution to this dilemma: monetization. Just have the monetary authority run cash off the printing presses until the debt is repaid, the story goes, then promise to be responsible from that point on and hope your sins will be forgiven by God and Milton Friedman and everyone else.
And the Obama administration is worried about recouping $21 billion a year from corporate-tax loop-holes?

Mogambo Guru is right: we're freakin' doomed.

1 comment:

MikeT said...

It won't work. It assumes that people are evading taxes rather than losing their jobs or scaling back.