The VAT: coming to America

I know I've been on an ObamaCare kick for the past few months, and I wouldn't blame you if you are tired of it by now.  I wish I could abandon it for some other topic -- any other topic, in fact.  But, alas, I cannot.  Why? Because I see this new law as the greatest single threat to our continued prosperity in my lifetime.

Those on the left think that conservatives are exaggerating the potential impact of this law.  Paul Krugman, no doubt the dumbest Nobel Prize winner in history, was on ABC's "This Week" on Sunday and talked of the the health care reform law as "a minor change", and is certain that it will both be cost and care effective in improving the nation's medical system.  Indeed, this is the talking point for the Democrats, who want to focus on all the "good" things in the law and act as if the economic sleight-of-hand implicit in the law's assumptions are trivial.  Of course, it's all trivial when you are saving the lives of women, children and the infirm (well, most children, anyhow -- we won't mention the baby killing public abortion funding in the law -- I know the left doesn't like to talk about that part).

And herein lies the problem: the left is touting the benefits, while hiding the costs.  And the costs are a killer -- a path to insolvency for this country.  Why?  Because the numbers just don't add up.  As Alan Reynolds of the Cato Institute points out in today's Wall Street Journal, Obama's plan is to tax "the rich" to pay for all this entitlement spending:

President Barack Obama's new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% "Medicare tax" on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.

The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.

Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.

It won't work. It never works.

How do we know it won't work?  Because we've tried it before -- in California, in fact.  A burgeoning entitlement and public employee pension system paid for by a tiny percentage of tax payers.  I've written about it before here and here.  California has relied on its top earners to the point where too much of the budget relies on too few tax payers.  And now it has squeezed them to the point that there is no more blood in the rock.  There just isn't any more marginal revenue to gain from raising taxes further, and the "brain drain" to other states has only made the situation worse.

We are now about to embark on a similar experience nationally -- and the numbers won't work any differently there than they have in California.  As Reynolds makes clear, higher marginal tax rates will ultimately lead to LESS revenue, not more.  It's the same lesson that Regan taught us -- that the left refuses to learn: incentives matter:

In short, the belief that higher tax rates on the rich could eventually raise significant sums over the next decade is a dangerous delusion, because it means the already horrific estimates of long-term deficits are seriously understated. The cost of new health-insurance subsidies and Medicaid enrollees are projected to grow by at least 7% a year, which means the cost doubles every decade—to $432 billion a year by 2029, $864 billion by 2039, and more than $1.72 trillion by 2049.

If anyone thinks taxing the rich will cover any significant portion of such expenses, think again.

The federal government has embarked on an unprecedented spending spree, granting new entitlements in the guise of refundable tax credits while drawing false comfort from phantom revenue projections that will never materialize.

At the end of this train comes Nancy Pelosi's big dream: the Value Added Tax (VAT).  The VAT is a tax on goods at every stage of production -- hence the "value added" after each stage (production, assembly, packaging, distribution, etc.)  It's a stealth tax because they don't add it at the cash register -- it's already baked in.  And it's high -- in the UK, for example, that VAT is 17.5%.  And it is in addition to the income, property, capital gains and local sales taxes you pay.

Remember this fact: every nation with a nationalized health care system has at VAT.  It is the only way that the high costs of national health care can be paid for.  Nancy Pelosi is on record as favoring a VAT; she told Charlie Rose in October, 2009:

"Somewhere along the way, a value-added tax plays into this," she said. "Of course, we want to take down the health-care cost, that's one part of it. But in the scheme of things, I think it's fair to look at a value-added tax as well."

The Wall Street Journal has outlined the desires of Pelosi and other Democrats for a VAT on numerous occasions as well:

Mrs. Pelosi is the second prominent Democrat to call for a VAT in recent weeks. John Podesta, an adviser to President Obama and president of the very liberal Center for American Progress, called in September for a "small and more progressive" VAT. Mrs. Pelosi and Mr. Podesta argue a new tax is necessary to address the nation's exploding financial liabilities, as if those liabilities exploded on their own. Of course, VATs always start "small" and get bigger. The bills for the Democratic spending blowout are coming due even sooner than advertised, and the middle class will pay, whatever Mr. Obama's campaign promises. 

So, here's the dirty little secret of ObamaCare: the left knows the numbers are wrong and that the program will lead to massive deficits.  They know it will happen and it is by design: the only way to fully re-make America in Europe's vision is to have a VAT that will support the welfare state.

It is a key part of the leftist game plan.

You heard it here first:  The VAT is coming to America, and sooner than you think.

Old movies and unwelcome history

The moment the Japanese Empire bombed Pearl Harbor, the vast majority of Americans were committed heart and soul to winning the world war that the sneak attack abruptly brought our nation into. But as welcome as the ultimate victory was, World War II’s conclusion was, like most wars, a mixed blessing. For while the Nazis, fascists and warlords were thoroughly defeated, one of our principal allies, the Union of Soviet Socialist Republics (deceased, 1991) was in command of central Europe and portions of the Far East. No less pleased at the outcome as the western allies–the United States, Great Britain and France–the USSR nevertheless was a regime no less hateful than the ones defeated in war. In Europe, a divided continent entailed further divisions within defeated countries, specifically, Germany and Austria. In both countries, four zones of occupation were established at the Potsdam Conference, not only for these countries but for their capital cities, Berlin and Vienna. The division of Germany epitomized the tragic results of the "good war," as it came to be called, with crises in 1948 and 1961 that threatened another world war, and the remarkably peaceful outcome of 1989 with the fall of the Berlin Wall, erected in 1961. Austria was more fortunate, as the four-power occupation of the country and its capital ended with its official neutrality, agreed to at a summit conference in 1955.

But, of course, this was not the case in the immediate aftermath of the war, as painfully the true nature of our Soviet allies became clear. It was bad enough that Soviet troops remained from the Baltic republics to Bulgaria. But even those persons in Russia and its satellites who managed to flee ahead of those troops to the western democracies were relentlessly pursued by Soviet authorities.

Operation Keelhaul was the wrenching obligation of Western powers to deal with the Soviet refugee "problem." Aleksandr Solzhenitsyn, the heroic Russian writer who took on the Communist colossus and ultimately won, denounced even the estimable Winston Churchill for consenting to this massive human tragedy. Because the operation mocked everything the victorious allies fought (and prosecuted German and Japanese leaders) for, it was given little publicity.

But movie makers in those days took note. "The Red Danube," an MGM production of 1949, (shown on TCM) zeroed in on the grisly work of Soviet repatriation with telling effect. Despite the British occupation forces’ determination to carry out their orders to deliver thousands of unhappy and unwilling refugees from Soviet tyranny to their horrible and undeserved fate, the truth obtrudes itself.

Here is a useful plot summary from IMDb (Internet Movie Database):

"Shortly after the end of World War II, British Colonel Michael 'Hooky' Nicobar (Walter Pidgeon) is assigned to a unit in the British Zone of Vienna. His duty is to aid the Soviet authorities to repatriate citizens of the Soviet Union, many of whom prefer not to return to their home country. Billeted in the convent run by Mother Auxilia (Ethel Barrymore), Nicobar, and his military aides Major John 'Twingo' McPhimister (Peter Lawford) and Audrey Quail (Angela Lansbury), become involved in the plight of a young ballerina (Janet Leigh) who is trying to avoid being returned to Moscow. Nicobar's sense of duty is tested as he sees first hand the plight of the people he is helping return to the Soviet Union; his lack of religious faith is also shaken by his contact with the Mother Superior."

I read several of these plot summaries, all of which equivocated in some way on the momentous issues involved. To say that "many" of the Soviet citizens "prefer[red] not to return to their home country" is a huge understatement. All were actively hostile to the idea, for it does not take a genius to figure out that a regime that deprives you of your liberty is to be avoided at all costs. Other summaries called the movie "propaganda" and "heavy handed." That’s how things appear to those who are either ignorant of political realities or wilfully blind for the sake of avoiding conflict.

But the summaries indicate that there are several threads in this movie. Front and center is the painful dilemma of the officers of a good regime being ordered to deliver unwilling people to an evil one. The film "humanizes" this weighty issue with a young officer’s passion for a beautiful victim of the massive roundup. (The officer’s aide is also in love with him.) So our hearts tug for the young couple’s fight to avoid her repatriation and hurt badly when events conspire against them.

Col. Nicobar’s sense of duty, reinforced at all levels of the British command, is not hard to admire, but our awareness of the evils it brings about forces us to stop and think. As determined as he is to carry out his orders, a combination of the true facts of the repatriation and his being prodded by the mother superior, produce a far different outcome. Looking back at the event, today’s reviewers reflect the influence of postwar revisionism that refuses to acknowledge that the Cold War was rooted in Soviet tyranny, and of "political correctness" that all too incorrectly seeks to banish religious issues from public discussion.

The good-hearted and honest colonel has difficulty reconciling the existence of massive evil in the world with the promise of love and peace that is the Christian message. He is not one to change his mind easily for, as John Adams long ago observed, "facts are stubborn things." Not only Nazi atrocities but, as he is painfully learning, Soviet atrocities shake the world, leaving men like him with the unending duty of opposing them by force. Religious sentiment, he believes, is no better than rank superstition in the face of these great evils.

Gently, but firmly, the mother superior reminds him, by her persistence in fighting for Maria’s release and even publicizing the whole repatriation issue with the Pope, as well as by her pointed observation that God did not do these wicked deeds but man, Nicobar sees a new and more compelling duty to risk his position and his sustenance by refusing to carry out any further cooperation with the Soviets’ nefarious project. The denouement will bring delight to every lover of liberty and freedom of conscience.

Momentous issues at mid century gave many people a sense of moral clarity than has seldom been seen since. We can be grateful to old Hollywood (and Turner Classic Movies) that it made films worthy of the best characters that humanity has put forth. May it plague the consciences of those who will not see the truth that is right in front of them.