0bama follows Europe into places Europeans are moving away from

Having spent half my life in Europe, I’ve on many occasions made wry comments about America under BHOzo adopting Euro-style social-democratic policies (which I once advocated myself) at the same time that European countries are seeking to get away from them.

Now Matt Welch explores this theme at some length (via Insty):

With the stunning emergence of the consumption-based Value Added Tax (VAT) as a legitimate public policy option, the Obama administration has now all but made it official: There is no European economic idea too extreme for 21st century America. Even if the Europeans themselves are largely headed in the opposite direction.

VAT, first rolled out in 1950s France, is a sales tax on everything that every person or entity buys within a country, with exceptions or reductions carved out for things like food, newspapers, or various links along the industrial supply chain.

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Compared to the H&R Block subsidy program that is the US tax code [heh!], the VAT is a straightforward way for governments to skim 20% or so off the top of every transaction. By penalizing consumption and not earnings, it encourages savings and resists gaming by well-connected special interests. In an ideal world, you could enact a VAT while slashing America’s corporate income tax rate, which is the globe’s second-highest.

But as the last 18 months of federal misgovernance has aptly demonstrated, we do not live in anything like an ideal world.

The only reason VAT is even on the table right now is that bureaucrats like VAT enthusiast Nancy Pelosi have an appetite for spending that far outpaces Americans’ willingness to cough up their hard-earned dough. Every statehouse and city council across the land is literally out of money, and turning to the only people who can print the stuff: Washington.

The federal government spent $3.5 trillion last year while taking in just $2.1 trillion, producing a deficit-to-Gross Domestic Product ratio of 10%, a level not seen since World War II. By contrast, the European Union requires member countries to keep deficits at 3% of GDP. If America was in Europe, we’d be Greece.

[…] The VAT isn’t a way to streamline a complicated tax code; it’s a new spigot to flood money into the pockets of teachers who can’t be fired, and securities regulators who can’t get enough porn.

The grand irony here is that the very continent we’re scrambling to emulate has been moving aggressively in the opposite direction on taxes and economic policy.

While the US keeps corporate taxes frozen near 40%, EU countries have slashed them down to an average of around 25%. Top marginal income tax rates, which in the US are 35%, are under 25% all across the former East Bloc.

As the share of government spending in health care has been steadily increasing in the US, it has been inching downward in Europe. While first Bush and then Obama pushed through massive new public entitlements, governments from Stockholm to Rome have been grappling with real private reform.

Though conservatives especially like to sneer at the democratic socialism of Old Europe, it is precisely those cheese-eaters in France and Vikings up north who have been leading the world in privatization these last two decades, selling off everything from airports to sewage companies.

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It was hardly an accident that, in the midst of Washington’s partial nationalization of Detroit automakers, Swedish Enterprise Minister Maud Olofsson announced “The Swedish state is not prepared to own car factories.” With this week’s news that General Motors is “paying back” one set of Troubled Asset Relief Program loans from another pile of TARP money, we can see why Europeans have a lot to teach us about separation of industry and state.

Where Republicans look across the Atlantic and see soft socialists worth avoiding, Democrats see enlightened progressives worth emulating. And it does not matter how little reality conforms to either fantasy.

So now the federal government is pushing to ape Germany and France in paying individuals far-above-market prices for selling their excess solar or wind power back to the electricity grid. The only problem? Those countries are running, not walking, away from those unaffordable programs.

The same dynamic is at play with labor relations. President Obama is on record pushing organized labor’s dream policy of “card check,” which would drastically bump up private sector unionism after decades of steady decline, and he has gone so far as appoint to his bipartisan “deficit commission” the notorious labor honcho Andy Stern.

Meanwhile Germany, which has the tightest labor-management-government relations in the EU, has been aggressively loosening, not tightening, workplace rules.

The fact that America’s most influential public-sector union leader is within a thousand miles of a deficit commission, let alone one that is floating the idea of an American VAT, tells you all you need to know about the relationship between any new consumption tax and fiscal responsibility. Which is to say, there isn’t any.

Read the whole thing.

Senate votes 85-13 against VAT

VAT trial balloon just deflated big time? (H/t: C2)  Senate Votes 85-13 to Condemn Value-Added Tax Sure, it’s only a “nonbinding resolution”, which expresses the “sense of the Senate”, but still: 85-13? (Roll call vote.) Two senators [Nelson and Warner] abstained. One RINO [Voinovich] voted against: the other votes against were all Democrats. Independent Joe Lieberman voted in favor.

Speaking of taxes, some places to go for coverage of yesterday’s Tax Day Tea Parties:

And meanwhile, courtesy of this article, here is a map of 0bama popularity/impopularity ratings (deep blue means a popularity index of  10% or higher, deep red of -10% or lower)

Krauthammer: VAT is coming

Charles Krauthammer: The VAT is coming  [Read the whole thing]

OBAMA KNOWS that the debt bomb is looming, that Moody’s is warning that the Treasury’s AAA rating is in jeopardy, that we are headed for a run on the dollar and/or hyperinflation if nothing is done.

Hence his deficit reduction commission. It will report (surprise!) after the November elections.

What will it recommend? What can it recommend?

Sure, Social Security can be trimmed by raising the retirement age, introducing means testing and changing the indexing formula from wage growth to price inflation.

But this won’t be nearly enough. As Obama has repeatedly insisted, the real money is in health care costs – which are now locked in place by the new Obamacare mandates.

That’s where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude – if you exempt food, for example, the yield would be more like $900b.).

It’s the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20%. Most of Scandinavia: 25%. [Israel’s is somewhat lower, at 16% — Ed.]

American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.

Obama set out to be a consequential president, on the order of Ronald Reagan. With the VAT, Obama’s triumph will be complete. He will have succeeded in reversing Reaganism. Liberals have long complained that Reagan’s strategy was to starve the (governmental) beast to shrink it: First, cut taxes – then ultimately you have to reduce government spending.

Obama’s strategy is exactly the opposite: Expand the beast, and then feed it. Spend first – which then forces taxation. Now that, with the institution of universal health care, we are becoming the full entitlement state, the beast will have to be fed.

And the VAT is the only trough in creation large enough.

As a substitute for the income tax, the VAT would be a splendid idea.

Taxing consumption makes infinitely more sense than taxing work. But to feed the liberal social-democratic project, the VAT must be added on top of the income tax.

Ultimately, even that won’t be enough. As the population ages and health care becomes increasingly expensive, the only way to avoid fiscal ruin (as Britain, for example, has discovered) is health care rationing.

It will take a while to break the American populace to that idea. In the meantime, get ready for the VAT. Or start fighting it.

People of a classical-liberal bent in Western countries who see things going pear-shaped look to the USA as an alternative to immigrate to. At this rate, why should they bother?

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