Nancy was Right

Thought this post at NRO was worth presenting in full:

Nancy Pelosi was correct when she said that we have to pass the health-care-reform bill in order to find out what’s in it.

Now that the bill has been safely passed and signed into law, the mainstream press is gradually revealing the scores of delightful provisions tucked away in the 2,700 page abomination: job-killing taxes on businesses, innovation-killing taxes on medical products, suffocating regulations on individual freedoms, wealth-sapping taxes on the middle-class, unprecedented intrusions on personal privacy, unconstitutional mandates on individuals, racially discriminatory preferences for favored groups, a Ponzi-scheme-on-steroids financing mechanism, and spending on a galactic, incomprehensible scale.

And that’s just the first 600 pages. But somewhere in this heaping pile of manure there just has to be a pony.

The Debt Bomb

Also, in a previous post I mentioned that, given the exploding levels of future federal debt and obligation put into place in the last 14 months, the country would invevitably be forced to choose be between a catastrophic default or catastrophic hyper-inflation.

Commenter “Ted,” the astute student of history, pointed out:

I’m trying to think of a historical case where a government has chosen default over the print-more-money-and-destroy-the-middle-class option, but I can’t think of one.

Today Dr. Krauthammer warns us about the course of action most likely to be chosen to push the day of “Sophie’s Choice” off a little farther into the future. But first, he validates the premise of my argument (he probably reads this blog ;):

Obama knows that the debt bomb is looming, that Moody’s has warned that the Treasury’s AAA rating is in jeopardy, and 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.

According to Krauthammer, the band-aid solution will be the VAT tax (Value Added Tax)–a national sales tax that, like local sales or property taxes, can be ratcheted up a quarter-point higher every time a new entitlement program is dreamed up. Charles point out:

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.

The VAT is all the rage in Europe. The rate in the UK, for example, is 17.5 percent . This is on top of an income tax rate there of 40% on income over $50k. Oh, and the UK tax rate on interest earnings from savings is 40%, too. (And yet their universal health care system still has to ration care.)

But the Brits are pantywaists on the VAT. In the socialist utopias of Sweden and Norway, the places we’re always being told we should emulate, the VAT rate is 25% and the top marginal income tax rate is 55%.

When I first started doing a lot of international travel about 10 years ago, I couldn’t initially figure out what the big deal was with all the “Duty Free” shops in the airports. I looked at the prices and things didn’t seem to be any cheaper than in the regular retail stores. Yet I watched European travelers running into them like they were having a “Buy One, Get Three Free, AND a Foot Rub” sale.

Then I bought a few items “in country” and looked at my receipt. My $100 in gift trinkets for my wife and daughters had been taxed an additional $25. Lights . . .on!  As a foreigner, I was often handed a “VAT Reimbursement” form that I could fill out, mail in, and eventually get my $25 back.

Heck yes, I filled it out. Now where was that duty free shop?

Even with these crushing levels of taxation, the economies of Europe would still have collapsed in insolvency decades ago were it not for one thing. They all, by necessity, gutted their military budgets and ceased to be a credible deterrent force to anyone or anything on the planet.

They could afford to do so in a dangerous world because the United States offered them a world-stabilizing umbrella of protection and deterrence.

Today, some of the clearer minds of Europe are waking up to sobering reality of what a world without that umbrella will mean for them.