How to run a budget like an idiot

We've got war, Social Security, Medicare ... Why can't all these "tough on spending" GOP candidates get real about taxes?

By Matt Miller, Fortune columnist

(Fortune Magazine) -- New Census data show that the top 1 percent of U.S. earners now take home a greater share of national income than at any time since the height of the go-go 1920s. The top 300,000 earners together receive almost as much income as the bottom 150 million.

Democrats inhale these facts and breathe out fire.

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Republicans say, "Hey, this is no time to be complacent. With a little effort we can push this closer to Louis XVI levels of inequality!"

At least that's what GOP presidential wannabes are sounding like as they genuflect before the altar of tax reduction, despite that creed's growing fiscal, moral, and mathematical indefensibility.

Mitt Romney wants more marginal and corporate rate cuts. Rudy Giuliani touts the endorsement of Steve "Flat Tax" Forbes. Even John McCain, the "straight talker" who opposed Bush's original tax cuts, now insists on their extension.

Before every red-blooded tax loather spits on this page in disgust, consider the context. Over the past six years we've borrowed nearly $2 trillion to cut taxes for the wealthiest during a time of war, meaning we've slipped the bill for our war and our tax cuts to our kids.

How do the candidates - who also claim to be "fiscally conservative" (not to mention devotees of "family values") - square all this?

Their stock answer is that we can cut taxes further if only we "get tough on spending." Sounds marvelous, but when Republicans controlled every corner of Washington, they balked at trimming a teensy few million from the next trillion in planned Medicaid expenses.

Bottom line: The outer limits of Republican spending-cut zeal won't get us anywhere close to balancing the books.

And that's before you toss in our $39 trillion in unfunded Social Security and Medicare liabilities.

I once asked budget gurus at two conservative think tanks what federal spending and taxes should be as a percentage of GDP a decade from now (it's 20 percent today). They casually replied 12 percent or 13 percent - meaning they think we'll slice government by more than a third as 77 million baby-boomers hit their rocking chairs.

This evidences either (a) deep disingenuousness or (b) deeper delusions.

Neither speaks well for the state of conservative thinking. Truth is, the only way GOP math adds up is if Giuliani, Romney, and company adopt the incentives for voluntary "transitions" (read suicides) for 65-year-olds featured in Chris Buckley's new comic novel, "Boomsday."

The most disappointing feature of the GOP case on taxes is a sin of omission. Tax-cut cheerleaders, like the Wall Street Journal editorial page, focus exclusively on the income tax. And it's true, the top 5 percent of earners do pay about 58 percent of federal income taxes.

But the income tax is only 47 percent of federal revenue today - something Republicans never want to discuss.

When you throw other federal taxes into the mix (especially the regressive payroll tax disproportionately borne by average earners), you find that "all in," the top-earning 5 percent make about 30 percent of the income and pay about 40 percent of overall federal taxes. In other words, we have a modestly progressive system.

Of course, if you had an Ayn Rand infatuation in high school that you never outgrew, you may think those top 300,000 supermen are dragging the 150 million proles around like a ball and chain, and the proles should shut up and be grateful.

So let me appeal to your scientific side instead, with what I call the Plutocrat Insulation Index (or PII). Take the percentage of tax cuts going to the top 1 percent of earners and divide that by the percentage of men and women serving in Iraq who are from the families of that same top 1 percent.

Miller's Social Decadence Theorem posits that as the PII approaches infinity (which it does today), we're deep in Marie Antoinette territory. With a push from those shiny new GOP tax plans, we'll be telling them to eat cake in no time.

Matt Miller is a management consultant and a senior fellow at the Center for American Progress. He is at work on a book on the new ways of thinking needed for capitalism to prosper. He can be reached at  Top of page