U.S. government taxes, relative to the size of the economy, are
significantly lower than they were after President Ronald Reagan cut
taxes.
Will the United States follow the European path in 2013?
Let's hope so.
A year ago, the world's markets were watching Europe with rising
fear. Some expected 2012 to be the year that the euro zone broke up.
Germany did not want to pay to bail out its less fortunate neighbors
unless they agreed to severe austerity and to what amounted to a
surrender of sovereignty -- ideas that other countries were loath to
accept.
What ensued during the year was a series of summit meetings that
often seemed to be doing more for the hotel business in European
capitals than they were for solving the problem. Agreements in
principle were announced, and markets went up, only to tumble back
when the details got difficult.
What the naysayers missed was that there really was a common
commitment to save the euro, and that in the end they would do what
was needed to avert disaster. Finally, in July, the European Central
Bank came up with a plan that assured the euro zone banks, and the
troubled governments, would have access to money at reasonable
rates. Angela Merkel, the German chancellor, went along, angering
some of her German colleagues, who thought she was straying from
basic principles.
So it could be in the U.S. Congress. The outgoing Congress went
up to the final minutes, amid much angst, before it largely averted
the automatic enactment of tax increases and spending cuts. There
are reasons to grumble about the details -- and more deadlines loom
in the new Congress -- but the essential point was that, in the end,
the House Republicans allowed a bill to pass even though a majority
of them opposed it.
John A. Boehner, the speaker of the House of Representatives, who
has often seemed to be scared to do anything that his Tea Party
colleagues might oppose, not only allowed a vote on the proposal but
voted for it himself.
The first indication of whether this is a new dawn, or simply a
case of the House Republicans' having been outmaneuvered, could come
when the debt ceiling is addressed. The debt ceiling is an absurd
vote to begin with. Raising it simply allows the government to pay
the bills for spending that Congress has already approved. To allow
the spending bills to pass, but to then refuse to raise the debt
ceiling, is equivalent to a family refusing to pay its credit card
bill while continuing to spend. That would only destroy the family's
credit.
Perhaps some Republicans will threaten to keep the country from
paying its bills in order to accomplish something they do not have
the votes to accomplish otherwise. But if the European precedent
holds, the final result will at least avert disaster.
Whether more than that can be hoped for may depend in part on
whether those screaming for major cuts in government spending
actually believe their rhetoric -- that the United States could
become another Greece.
The reality is that the current budget deficit largely reflects
two things: exceptionally low government revenue and the continuing
problems caused by the financial crisis and recession that followed
the bursting of the housing bubble. Bringing tax revenue back to
historic levels, as well as the growth in revenue and reductions in
