You Decide

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.

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.

What’s worse for us is that we’ve pretty much given up trying to address the root problem, which is the decade long spending binge initiated byGeorge W. Bush and then tripled down on by Barack Obama. 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.

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.

The solution to unsustainable budget deficits and precarious debt levels remains the same as when Barack Obama took office: Stop spending so much ed money. Until government gets serious about that, trial balloons for gobbling ever-more tax money deserve nothing more than a good swat.

And we’ll be left with a massive exodus of business geniuses to that bastion of capitalism — France."