Economist Greg Mankiw is a study in contradictions. His establishment credentials are impeccable: a graduate of Princeton – summa cum laude – with a degree in economics, then on to MIT and Harvard Law. He chaired President George W. Bush’s Council of Economic Advisors, advised Mitt Romney, and now teaches economics at Harvard.
But every now and then he speaks the truth, or at least some part of it. In his article in the New York Times, Mankiw was clear about who’s paying the taxes in the country: the rich, by a country mile:
In 2009, the most recent year for which data are available, the richest 1 percent of Americans paid 28.9 percent of their income in federal taxes, according to the Congressional Budget Office. (That includes income taxes, both individual and corporate, and payroll taxes.) Members of the middle class, defined as the middle fifth of households, paid 11.1 percent of their income in taxes.
Some of this difference in tax rates is attributable to temporary tax changes passed in response to the recent recession. But not all. In 2006, before the financial crisis, the top 1 percent paid 30 percent of their income in taxes, compared with 13.9 percent for the middle class.
These data suggest that the rich are not, as a general matter, shirking their responsibilities to support the federal government.
Wow! Considering the source, this is an amazing admission. The rich are paying more than their fair share! And then he goes on to explain that even if Obama has his way with Congress – which he is largely getting – the proposed increases on the richest Americans will have precious little impact on the deficit:
Even if President Obama wins all the tax increases on the rich that he is asking for, the long-term fiscal picture will still look grim.
“Grim” is probably the nicest word he could find to describe the situation.
But here’s the point I want to make: Mankiw is building his case for more taxes on the middle class, which of course is where the true wealth is, and which understandably has been the target of tax tyrants forever. He explains:
Unless we scale back entitlement programs far more than anyone in Washington is now seriously considering, we will have no choice but to increase taxes on a vast majority of Americans. This could involve higher tax rates or an elimination of popular deductions. Or it could mean an entirely new tax, such as a value-added tax or a carbon tax.
I suggest that, given Congress’ studied and continuing determination to avoid facing reality, there will be another route: default. I agree with Gary North that defaulting on promises – to bondholders, to welfare recipients, to Social Security and Medicare beneficiaries, to pensioners – is the likely outcome. There just isn’t enough wealth, anywhere, to fund the deficit and national debt. I call it the result of inevitable mathematics.