Tax and fiscal policies -- how they intersect

 Jonathan Chiat, a reliable liberal shilll for higher taxes and more government,  and Nick Gillespie, libertarian editor of Reason Magazine, engage in a debate below that is at the crux of the political dilemma we face in this country at this time.  Liberals want to tax the high income producers in the economy much more and have a larger "benevolent" government redistribute this wealth in order to have a more "fair" society, or whatever, while the conservatives want to lower taxes and keep government out of the picture as much as possible, in order foster a dynamic entrepreneurially driven economy that produces wealth and jobs aplenty.  Who's right and who's wrong in this argument?  From my perspective the conservative view, or in this case libertarian, prevails.  Not only does big government stifle innovation with all the rules and regulations it imposes to control business, but it also saps individual initiative and personal responsibility which are character building traits necessary for survival.  Socialism has failed all around the world where ever it has been tried, and failed miserably at that.  Why do certain types, like Jonathan Chiat, Barack Obama, et al keep wanting to come back to this failed models is an enigma to most people who have real world experience in business.  Below is the crux of this argument as it appears in Gillespie's blog::

Even more Chait:

Inflation, population growth, and a growing economy all impact the value of a given dollar sum of taxation of spending. Pointing out that the nominal size of government is growing is a nice tactic to use for the Rush Limbaugh audience. Any remotely serious economist looks at revenue and spending as a proportion of the economy.

Hey, I want to be remotely serious too! There's no question that looking at revenue and outlays as a percentage of GDP is an important measure, which is one of the reasons why I do it all the time, such as in this post. Here's how revenue as a percentage of GDP fared in the '00s (and I'm including 2001 as a sop to Chait):

2001	10286.2	19.36	a
2002	10642.3	17.42	a
2003	11142.1	16.00	a
2004	11867.8	15.84	a
2005	12638.4	17.04	a
2006	13398.9	17.97	a
2007	14077.6	18.24	a
2008	14441.4	17.48	a
2009	14258.2	14.76	a

That comes to an average of about 17 percent, a point lower than that the post-war historical average of about 18 percent.

And what about spending as percentage of GDP over the same period?

2001	10286.2	18.11	a
2002	10642.3	18.90	a
2003	11142.1	19.39	a
2004	11867.8	19.32	a
2005	12638.4	19.56	a
2006	13398.9	19.82	a
2007	14077.6	19.38	a
2008	14441.4	20.65	a
2009	14258.2	24.67	a

Average federal spending was about 20 percent, or about 3 percentage points higher than revenue.When you look at these figures, it becomes pretty obvious where the deficits come from: From spending more money than the amount coming in.

To the right is a graph that spells out the mismatch. Do you need to be a remotely serious economist to get the picture? And as AOL News' John Merline points out in the story accompanying that graph, good luck goosing revenue higher than 18 percent. It happens from time to time (in fact, it did so under Bill Clinton, who also increased total spending a relatively measly 11 percent over eight years), but it is the exception to the rule.

But more importantly - and directly to Chait's churlish dismissal that year-over-year amounts don't count for shit - I want to make the point that simply discussing amounts as percentages of GDP misses a huge amount of information. There is absolutely no reason to assume that government revenue or spending can or should stay equal as a percentage of GDP forever and ever. Various defense hawks argue, for instance, that defense spending should always be 4 percent of the federal budget. Why? Because they say so. That's as unconvincing an argument as saying that if you make $10,000 a year and food is 20 percent of your budget, it should still be 20 percent of your budget when you make $100,000. There is an exhaustible limit of how much a family or a country should spend on various goods and services. Is there any reason why Medicare should always be a set percentage of the budget? Or education? Or AmeriCorps? Or abstinence-only sex ed programs? Or anything? The short answer is no, of course not. Unless, of course, you're trying to bias the discussion toward the status quo.

Chait winds up with:

There's just a lot of vaguely anti-government, anti-Obama hand-waving, culminating in the conclusion that we should stop blaming the Bush tax cuts for contributing to the deficit. It's a telling portrait of how your tertiary anti-government type goes about deciding to sign up for Team Tax Cuts.

I am not sure if being called a "tertiary anti-government type" is more or less of an insult than being called a "conservative dupe." Given that in the past I've been called everything from an "apologist for stupefaction" to "a gay Elvis impersonator" to "the free-market Fonzie" to "a dishonest whore for the wealthy" (this last treat coming from an emailer who had just glossed Chait's post), I take insults and compliments where I find them.

Sure, I'm anti-Obama. Every bit as much as I was anti-Bush. But that's really neither here nor there when it comes to looking at how Bush spent our way to the poorhouse. It's Bush's spending policies - recall that he increased inflation-adjusted outlays by 104 percent! - that were his major contribution to deficits, not his tax cuts. While I'm not a member of "Team Tax Cuts" (whatever that is), I do like the idea of people keeping more of their own money.

After all, it is their money and I'm betting they can put it to better use than Tim Geithner or Hank Paulson. Or Gen. Petraeus for that matter. I'm foolish enough to think that government can and should live within its means, which does qualify as a tertiary position since neither the Democrats nor the Republicans (or their handmaiden journalists) seem to agree.