Most serious people would agree that in order to dig ourselves out from under the enormous debt that's been accumulating (particularly in the last few years) we've got to do two things—1) substantially reduce government spending, and 2) increase revenue.  Obviously there has been considerable disagreement between the parties over what to cut, and by how much.  What has gotten less attention in the deficit/debt debate, however, is the greater partisan divergence over how to boost revenue.

Make no mistake, reigning in the size and scope of government is mission number one.  We're on an unsustainable path, and could never grow enough to overcome the hyper-insanity of our current structurally driven budget shortfalls.  But, if we're going to take a serious shot at avoiding the fiscal and social calamity of European-type debt levels, economic growth must be a key element.  In a $15 trillion economy, the difference between 0% to 2% growth and the 6% to 8% growth that's historically been associated with vibrant economic times can be upwards of $1 trillion.  Obviously, such an amplification of revenue would go a long way toward putting the country back on a path to prosperity.

The Dems are trying to get out in front of the revenue issue.  Not surprisingly, though, they are attempting to do so by promulgating a narrative that higher taxes, specifically on the wealthy, is the tough medicine necessary to move the revenue needle.  

Any student of economic history (or this blog) understands the folly of that argument.  As evidence that their prescription is the right one, the Lefties will no doubt trot out their one trick pony—the Clinton income tax increase.  You've heard the yammering a thousand times...'Clinton raised taxes, yet we were running surpluses as far as the eye could see.  Yadda, yadda, yadda.'   The argument, of course, does not hold water.  Even a superficial examination of the situation illuminates a couple key facts (among others).  First, the income tax rate increases were offset by a substantial reduction in the capital gains tax rate which spurred investment and employment, and concomitantly swelled revenue (as it has each time it's ever been lowered).  Second, and of greater importance, is that three of the largest bubbles ever (Internet, Telecom, and Y2K) were in the process of inflating.

The Libs other line of attack on the tax front is that the rich are paying a dramatically smaller percentage of taxes on their total income than do the middle class.  Several articles have been published recently purporting that the effective tax rate on the wealthy is roughly 17%, rather than the 36% top marginal rate.

You can hear the manufactured cries of outrage from all corners of liberal land.  Once again, the Democrat case is specious.  Their flawed rationale conveniently fails to recognize our decision as a society to tax capital at risk at a lower level.  By taxing it less we attract investment and talent from across the globe which in turn stimulates economic activity and employment, thereby creating an overall climate that sustains our culture and provides the biggest benefit to the largest cross section of the population. 

So, the next time you hear Buffett or Gates drone on about the inequity of their tax rate versus their secretary's, recognize it for what it is...a politically correct inanity.  When Buffett's secretary's salary is subject to the same vicissitudes as investment capital and her job has the same multiplier effect on the economy as does investment in new and existing businesses, then come talk to me about the inequity.

There is truth, though, in the Dem argument that we can not cut our way back to prosperity.  Revenue is important, too.  Regrettably and misguidedly, they want to couple cuts with supposed revenue enhancing tax measures (i.e. higher taxes on the wealthy).  To stoke the class warfare fires and lay the groundwork for higher taxes on the wealthy, which in their distorted view would increase tax receipts, they are aggressively pushing a storyline that the well-off are paying the lowest effective tax rate ever (17%).  In furtherance of that position, Democrats are also yelling, as they have for decades, that tax breaks, deductions, and exemptions disproportionately favor the rich (and those who can afford good tax advice).

These Democrat protestations all leave the GOP with a monumental opportunity.  Unfortunately, it will require somebody who can hit the ball off a tee—something the Republicans have not had in quite some time.

Simply stated, if the Dems are correct that the wealthy benefit almost exclusively from tax breaks, deductions, and exemptions, and that they also only pay an effective tax rate of 17%, what rational Democrat wouldn't agree to a flat individual and corporate tax rate of say 25%, coupled with the elimination of all deductions and exemptions?  Is there a liberal or progressive out there who would pass up the opportunity to hike the tax rate on the wealthy by eight full percentage points?

The next several months will be interesting.  Can the Republicans finally find one or more people to eloquently and convincingly make an eminently makable case on balancing the budget and tax reform?  And, can they do it by using the Dems own rhetoric to seal the deal?

Unwittingly, the Dems have put the ball right on a tee.  Will the GOP shank it or stripe it down the middle?

Prosperity is a mere 300 yards away.