The Democratic Party hasn’t yet come down from its weeklong self-congratulatory bender after its victory over the majority of the American people on health care.

Gleeful media supporters rightly say the plan is “historic,” without mentioning that term could have more than one meaning. Still, the celebrations dwindle quickly once you leave the deeply blue Washington-New York-Boston corridor.

Giddiness is understandable from people on a high. But, like any bar tab, eventually the bill has to be paid, and that payment can take a variety of forms.

One may be political rejection by the country: A variety of polls say that 55 percent to 60 percent of the people don’t agree with Democrats on the worth of their accomplishment, and would like to see it go away.

They have the same desire for many Democrats: Every national party leader, including President Obama, has a higher unfavorable rating than a favorable one, and Speaker Nancy Pelosi and Senate Majority Leader Harry Reid score 11 percent and 8 percent approval, respectively.

A substantial majority wants Republicans to keep fighting the plan, and presumably, unless the party wants to go out of business, it will. But that doesn’t mean I want to make any predictions about Novem- ber. Seven months are an eternity in politics – and that’s 10 times as true for 2012.

Many things will occur between now and then – al-Qaida hasn’t disbanded, and Iran will build a bomb, just to mention a couple of them – and thus anyone who makes confident predictions is simply not in contact with the real world.

If ObamaCare is stalled in 2010 and overturned after 2012, that could lead us to a system that is focused on empowering individuals, not government.

But if that doesn’t happen, what will inevitably occur is that deficits will rise. The costs of the new law have been subsumed by postponing ObamaCare’s effects until the middle of the next decade, but the projections for the 10-year period beginning in 2014, when the law kicks in, forecast deficits at the $2.5 trillion level.

But, you say, the president has created a panel to figure out how to rein in the red ink.

True. But if you think those advisers are going to suggest reducing spending, I’ve got some carbon credits in my hip pocket I’d like to sell you.

In fact, a number of observers see the panel as the stalking horse for a major new form of taxation that has the potential to be a firehose of tax revenues.

As laid out in a New York Times column on Feb. 14 by N. Gregory Mankiw, a Harvard economics professor who was an adviser to President George W. Bush, the current administration is pondering something called a “value-added tax,” or VAT for short – and may believe it has “no choice but to find some major source of government revenue.”

Because Obama’s “long-term fiscal strategy is to appoint a commission to figure out a long-term fiscal strategy,” voters may not know its recommendations or his plans until after the November elections, Mankiw says. But Pelosi says a VAT is “on the table,” and because it is, we ought to understand how it works and what its impact will be.

Mankiw says it is “like a sales tax, but rather than being collected entirely at the retail store, it is collected in stages along the chain of production.”

That is, iron is taxed at the mine, taxed again when sold to a steel mill, taxed again when the steel is sold to a car manufacturer, taxed again when the car is sold to a dealer, and taxed a final time when the car is sold to a customer.

Now, perhaps, you can see why big-spending types would be salivating at the prospect of taxing the same thing half a dozen times (some products offer dozens of opportunities).

As Mankiw says, “Many European countries use it, and it is one of the more efficient ways to raise revenue.”

That is a finalist in the 2010 Understatement of the Year competition, but the real kicker from the government’s point of view is that every one of those taxes except the last one is utterly invisible to the final purchaser – which is to say, you.

Yet, you will be the one paying all of them, because the tax is added into the price of the product at each succeeding stage of production, with each “value-adder” getting a credit that applies to the tax paid at the previous stage.

Except, of course, for the final purchaser, Mr. and Mrs. Deep Pockets.

As Mankiw says, VATs “raise consumer prices, lower real wages, discourage work and depress economic growth.”

Ever wonder why unemployments rates in Europe have been twice the U.S. rate (until the recession boosted ours)?

Generous benefits that make hiring workers more expensive, along with rules that make dismissing them very difficult, are part of the reason. The widespread use of a VAT in the European Union is the other.

Now, if you want government to give you goodies, then you want to be able to finance those goodies over time. And the VAT is a revenue source for benefits without peer, because it applies so broadly and so much of it is hidden. People can do things to avoid income or sales taxes, but the VAT just keeps on taking, and taking, and taking.

But what if you want government to do only what it absolutely must and let you spend your money on your own priorities? In that case, you have two shots left, one in November and one two years later.

After that, Option A is all you’ll get. And you will get it good and hard.

 

M.D. Harmon is an editorial writer. He can be contacted at 791-6482 or at:

mharmon@mainetoday.com

 

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