Paul Krugman’s “Solution” to the U.S. Deficit: Death Panels and VAT

In a roundtable discussion on the U.S. National Commission on Fiscal Responsibility and Reform (“Deficit Reduction Commission”), Nobel Prize laureate and hyper-Keynesian economist Paul Krugman came clean on his view on ABC’s “This Week with Christiane Amanpour,” regarding how to reduce the gigantic federal deficit that he has been so supportive in seeing created: death panels and a national Value Added Tax (VAT). Krugman has been among the leading figures in attacking Sarah Palin’s warnings that Obamacare, without the use of free-market pricing, would necessarily include “death panels” to ration medical treatments for the seriously ill and aged. Neglecting to propose any cuts in spending or taxes, Krugman stated the following:

Some years down the pike, we’re going to get the real solution, which is going to be a combination of death panels and sales taxes. It’s going to be that we’re actually going to take Medicare under control, and we’re going to have to get some additional revenue, probably from a VAT. But it’s not going to happen now.

The Obama healthcare plan passed by Congress in 2010 includes government-run healthcare committees with sweeping powers, including the power to engage in competitive pricing and cost analysis, a system Britain uses that has led to rationing of medical care for the elderly.

Later Krugman, in realizing that his remarks would be met with outrage, tried to cover his trail on his blog for the New York Times, “The Conscience of a Liberal,” but in the process, has only dug himself in even deeper:

I said something deliberately provocative on This Week, so I think I’d better clarify what I meant (which I did on the show, but it can’t hurt to say it again.)

So, what I said is that the eventual resolution of the deficit problem both will and should rely on “death panels and sales taxes”. What I meant is that

(a) health care costs will have to be controlled, which will surely require having Medicare and Medicaid decide what they’re willing to pay for—not really death panels, of course, but consideration of medical effectiveness and, at some point, how much we’re willing to spend for extreme care

(b) we’ll need more revenue—several percent of GDP—which might most plausibly come from a value-added tax

And if we do those two things, we’re most of the way toward a sustainable budget.

By the way, I’ve said this before.

Now, you may declare that this is politically impossible. But medical costs must be controlled somehow, or nothing works. And is a modest VAT really so much more implausible than ending the mortgage interest deduction?

So that’s my plan. And I believe that some day—maybe in the first Chelsea Clinton administration—it will actually happen.