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Megan McArdle: Dumb questions, some smart answers

STEVE SACK/THE MINNEAPOLIS STAR TRIBUNE
STEVE SACK/THE MINNEAPOLIS STAR TRIBUNE

Toward the end of Wednesday's presidential debate, a moderator asked Jeb Bush about fantasy sports betting: Is this gambling, and should it be allowed? This was, as Chris Christie pointed out, a fairly stupid question. On a comprehensive list of important questions our next president will need to deal with, the regulation of fantasy leagues ranks somewhere between the emerald ash borer and the design of the next set of White House china.

In fairness, the Republican candidates had spent so much time in fantasyland earlier in the debate that the moderator may have thought this was on point. This was supposed to be the economics debate, although the moderators seemed to quickly get bored with all that finance and economics stuff, switching to poorly researched gotcha questions on topics of limited economic significance, like Marco Rubio's personal finances and Ben Carson's views on gay marriage. Nonetheless, aside from the oppo research dumps, we did get discussion of two topics that matter to the economy quite a lot: taxes and entitlements.

On entitlements the Republicans conducted a serious debate, with Mike Huckabee arguing that we've made promises we have to keep, and other candidates explaining, surprisingly deftly, why we need to reform the programs for future generations to keep our promises within our pocketbook. On taxes, however, they stopped debating one another and started debating reality.

Bush reiterated his plans to deliver 4 percent annual growth through the magic of tax reform. Carson claimed that a flat tax on the order of 15 percent would be possible without blowing the budget deficit up past the trillion-dollar mark. Carly Fiorina said that the tax code should be three pages long, because anything longer than that put small businesses at a disadvantage compared to big corporations that can afford fancy tax lawyers.

Most of what happens in a basically free economy is going to happen whether or not the government lowers the corporate tax rate, or offers businesses a new and improved version of the R&D tax credit.

This means that adding an extra tenth of a percent onto the growth rate through policy is really hard. Nearly doubling the growth rate -- which is what Bush is proposing to do-- is basically impossible unless the baseline government policy is really bad.

Whatever supply-side benefits tax cuts will unleash will not be enough to let you run a government of the size that Americans demand on tax rates of the size that Carson is promising.

Americans want their Social Security and their Medicare, their giant military and their equally giant national parks.

What they don't want to do is pay for them. That's the political insight behind lines like Carly Fiorina's claim that she could shrink the tax code to a dainty, bite-size three pages, which sounds splendid until you think about it for more than a few brief seconds, at which point you realize it's utterly daft. But the tax code could certainly be shorter than it is, and ought to be.

If Republicans want to talk about cutting taxes, they are also going to need to talk about cutting spending, because to spend is to tax.

Onstage Wednesday night, Republicans complained that the Democrats were running as the party of free stuff without paying for it.

They're right; Democrats are selling the fantasy of a European-style welfare state paid for entirely by taxing a handful of rich people, which is impossible. But Republicans are selling an equally impossible fantasy: of an American-style welfare state paid for by no one at all.

That's the sort of gambling that no country can afford to allow.

Contact Megan McArdle, a Bloomberg View columnist who writes on economics, business and public policy, at mmcardle3@bloomberg.net

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