First you throw away $787 billion dollars on democrat party special interests, then you raise taxes on “the rich,” i.e., you, me, and Joe the Plumber, and finally you cut the Defense Budget.

After all, in 2008, with two wars underway, we spent the staggering sum of $667 billion (base budget of $480 billion and $187 billion in supplemental spending) on national defense. Why, we wasted almost as much money last year on defending the country as Obama spent in his first month in office on “community development” (i.e., ACORN), the National Endowment for the Arts, more welfare, green boondoggles, and fattening the wallets of politically connected construction companies.

President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on businesses and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said.

In addition to tackling a deficit swollen by the $787 billion stimulus package and other efforts to ease the nation’s economic crisis, the budget blueprint will press aggressively for progress on the domestic agenda Obama outlined during the presidential campaign. This would include key changes to environmental policies and a major expansion of health coverage that he hopes to enact later this year.

A summary of Obama’s budget request for the fiscal year that begins in October will be delivered to Congress on Thursday, with the complete, multi-hundred-page document to follow in April. But Obama plans to unveil his goals for scaling back record deficits and rebuilding the nation’s costly and inefficient health care system tomorrow, when he addresses lawmakers and budget experts at a White House summit on restoring “fiscal responsibility” to Washington. ...

Even before Congress approved the stimulus package this month, congressional budget analysts forecast that this year’s deficit would approach $1.2 trillion—8.3 percent of the overall economy, the highest since World War II. With the stimulus and other expenses, some analysts say, the annual gap between federal spending and income could reach $2 trillion when the fiscal year ends in September.

Obama proposes to dramatically reduce those numbers, said White House budget director Peter Orszag: “We will cut the deficit in half by the end of the president’s first term.” The plan would keep the deficit hovering near $1 trillion in 2010 and 2011, but shows it dropping to $533 billion by 2013, he said—still high but a more manageable 3 percent of the economy.

To get there, Obama proposes to cut spending and raise taxes. The savings would come primarily from “winding down the war” in Iraq, a senior administration official said. The budget assumes continued spending on “overseas military contingency operations” throughout Obama’s presidency, the official said, but that number is lower than the nearly $190 billion budgeted for Iraq and Afghanistan last year.

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Obama also proposes “a fairly aggressive effort on tax enforcement” that would target corporate loopholes, the official said. And Obama’s budget seeks to tax the earnings of hedge fund managers as normal income rather than at the lower 15 percent capital gains rate.

Overall, tax collections under the plan would rise from about 16 percent of the economy this year to 19 percent in 2013, while federal spending would drop from about 26 percent of the economy, another post-World War II high, to 22 percent.

Beef and dairy cattle and hogs are part of the cycle of life. They breathe in oxygen and breathe out CO2, and their digestion of food produces methane as well. Living animals, at least domestic ones, from the perspective of environmentalists, thus constitute a major source of greenhouse gas air pollution, and consequently need to be taxed in order to discourage bovine respiration and porcine flatulence.

The EPA’s proposed addition of “greenhouse gases” under the Clean Air Act would amount to the imposition of major new taxes on domestic agriculture and on American consumers.

The American Farm Bureau offers some figures and notes that taxing US beef and pork production will only move that production outside US borders.

Most livestock and dairy farmers would not be able to pass along the costs incurred under this plan,” said Mark Maslyn, AFBF executive director of public policy. “Steep fees associated with this action would force many producers out of business. The net result would likely be higher consumer costs for milk, beef and pork,” said Maslyn, in comments submitted to EPA.

According to Agriculture Department figures, any farm or ranch with more than 25 dairy cows, 50 beef cattle or 200 hogs emits more than 100 tons of carbon equivalent per year, and thus would need to obtain a permit under the proposed rules. More than 90 percent of U.S. dairy, beef and pork production would be affected by the proposal, Maslyn noted.

Permit fees vary from state to state but EPA sets a “presumptive minimum rate” for fees. For 2008-2009, the rate is $43.75 per ton of emitted greenhouse gases. According to Maslyn, the proposed fee would mean annual assessments of $175 for each dairy cow, $87.50 for each head of beef cattle and $20 for each hog.

In addition, Maslyn said the proposed rules would be ineffective because of the global nature of greenhouse gases. “Reduction of a ton of greenhouse gases anywhere will make a difference, but if a ton is removed in Iowa and replaced by a ton in China, then no net effect occurred,” he said. “A livestock tax and regulation of greenhouse gases under the Clean Air Act will impose restrictions and added costs on the U.S. economy without reducing greenhouse gases in the atmosphere.

Mark Steyn finds that democrats have been revising those figures of just who is “rich” and therefore eligible for Obama’s tax increases.

Just wait until after the inauguration.

The Obama middle-class limbo dance descends further. First, it was $250,000. Then $200,000. Just a couple of days ago, Joe Biden reduced it to $150,000. And now...

For the second time in a week, a prominent Democrat has downgraded Barack Obama’s definition of the middle class — leading Republicans to question whether he’ll stick to his promise not to raise taxes on anyone making under $250,000.

The latest hiccup in the campaign message came Friday morning on KOA-AM, when New Mexico Gov. Bill Richardson pegged the middle class as those making $120,000 and under.

“What Obama wants to do is he is basically looking at $120,000 and under among those that are in the middle class, and there is a tax cut for those,” Richardson said in the interview…

$120,000? I’m confident Senator Biden can cut that in half by Tuesday morning. Bottom line: If you make over 30 grand, you might want to restructure yourself as an offshore corporation in the Turks & Caicos.

Eugéne Delacroix (1798-1863), (detail) Atilla suivi de ses hordes, foule aux pieds l’Italie et les arts (Attila followed by his Horde, Trampling under Foot Italy and the Arts), Bibliothèque, Palais Bourbon, Paris, 1843-47

Bruce Bartlett, at the Cato Journal, describes how the same policies pursued by today’s democrat party produced the downfall of Rome.

In the end, there was no money left to pay the army, build forts or ships, or protect the frontier. The barbarian invasions, which were the final blow to the Roman state in the fifth century, were simply the culmination of three centuries of deterioration in the fiscal capacity of the state to defend itself. Indeed, many Romans welcomed the barbarians as saviors from the onerous tax burden. [15]

Although the fall of Rome appears as a cataclysmic event in history, for the bulk of Roman citizens it had little impact on their way of life. As Henri Pirenne (1939: 33-62) has pointed out, once the invaders effectively had displaced the Roman government they settled into governing themselves. At this point, they no longer had any incentive to pillage, but rather sought to provide peace and stability in the areas they controlled. After all, the wealthier their subjects the greater their taxpaying capacity.

In conclusion, the fall of Rome was fundamentally due to economic deterioration resulting from excessive taxation, inflation, and over-regulation. Higher and higher taxes failed to raise additional revenues because wealthier taxpayers could evade such taxes while the middle class—and its taxpaying capacity—were exterminated. Although the final demise of the Roman Empire in the West (its Eastern half continued on as the Byzantine Empire) was an event of great historical importance, for most Romans it was a relief.

Read the whole thing.

Biden: “I don’t have any Joe the Plumbers in my neighborhood that make $250,000 a year and are worried.”

1:12 video

Of course he doesn’t. How many plumbers (even those grossing $250K per annum) could possibly afford to live in Delaware’s Chateau Country like Joe Biden?

Delaware Online:

First elected to the Senate 36 years ago, (Biden) lives off Barley Mill Road in Greenville—northern Delaware’s priciest area—on a four-acre lakefront estate in a 7,000-square-foot custom home. Biden also owns a smaller carriage house on his property, where his widowed mother lives.

Local real estate agents said the Biden property is worth at least $2.5 million.

“Not ready to be president.”

1:17 video

How about the endowments of major universities? Massachusetts is thinking about doing just that.

WSJ:

Massachusetts legislators, demonstrating a growing resentment against the wealth of elite universities in tight economic times, are studying a plan to levy a 2.5% annual tax on the portion of college endowments that exceed $1 billion.

After all, as Jim Manzi notes:

Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.

Hat tip to David Nix.

Marc Morano reports on Senator James Inhofe’s blog from the UN conference in Bali.

How do you save the Earth from catastrophic climate change? Create a new International tax to be used to redistribute monies from countries like to US to the Third World.

A global tax on carbon dioxide emissions was urged to help save the Earth from catastrophic man-made global warming at the United Nations climate conference. A panel of UN participants on Thursday urged the adoption of a tax that would represent “a global burden sharing system, fair, with solidarity, and legally binding to all nations.”

“Finally someone will pay for these [climate related] costs,” Othmar Schwank, a global tax advocate, told Inhofe EPW Press Blog…

Schwank said at least “$10-$40 billion dollars per year” could be generated by the tax, and wealthy nations like the U.S. would bear the biggest burden based on the “polluters pay principle.”

The U.S. and other wealthy nations need to “contribute significantly more to this global fund,” Schwank explained. He also added, “It is very essential to tax coal.”

The UN was presented with a new report from the Swiss Federal Office for the Environment titled “Global Solidarity in Financing Adaptation.” The report stated there was an “urgent need” for a global tax in order for “damages [from climate change] to be kept from growing to truly catastrophic levels, especially in vulnerable countries of the developing world.”

The tens of billions of dollars per year generated by a global tax would “flow into a global Multilateral Adaptation Fund” to help nations cope with global warming, according to the report.

Schwank said a global carbon dioxide tax is an idea long overdue that is urgently needed to establish “a funding scheme which generates the resources required to address the dimension of challenge with regard to climate change costs.” ...

The environmental group Friends of the Earth, in attendance in Bali, also advocated the transfer of money from rich to poor nations on Wednesday.

“A climate change response must have at its heart a redistribution of wealth and resources,” said Emma Brindal, a climate justice campaigner coordinator for Friends of the Earth. ...

MIT climate scientist Dr. Richard Lindzen warned about these types of carbon regulations earlier this year. “Controlling carbon is a bureaucrat’s dream. If you control carbon, you control life,” Lindzen said in March 2007.

Peggy Noonan rightly identifies the skepticism of ordinary Americans as a key obstacle to Hillary’s 2008 ambitions.

For a few years now I’ve thought the problem for the Democrats in general but for Mrs. Clinton in particular is not that America is against tax increases. They’ve seen eight years of big spending, of wars, of spiraling entitlements. They’ve driven by the mansions of the megarich and have no sympathy for hedge fund/movie producer/cosmetics empire heirs. They sense the system is rigged toward the heavily protected. They sense this because they’re not stupid.

The problem for Mrs. Clinton is not that people sense she will raise taxes. It’s that they don’t think she’ll raise them on the real and truly rich. The rich are her friends. They contribute to her, dine with her, have access to her. They have an army of accountants. They’re protected even from her.

But she can stick it to others, and in the way of modern liberalism for roughly half a century now, one suspects she’ll define affluence down. That she would hike taxes on people who make $150,000 a year.

But those “rich”—people who make $200,000 and have two kids and a mortgage and pay local and state taxes in, say, New Jersey—they don’t see themselves as rich. Because they’re not. They’re already carrying too much of the freight.

Followup: The Financial Times observes the even the democrats have begun to recognize the truth. Though democrats love class warfare, they’re really shooting at themselves.

A legislative proposal that was once on the fast track is suddenly dead. The Senate will not consider a plan to extract billions in extra taxes from megamillionaire hedge fund managers.

The decision by Senate majority leader Harry Reid, the Nevada Democrat, surprised many Washington insiders, who saw the plan as appealing to the spirit of class warfare that infuses the Democratic party. Liberal disappointment in Mr Reid was palpable at media outlets such as USA Today, where an editorial chastised: “The Democrats, who control Congress and claim to represent the middle and lower classes, ought to be embarrassed.”

Far from embarrassing, this episode may reflect a dawning Democratic awareness of whom they really represent. For the demographic reality is that, in America, the Democratic party is the new “party of the rich”. More and more Democrats represent areas with a high concentration of wealthy households. Using Internal Revenue Service data, the Heritage Foundation identified two categories of taxpayers – single filers with incomes of more than $100,000 and married filers with incomes of more than $200,000 – and combined them to discern where the wealthiest Americans live and who represents them.

Democrats now control the majority of the nation’s wealthiest congressional jurisdictions. More than half of the wealthiest households are concentrated in the 18 states where Democrats control both Senate seats.

The Sunday Times reports:

Pennsylvania officials plan to build up to 10 toll areas along the 311-mile stretch of Interstate 80 in the next three years to help pay for road, bridge and mass transit projects and subsidies. ...

Pennsylvania’s plan is to generate about $950 million a year through the sale of bonds backed by tollway revenue and other state sources over the first 10 years, with about $500 million going to road and bridge projects throughout the state, and the remaining $450 million going to subsidize mass transit in Philadelphia, Pittsburgh and other cities.

State officials say that about 70 percent of the 21 million vehicles that travel I-80 annually are from out of state, and 40 percent are commercial trucks.

This is completely outrageous.

The owners of the cars and trucks driving on Pennsylvania’s portion of Route 80 already paid for its construction with their federal income taxes. And they continue to support its upkeep by paying federal fuel taxes.

There is no justification whatsoever for the greedy, grasping pols who infest Harrisburg to reach out for additional revenues for highway maintenance. Funds are already amply provided for just that purpose through both state and federal systems of taxation.

And the proposed transfer of wealth from far-from-affluent rural Pennsylvania to the Commonwealth’s two largest cities is absolutely unconscionable.

Making I-80 a toll road also violates the principle that at least one major route ought to be free of tolls, providing travellers some choice about paying toll charges. The only East-West alternative route across Pennsylvania, Route 76, is already a toll road.

When you read the Times article, too, you’ll find that Arlen Spector has declined to oppose this loathsome scheme. Whenever I read about the political genius of Karl Rove, I remember the craven refusal of George W. Bush and the National Party to support the conservative Pat Toomey against Spector in the 2004 Republican Primary. Spector defeated Toomey, even with George W. Bush’s support, only by 51-49 per cent. There might be a real Republican senator from Pennsylvania if Karl Rove was really so smart.

Wars are costly, and the US has conventionally spent more than its actual revenues in time of war. Say what you will about George W. Bush’s management of the War in Iraq. His domestic tax policies (i.e. tax cuts) combined with the Rumsfeldian parsimony in troop deployments have successfully kept the US economy healthy and avoided customary war-time inflation.

As the New York Sun notes, the deficit is shrinking faster than those glaciers the moonbats are so concerned about.

2004: $413 billion
2005: $318 billion
2006: $248 billion
2007: $158 billion

Close readers of this column may recall the top three numbers in the list above from our editorial of July 12, “Incredible Shrinking Deficit.” It commented on the mid-session review released by President Bush’s Office of Management and Budget, which projected the fourth number, the 2007 federal budget deficit, at $205 billion. Yesterday, the Congressional Budget Office released its own updated estimate for 2007, $158 billion, a deficit even smaller than the White House’s July figure. The CBO yesterday also released its latest estimate of the 2007 deficit as a percentage of the Gross Domestic Product, allowing us to update another list of deficit numbers:

2004: 3.6%
2005: 2.6%
2006: 1.9%
2007: 1.2%

Bizzyblog notes:

US Tax Revenues Up 9.7% through four months, Deficit Down 57%; US Media Outlets Mostly Ignore the News.

Treasury Report

The Wall Street Journal celebrates the twenty fifth anniversary of Ronald Reagan signing the Economic Recovery Tax Act by noting the significance of the impact of Reagonomics on the US and World economies and the breadth of his philosophy’s current acceptance. Russia today has a 13% flat tax.

Twenty-five years ago this weekend, Ronald Reagan signed the Economic Recovery Tax Act. The bill cut personal income tax rates by 25% across the board, indexed tax brackets for inflation and reduced the corporate income tax rate. The anniversary is worth commemorating as a seminal moment that continues to influence policy for the better in the U.S., and around the globe.

The achievement of Reaganomics can only be fully understood by recalling the miserable state of affairs a quarter-century ago. Newsweek summarized the national mood when it wrote in 1981 that Reagan “inherits the most dangerous economic crisis since Franklin Roosevelt took office 48 years ago.”

That was no exaggeration. The economy was enduring a cycle of rising inflation with growing levels of unemployment. Remember 20% mortgage interest rates? Terms like “stagflation” and “misery index” entered the popular vocabulary, and declinists of various kinds were in the saddle. The perception of American economic weakness encouraged the Soviet empire to ever bolder adventures, as reflected by Soviet tanks in Kabul and Communists on the march in Nicaragua and Africa.

The reigning Keynesian policy consensus had no answer for this predicament, and so a new group of economic ideas came to the fore. Actually, they were old, classical economic ideas that were rediscovered via the likes of Milton Friedman and the Chicago School, Arthur Laffer, Robert Mundell, and such policy activists in Washington as Norman Ture and Jack Kemp, among others. These humble columns under our late editor, Robert Bartley, led the parade.

For every policy goal, you need a policy lever, Mr. Mundell likes to say. Monetary restraint was needed to break inflation, while cuts in marginal tax rates would restore the incentives to save and invest. With Paul Volcker at the Federal Reserve and Reagan at the White House, those two levers became the essence of the “supply-side” policy mix.

The results have been better than even some of its supporters hoped. The Dow Jones Industrial Average first broke 1,000 in 1972, but a decade later it was barely above 800—one of the worst and most enduring bear markets in history. In the 25 years since Reaganomics, however, the Dow has climbed to about 11,000, accounting for an increase in national wealth on the order of $25 trillion. To match that increase in percentage terms, the Dow would have to rise to some 150,000 in the next quarter century. American living standards have risen steadily, and U.S. businesses have created entire industries that didn’t exist a generation ago…

Adherents of Rubinomics—after Clinton Treasury Secretary Robert Rubin—are still not converts, arguing that tax increases are virtuous if they reduce the deficit. We’ve addressed that argument many times and will again. But even the Rubinites haven’t dared to repeal indexing for inflation (which pushed taxpayers via “bracket creep” into ever-higher tax rates), and even the most ardent liberals don’t propose to return to the top pre-Reagan income tax rate of 70%. They also now understand that, at some point along the Laffer Curve, high rates begin to yield less tax revenue. The bipartisan consensus in favor of sound money has also held.

Thus today, the top marginal personal and corporate tax rates are 35%, compared with 70% and 48% in 1981. In the late 1970s the tax on dividends was 70% and the capital gains rate was 50%; now they’re both 15%. These reductions have increased the rate of return on capital, and hence some $3 trillion more was invested by foreigners in the U.S. between 1981 and 2005 than was invested by Americans abroad. One result: 40 million new jobs, more than the rest of the industrialized world combined.

The rest of the world, meanwhile, has followed the Gipper down the tax-cut curve. Daniel Mitchell of the Heritage Foundation finds that the average personal income tax rate in the industrialized world is now 43%, versus 67% in 1980. The average top corporate tax rate has fallen to 29% from 48%. This decline in global tax rates has been the economic counterpart to the fall of the Berlin Wall. Most of Eastern Europe has adopted flat tax rates of 25% or lower, and the Russians now have a flat income tax of 13%. In Old Europe, Ireland’s corporate and personal income tax rate cuts have helped generate the swiftest economic growth in the EU.

Not bad for a President dismissed as a dreamy former actor. In his 1989 farewell address, Reagan said that “People say that I was a great communicator. It would be more accurate to say that I communicated great ideas.” He was right, and a remarkable global prosperity has followed in his wake. The challenge for current and future political leaders is not to forget it.

The San Francisco Chronicle reports some eye-opening statistics from a study by the National Association of Homebuilders of the distribution of federal tax benefits for homeownership.

Homeowners in a single congressional district in California, the 14th District in Silicon Valley, took more in mortgage interest write-offs than all the residents of six states combined. Homeowners in the 14th—which covers most of San Mateo and Santa Cruz counties, plus part of Santa Clara County—claimed $3.2 billion in mortgage interest deductions during the year covered by the study, compared with $2.9 billion by all the residents of Vermont, Wyoming, West Virginia, Alabama and North and South Dakota. The average deduction in the 14th District was $35,000, compared with an average of $9,500 for homeowners nationwide.
—Residents of a single congressional district on Long Island wrote off more in real estate property tax deductions than all the homeowners from seven states combined. Owners in New York’s Third District took $1.25 billion in deductions—more than the $1.2 billion total claimed during the same period in Hawaii, Wyoming, Arkansas, Delaware, the District of Columbia and North and South Dakota.
—The average New Jersey homeowner claimed $6,005 in real estate tax write-offs—more than five times the average deduction by residents of Hawaii ($1,126). New Yorkers claimed an average $5,181 in property tax deductions, followed by the residents of New Hampshire ($4,830), Illinois ($4,129) and Vermont ($3,845).
—The average California homeowner wrote off $14,217 in mortgage interest deductions, while the average homeowner in Oklahoma wrote off $5,710. Washington, D.C., homeowners took an average $11,759 in mortgage interest deductions, while the average homeowner in North Carolina got $6,808.

Higher federal deductions mirror the impact of liberal governments. Home prices (and mortgage deductions) are far higher where new development is intensely regulated and curtailed, and liberal states and municipalities impose (naturally) the highest real estate taxes resulting in the largest local tax deductions.

Thus, the cost of bad government in San Francisco, Manhattan, and the District of Columbia is shared with residents of low regulation, low tax red states.

The irrationality of a tax-subsidy-created insurance system which typically gives you free (or at least low cost) health care when you are employed and prosperous, and which then shifts drastically-increased insurance costs to you as soon as you are out of work, is a nasty problem which perennially provides democrats with talking points and opportunities to try seducing the public into supporting its vision of a government-supplied free lunch.

Miraculously, this country actually had enough intelligence to reject HillaryCare once, but neither Hillary nor socialized medicine schemes are going away anytime soon. Today’s lead Journal editorial identifies the actual problems and points out precisely the correct solutions.

the President wants to fix defects in the market for health care. This is an area where he can do a great deal of good at little cost to the Treasury. And it’s high time. The inefficiencies of the current system are a drag on wage growth that’s being felt now even by the United Auto Workers union. And health care costs may partly explain why many Americans don’t feel as good as they might about the current economic expansion.

Longer term, it’s also increasingly obvious that the U.S. is approaching a tipping point where the reforms needed to preserve an innovative, market-based health system may become politically impossible. That’s because almost half of our health-care dollars are already spent by government. Do nothing and the inevitable growth of Medicare alone will lead us far down the path toward government-rationed health care a la Europe or Canada.

Even the half of our national health-care spending that remains a “private” responsibility bears little resemblance to an efficient market. That’s because the vast majority of Americans with private insurance get it from their employers, a relic of World War II when companies adapted to wage and price controls by offering insurance as a benefit to attract the best employees.

A tax exemption for employer health spending was later codified and will be worth about $126 billion this year. This enormous subsidy has created a system of overgenerous employer-provided plans that give individuals little incentive to pay attention to costs. It’s also unfair to people who aren’t lucky enough to get insurance from their employers, and therefore must pay for it with after-tax dollars.

So the first principle of reform must be to equalize the tax treatment of individually purchased and employer-provided insurance. Health Savings Accounts, which were part of the 2003 Medicare bill, are already a step in the right direction, since they mate a high-deductible insurance policy with a tax-free savings account to help pay pre-deductible expenses. Mr. Bush is usefully going further by asking for the premiums on the HSA insurance policy to be tax-free as well.

Equally important is creating a national market for individual insurance. Right now employers large enough to “self insure” can do so mostly as they see fit. But individuals and small businesses who want to buy insurance are at the mercy of state regulators where they live or operate. In overregulated states like New York and New Jersey, residents can pay 10 times as much for insurance as they would in neighboring states, and might not even be able to buy the high-deductible insurance necessary for an HSA. Individually purchased insurance also isn’t portable across state lines, contributing needless anxiety to normal life decisions like moving or switching jobs.

The Founders put the Commerce Clause in the Constitution precisely so Congress could act against internal restraints on trade such as today’s 50-state insurance market. We hope Mr. Bush endorses and fights for the bill from Representative John Shadegg of Arizona that would let individuals buy insurance from vendors in any state, no matter where they live.

The overall goal here is to move from the inefficiency and insecurity of the employer-dependent system to one where all workers have portable, individually owned insurance. A good analogy is portable 401k retirement plans, which are more appropriate to the mobile nature of the modern economy than traditional pensions. They are also more secure, as the increasing number of defined-benefit pension plans in default (United Airlines) amply demonstrates.

Achieving this won’t be easy, especially given the ideological stake that so many politicians have in a government-run system. They like the leverage of determining payment rates to hospitals and doctors, not to mention being able to take credit with voters for providing more benefits. But there is no free lunch in health care, any more than there is in any other part of the U.S. economy.

Health care is either going to be allocated by prices or by government, which in the latter case means price controls and waiting lines. Though it represents one-sixth of the U.S. economy, health care is the one industry in which the purchasers actually have no idea what anything costs. An individual market for health insurance would allow more freedom of choice while making consumers more cost conscious.

Market-based health-care reform could be a big political winner for Mr. Bush and the GOP. Americans have shown themselves averse to rationing via brute force, both in their rejection of HillaryCare and in the backlash against HMOs. And while the opponents have skillfully played on fears, consumer-driven plans—which let individuals “ration” care for themselves—have proven popular when they’ve been offered. Just last week the insurance industry announced that enrollment in HSAs had tripled in 10 months to three million people.

That’s a small part of the entire market, but an important start. Policy inertia on health care will inevitably lead to more government and Canadian or British-style waiting lists. But there’s still a chance to change course. Republicans in Congress should join Mr. Bush in seizing it.