This tax-and-budget analysis from Bruce Bartlett is wrong on many levels — in both its particulars and its overall sweep.

Bartlett claims the famous supply-side tax-cutters at The Wall Street Journal editorial page have, in a major reversal, opened the door to a Value Added Tax and thus a major expansion of overall taxation and American government. He thinks a new Journal opinion article from Columbia Business School dean Glenn Hubbard represents a big shift in the thinking of economic conservatives. I don’t see it that way at all. (more…)

What is the optimal economic arrangement to produce innovation and growth? And what is the optimal political arrangement needed to encourage and sustain such an economic order? I spend a lot of time thinking about these questions (as here in a paper on the rise of China). And so I’d recommend this thoughtful blog post by economist Scott Sumner. Sumner’s been blogging a lot on his recent trip to China and on the macroeconomics of the financial crisis/recession/rebound.

I disagree with a number of Sumner’s conclusions on the macro and political-economy fronts, but it’s insights like the one below that keep me reading Sumner.

Switzerland’s high level of democracy doesn’t just come from referenda, it also comes from its extreme decentralization.  This makes it a highly successful multiethnic society, and not just when compared to places like Yugoslavia and Iraq, but even in comparison to Belgium or Canada.  Another advantage of decentralization is that small places are less likely to be protectionist, as the gains from trade are much more obvious.  In addition, it is much easier to monitor and root out rent seekers in a community where most people know each other.

Stanford economist Paul Romer has had lots of good ideas over the years. Particularly his ideas about the importance of ideas in the economy. But his “Charter City” idea explored at the recent TED conference is one of the best yet.

Maybe I like it so much because it so closely tracks the concepts offered in my long paper of last August called “Entrepreneurship and Innovation in China – 1978-2008 – Thirty Years of Decentralized Economic Growth”, a follow-on article in The Wall Street Journal, and a previous essay “Breaking Metcalfe’s Law” on the economic importance of the exchange of ideas.

Romer uses China’s “free zones” envisioned by Deng Xiaoping and initially implemented by one Jiang Zemin as the chief example of how his charter cities would work in practice. He explains how they might cut the political-economic Gordian knot of societies too stuck in the past to make obviously needed rule changes that open the floodgates of ideas and entrepreneurship. These were the key themes of my paper.

Also check out this working paper by Romer that surveys the economic growth literature (hat tip: Growthology).

Roger Altman sees many of the same slow-growth problems that David Malpass warned against . . .

federal deficits may average a stunning $1 trillion annually over the next 10 years. This worsened outlook is stirring unease on Main Street and beginning to reorder priorities for President Barack Obama . . . .

The burst of spending in recent years and the growing likelihood of a weak economic recovery. The latter would mean considerably lower federal revenues, the compiling of more interest on our growing debt, and thus higher deficits. . . . the latest data suggests that we’re on a much slower path. Probably along the lines of the most recent Goldman Sachs and International Monetary Fund forecasts, whose growth rates average about 2% for 2010-2011.

A speedy recovery is highly unlikely . . . .

. . . but unlike Malpass’s pro-growth strategy, Altman proposes to make matters worse:

we’ll have to raise taxes.

Today, the U.S. ranks next to last among the 28 Organization for Economic Cooperation and Development nations in total federal revenue as a share of GDP. Our federal revenues represent 18% of national output, down from 20% just 10 years ago. That makes the mismatch between our spending and our revenue very large, producing the huge deficits we face.

We all know the recent and bitter history of tax struggles in Washington, let alone Mr. Obama’s pledge to exempt those earning less than $250,000 from higher income taxes. This suggests that, possibly next year, Congress will seriously consider a value-added tax (VAT). A bipartisan deficit reduction commission, structured like the one on Social Security headed by Alan Greenspan in 1982, may be necessary to create sufficient support for a VAT or other new taxes.

. . . it is no longer a matter of whether tax revenues must increase, but how.