60 Minutes' Steve Croft did an excellent segment on Grover Norquist and his group, Americans for Tax Reform (highlights and video below). It provides an inside look at one of the reasons why the Super Committee failed to reach agreement on specific deficit reduction measures because of the sticking point of tax increases which Republicans flatly refuse. My comments follow.

 
As head of Americans for Tax Reform since 1986, Grover Norquist has transformed a single issue - preventing tax hikes - into one of the key platforms of the Republican Party.

Steve Kroft: A lot of people think you're the most powerful man in Washington.

Grover Norquist: The tax issue is the most powerful issue in American politics going back to the Tea Party. People say, 'Oh, Grover Norquist has power.' No. Grover Norquist and Americans for Tax Reform focus on the tax issue. The tax issue is a powerful issue.

Grover Norquist is trying to be modest. Since creating Americans for Tax Reform at Ronald Reagan's behest back in 1985, Norquist has been responsible, more than anyone else, for rewriting the dogma of the Republican Party.

Norquist: The Republicans won't raise your taxes. We haven't had a Republican vote for an income tax increase since 1990.

Kroft: And this was your doing?

Norquist: I helped. Yeah.

My Thoughts

Federal government spending is out of control. It is a problem which was decades in the making. Over the past 60 years, federal government spending has grown at a 7.6 percent annual compound rate which is more than double the rate of inflation over that period. Excessive spending has led to excessive federal government debt. It has already brought various socialist European governments like Greece and Italy to their knees. The U.S. has been heading down that same dangerous path.

Excessive spending has been made possible by an increasing array of taxes - income taxes, Social Security taxes, Medicare taxes, estate and gift taxes, corporate income taxes, etc. It's easy for politicians to spend other people's money.

Norquist's solution to out of control government spending is actually a brilliant one. He believes that you can't get government spending under control until you begin to clamp down on the never ending stream of taxes - which provides the money for Congress to spend.

Now, what about the argument that Republicans can't really negotiate and compromise, for example, in the debt reduction discussions since they won't go for any "revenue" (tax) increases? On the tax issue, this is largely true given that nearly all Republicans in Congress have signed Norquist's Pledge not to increase taxes.

I don't see this as a "problem," however, given that the federal government needs to address its spending issues first and foremost. Also, as I have discussed, more tax revenue could be raised by lowering particular tax rates such as the ridiculously high and no longer competitive U.S. corporate income tax rate.

Copyright Eric Tyson, 2008 - 2012 all rights reserved.

Eric Tyson is the only best-selling personal finance author who has an extensive background as an hourly-based financial advisor and who does not accept speaking fees, endorsement deals or fees of any type from companies in the financial services industry or product or service providers recommended in his articles, books and his publications.