Passage of the health care bill has focused investor attention on the runaway deficit situation, and its long-term consequences.
The deficit, which ran to around 3 percent of gross domestic product in President George W. Bush's final year, is already exceeding 10 percent.
Government debt held by the public has gone from 40 percent of GDP when Bush was in the White House to 63 percent now and, says the nonpartisan Congressional Budget Office, will hit 90 percent by 2020. That's the level at which new studies say debt begins to reduce growth and jobs.
Unfortunately, the situation is even worse than reported figures suggest. Most dispassionate observers are estimating that the new health care bill will add $1 trillion to the nation's $8 trillion debt, and that the government's unfunded liabilities -- its promises of future pension and other payments -- come to somewhere between $60 trillion and $75 trillion over the next several decades.
Even without those obligations, the government now has $14 trillion in liabilities against only $2.7 trillion in assets. Bring in the receivers.
Well, no. As President Obama well knows, the government can levy taxes, and it can print money. So he does not see fiscal considerations as a reason to abandon his ideological commitment to "transform" America.
His fiscal plan is to raise taxes; his political calculation is that Americans will come to love their new entitlements and rank him with Franklin Delano Roosevelt in their pantheon of heroes.
Next on the president's list is the financial services sector: More and in some instances better regulation of banks, procedures for winding down busted banks without massive taxpayer bailouts, consumer protection, control of bankers' compensation systems. On to the energy and education sectors, both also on Obama's "transformation" list.
The courts have ruled that the Environmental Protection Agency already has wide-ranging power to reduce carbon emissions, and will use them if Congress continues to refuse to pass the president's cap-and-trade bill.
When the transformation of America is complete, the country will have been moved in the direction of the European social welfare state.
Families earning more than about $250,000 will have their marginal income tax rate increased from 35 percent to 39.4 percent when the Bush tax cuts are allowed to lapse, and capital gains taxes go from 15 percent to 20 percent.
In addition, the health care bill levies a hospital tax of about 1 percent of income, and 3.8 percent on some portions of their incomes, including interest, dividends, and short-term capital gains.
But revenues from these taxes won't begin to make a dent in future deficits, which the CBO estimates will still exceed 5 percent of GDP as far ahead as 2020.
Which is why it is now generally accepted that the President's Commission on Fiscal Reform will recommend adoption of a European-style value-added tax.
A 3 percent VAT would bring in $300 billion per year, $280 billion if food is exempted. Throw in printing enough money to drive inflation to around 4 percent per year -- the number the International Monetary Fund's economists are now recommending as a target to replace the 2 percent most central banks are using -- and the deficit just might become manageable.
But America would have been transformed. Government will be more intrusive. Some 16,500 new tax inspectors will make sure that every American has health insurance or has paid a fine, which by 2016 will come to $2,085 or 2.5 percent of income, whichever is higher.
Emissions from not only coal plants, but privately operated lawn mowers, will be regulated. Cars will be smaller.
Incomes will have been redistributed. Taxes on incomes of families earning more than $250,000 and on those in ranks of middle earners will be used to fund programs for lower-income groups. Slow-growth Europe, here we come.
Examiner Columnist Irwin M. Stelzer is a senior fellow and director of the Hudson Institute's Center for Economic Studies