The median size of a new single-family house in 2007 was over 2,300 square feet, more than 50 percent larger than its counterpart from 1970. That creates a problem for concerned parents, because good schools are usually found in affluent neighborhoods. To send your children to one, you must outbid others for a house in a good school district. Yet when all families increase their bidding for such houses, they succeed only in driving up their prices. No matter how much parents pay, only half of all children can attend schools in the top half.

Much of this waste could be eliminated by a few relatively simple changes in the tax code. Scrapping the current progressive income tax in favor of a more steeply progressive tax on consumption is probably the single most productive change we could make.

What’s a progressive consumption tax? First of all, it’s not a sales or value-added tax, neither of which takes individual income into account. Those taxes are imposed on the spot when someone buys a good or a service.

Under a progressive consumption tax, taxpayers would report their incomes, much as they do now. They’d also report their annual savings, much as they do for tax-exempt retirement accounts. The tax would be based on “taxable consumption” — the difference between their income and annual savings, less a standard deduction of, say, $30,000 for a family of four. Rates on additional expenditures would start low and rise gradually with taxable consumption.

Because savings would be tax-exempt, the biggest spenders would save more and spend less on luxury goods, leading to greater investment and economic growth, without any need for government to micromanage anyone’s behavior. Consumers in the tier just below, influenced by those at the top, would also spend less, and so on, all the way down the income ladder. In short, such a tax would attenuate the expenditure cascade that has made life for middle-income families so expensive.

Adopting a progressive consumption tax would be like creating wealth out of thin air. Its magical quality stems from the fact that luxury spending is strongly context-dependent, just as antlers are. If everyone spends less, you can still have the biggest mansion — or antlers — on the block, but you’ll also be able to do many other useful things. The money saved could help resolve the current fiscal impasse. And it could also be used to fix roads and bridges and support a host of other genuine improvements.

Changing the tax code in a fundamental way won’t be easy. But as the late Herb Stein, Richard M. Nixon’s chief economist, once remarked, “if something can’t go on forever, it won’t.” The dysfunctional system now in place threatens to destroy our economic future. If we don’t change it now, we’ll have to change it later.