Posted by: Jeff | May 6, 2010

A Very Philosophic Argument for Tax Increases

Back in early April I wrote a post about why I thought further taxes on the rich would be of limited usefulness for getting America out of its budget hole. I fully confess that I like tweaking buttons, and I wrote this sentence – “Americans’ attitudes towards how much they should reasonably be expected to pay in taxes are just going to have to change. That’s the bottom line.” – precisely because I know many (most?) Americans would be pretty peeved by the suggestion that their tax burden is too small. One of our intrepid commenters pushed back, pointing out that there’s no inherent reason why spending cuts can’t close the gap, and that sooner or later we Americans are going to have to realize we can’t have it all.

A useful way to setup this question, I think, is like so: We’re going to need to raise taxes or cut benefits in order to fix the deficit, but Americans hate both tax increases and benefit cuts. And politicians respond to those realities, which is why our budget is such a mess. So, when crunch time comes, which option will Americans ultimately hate less?

Ross Douthat highlights a post by Jonathan Chait that I think goes a long way towards bolstering the case that, ultimately, Americans hate tax increases less. The full post is a disembowelment of this op-ed by Mark Penn (the whole thing is a slew of valuable observations and bits of political science wisdom) but the key point for us deals with Penn’s lamentation that there is no clear party for socially liberal, economically conservative voters:

If you look closely at ideological fissures within the electorate — Pew’s “Beyond Red and Blue” survey does this very deeply — it’s clear that the far larger cohort is the opposite of Penn: pro-government social conservatives. That’s actually the cohort that’s being ignored, both by the Democrats, who are more socially liberal than their base, and the Republicans, who are far more economically conservative. The parties are more responsive to their elites, who lean more socially liberal and economically conservative than the voters.

You can back this up further with that Economist/YouGov poll from a while back, which demonstrated that no more than a third of Americans support cuts for any particular federal program. (Outside of foreign aid.) Indeed, for Medicare and Social Security – by far two of our most expensive programs – support for cuts does not rise above 10 percent. And support for cutting Medicare barely makes it above that mark. Then add to all this the fact that, out of all the other developed western countries (which is to say, the societies most similar to our own) virtually no one has a smaller government than the United States.

Here, I would argue, is the underlying truth: a lot of high-flying rhetoric and mythos aside, neither Americans specifically, nor human beings in general, are terribly fond of the idea of self-sufficiency or heroic individualism, in practice. Most of us, in our day-to-day lives, realize there are many forces in the world that we cannot overcome, and that we must often rely on one another and on our larger institutions (government!) for support and provision.

Indeed, the fact that the bulk of voters combine economic liberalism with social conservatism reinforces this; social conservatism is about the preservation of traditional norms and customs, deference to authority, tribal and religious loyalty, and other such things. Like economic liberalism, it’s about the interdependence of individuals and their enmeshment in broader society. Economic conservatism and social liberalism, by contrast, both champion the unencumbered individual; they are atomized, do-it-yourself approaches to the world. (Throughout most of Europe, political parties that champion free markets also tend to champion social liberalism. That it’s the other way around in America is something of an historical and cultural fluke.)

I think what we’re dealing with here aren’t just fleeting political loyalties, but some of the foundational values and priorities that make up both our culture and, to a lesser extent, human nature itself. The structural realities of who we are as a people and as human creatures naturally tilt us towards larger government.

Certainly, in theory, we can balance our budget with spending cuts. But while I think America will always have a smaller government in comparison to Europe, our chances of fixing the United States’ fiscal woes would probably be a lot better if we worked with these tendencies rather than against them.

Now, one complication I’d add is that I think the current design of taxation and spending in America is often pretty poor. If we froze our levels of spending as is, I imagine we could get a lot more productive and useful activity out of our government by reforming the tax code, cutting military spending, expanding certain forms of unemployment and welfare, and reforming Medicare and Social Security. But even freezing our current spending levels, we’d still need to raise taxes to bring revenues in line with expenditures.

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