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How low should taxes go? A reply to Bill Voegeli

Last week I posed a question: What level of taxation do conservatives consider appropriate? I'm not sure that I expected much of an answer, but I got one from William Voegeli, whose book "Never Enough: America's Limitless Welfare State" I referenced in posing the question. It was a thoughtful and civil reply, and though Dr. Voegeli and I have philosphical/instinctive differences, I'm grateful he took the time to craft such a response.

In composing my own reply, I wrestle with a few issues. A) Much of Voegeli's reply occupies itself not so much with the question I posed, but with restating the argument from his book--that overreaching advocates of the welfare state in the United States have created and continually seek to create institutions that have grown unsustainably large. I'm not going to spend much time defending liberals in this post (there are several portions of Voegeli's post that seem to deserve their own replies) because I'm still principally concerned with the question of how much conservatives are willing to pay to sustain the government they do envision. B) When he does settle on an answer, it is so broadly reasonable that I (and, I think, most liberals) couldn't quarrel with it. But C) the daylight between Voegeli's conservative response and the actions of America's conservative party is broad enough that a response purely on Voegeli's points seems to omit a lot of real-world ramifications. We're going to have to talk about Paul Ryan here.

Enough throat-clearing. Let's take a look at a couple of key points in Voegeli's response.
My answer is that one way to describe the difference between liberals and conservatives is that liberals want government spending to be the independent variable that determines tax levels, and conservatives want government spending to be the dependent variable determined by taxes.
I think this is an oversimplication. A slightly different way of putting it, I think, would be this: Liberals want taxes to be determined by what they want government to do. Conservatives want taxes to be determined both by what they want government to do and what they want it not to do. (There is, after all, a whole discussion to be had about what the tax level would look like if we had a much, much smaller defense establishment.) That's still an oversimplication--and one that's very charitable to conservatives, as we shall see.

I'm not entirely comfortable with his "liberals want/conservatives want" framework, though, because it is so oversimplified. Put another way: Voegeli's half-right. He and his fellow conservatives want to determine the size of the government and the welfare state, lock it in, and throw away the key. But I don't think it's the case that liberals want to build their utopia now and then figure out how to pay for it. To me, there's plenty of evidence that liberals try to balance goals and resources; the welfare state we expect and hope to build in the United States is not the welfare state we would expect and hope to build in, say, The Solomon Islands. That's a bug to conservatives, I suppose—Voegeli: "One of the reasons to like a growing economy should be that it makes a smaller welfare state possible, rather than because it makes a bigger one possible."—but not to me. A richer society is more capable of providing a safety net; I'm OK with the idea that that increased capability creates something of an increased--though not unlimited--obligation to do so.

But hey: Suppose we were all in agreement about the size of government and the welfare state? That still requires an answer to my question: What level of taxation do conservatives think is the right level of taxation? The conservative answer in our politics always seems to be "a little bit less." Voegeli, bless him, sounds slightly more reasonable.
So, Mathis asks, how high should do (sic) conservatives want our taxes to be? High enough to pay for the things the government needs to do. Which are those? In a democracy, all the things the people feel the government really ought to do. I'm happy to abide by the outcome of the democratic debate over that question, but I think it should be conducted honestly. Honesty requires stipulating that the amount of government we get is no larger than the amount we're willing to pay for, as opposed to the dream-world welfare state we would build if wealth were limitless.
See? I don't think I can argue with a single point in that paragraph. I really can't. We should only build what we can sustain. Let's shut 'er down and go home--after all, not even Paul Krugman thinks we should consign ourselves to a future of ever-larger debts!

So maybe my argument here isn't with Voegeli. Maybe it's with the Republican Party instead. Because it seems to me that over the last generation, welfare-state-loving Democrats have always tried to find the resources to finance their additions to the welfare state--that is, to pay for the things they believed government should do. And Republicans haven't.

Just to cite the two most-obvious examples: Much of the effort in building and passing the Affordable Care Act--known, sneeringly, in some quarters as "ObamaCare"--went into making sure that the act is deficit-neutral during the first 10 years of its life. You can argue that there was some trickiness involved, or that the 10-year-shelf-life of the deficit neutrality is too short a window. Fine. But Democrats actually tried to expand the welfare state without reaching for the national credit card first.

Republicans? Well, back in 2003, A Republican Congress passed the Medicare drug benefit. The law was signed by a Republican president. It reportedly added up to $1.2 trillion to the deficit over a decade. And Republicans couldn't come up with one dime to cover the costs. If there's been a disparity between the willingness to grow the welfare state and the willingness to pay for it, I'd argue that disparity can be found primarily in the actions of America's conservative party.

And we're not even mentioning the unfunded wars of the last decade.

I hear the objections: George W. Bush wasn't a "real" conservative. The Republican Party has learned its lesson. The Tea Party will hold this generation of Republicans accountable.

Enter Paul Ryan. The Republican congressman has introduced one of the more radical budget proposals ever seen. It commands near-unanimous support from the Republican Party in Congress, and to criticize it on the right is conservative apostasy. It is the "rightward pole" in the budget debate.

So what does it actually do? Well it reins in domestic and entitlement spending, reducing the anticipated costs of Medicare, Medicaid, and discretionary spending by more than $2 trillion over the next decade. Presumably, this is what America's conservative party sees as a "right-sized" federal budget—or, at least the closest thing to right-sized that Republicans think entitlement-loving voters will accept.

So. What level of taxation is appropriate to sustain Ryan's budget vision? Well, uh...a little bit less.

It cuts the corporate tax rate to 25 percent. It lowers the marginal tax rate for top incomes from 35 percent to 25 percent. (This at a time when both the rates and the actual taxes collected are really, really low.) And so on. The result? Washington Post columnist Matt Miller gives us the overview:
“The spending spree is over,” Ryan said the other day, after the House passed his blueprint. “We cannot keep spending money we don’t have.” Except that by his own reckoning Ryan is planning to spend $6 trillion we don’t have in the next decade alone.

“We have too many people worried about the next election and not worried about the next generation,” Ryan added. So Ryan is expressing his concern by adding at least $14 trillion to the debt between now and when his plan finally balances the budget sometime in the 2030s (and only then if a number of the plan’s dubious assumptions come to pass).
In other words, America's conservative party has set out its plan for balancing government goals and resources, and it still can't bring itself to pay the bill.* But it can cut taxes. It can always cut taxes.

*President Obama's budget proposal doesn't do any better over the long term, admittedly. Tee up on that if you like. But my purpose here is to determine how conservatives are willing to act.

Now, this isn't William Voegeli's fault. I don't know if he supports Paul Ryan's plan or not, and I'm not inclined to hold him rhetorically responsible. (No more than I'm willing to defend LBJ's 40-year-old comments about "reducing boredom" that Voegeli cites in his reply.) But the "conservative" plan supported by the conservative establishment seems to me a betrayal of the core principle that Voegeli espouses, which is that our leaders should honestly stipulate "that the amount of government we get is no larger than the amount we're willing to pay."

Do Democrats want to strengthen the safety net? Sure. But their efforts in the last generation, while imperfect, have sought to balance goals and resources. Republicans haven't even offered that much. Voegeli, in his book, suggests that Democrats and Republicans can come to a grand bargain on financing the welfare state if Democrats agree to limits on the size of that state. It seems to me, though, that if Republicans take his advice they must also agree to some level of financial support for that state—and right now, that goal appears impossible. What's the right level of taxation for Republicans? A little less, always and forever.


Rick Henderson said…
Joel, I agree that most Republicans and conservatives are unwilling to immediately impose the levels of taxation necessary to support the levels of government Congress has authorized (with the blessings of the public, presumably). Most liberals and Democrats feel the same way -- otherwise, the budget would have been balanced not long after the stimulus bill passed. Or Harry Reid and Nancy Pelosi would have endorsed balanced budgets when they ran Congress between 2007 and 2009. Oh, wait.

I'm not being snarky. I disagree with the accuracy of your premise, post-meltdown.

You're also a bit careless when you simply take Paul Ryan's proposed tax changes as a simple tax cut. Yes, he would cut rates. He also would end a host of exemptions over time (such as the home mortgage deduction). Such a tradeoff might well increase overall revenues by expanding the tax base.

There's a difference between reducing tax rates and expanding the tax base. Every state legislature dealing with a sales tax confronts this issue.

It's also the case that, even if conservatives hesitate at raising tax rates today, tax revenues will have to rise dramatically just to pay for the welfare state that was constructed in the 1930s, '60s, and beyond. Part of Ryan's plan is to minimize the impact of that welfare state on future generations without jeopardizing those who depend on it today.

Finally, one of Voegeli's commenters made a good point. Modern liberalism tends to seek new problems for government to "solve," even if those social ills do not lend themselves to programmatic responses. (The recent war on obesity is a prime example, and I'm pretty sure you're not on that bandwagon.)

Once the public decides to provide a reasonable safety net for retirees, liberals aren't satisfied. It has to be expanded to include the disabled, and children. Fair enough. But then it has to further to include working-aged people who should be self-sufficient. And then the middle class. And so on. Some states made families eligible for SCHIP who had net incomes approaching six figures. Voegelis' "Never Enough" premise is accurate.

Contemporary liberals can never create social institutions to protect those who cannot protect themselves and the let the rest of us pursue our own dreams.
Lou Covey said…
I am probably in the minority but I think the real debate is not about the amount of taxes but in the definition of the terms of the debate. I am not comfortable with bromides like "tax the rich," "Fair share," etc. because no one wants to give a real definition of those philosophies, which is at the hear of your argument, i.e. "How low should taxes go?" which is only the counterpoint to the unanswered conservative question, "How much in taxes is enough?" I am in favor of raising taxes if it can be demonstrated that the money being spent is being effective. Take education for example. In California, we have increased spending on education by more than 60 percent in the past five years, with an increase in enrollment of 1 percent. Yet we still rank in the lower 10 percent of results. Something is horribly wrong here. We are throwing more money at the problem and the problem gets bigger. That is, in essence, the real argument: "What the hell did you do with the increases we gave you?"
Now we have the same argument being applied to government health care spending, when the amount being spent on that entitlement grows every year but we keep hearing that the health care situation is getting worse.
At least with military spending, we know that the money going to blow stuff up is being spent to do exactly that and with great efficiency.
So we need to have a better discussion on the terms of the debate to get something done in Congress.
Andrew S. said…
Joel, this is an excellent response. Voegeli has largely sidestepped your question, but you'd pretty well anticipated the answer anyway.

There's no "set-it-and-forget-it" solution to the market failures that require the development of a welfare state, and I think we're all in agreement that what counts as a market failure/social ill can be sorted out in the political arena. That's what we've been doing.

So, is obesity one of these problems? I think so. We’ve gotten fatter, and that’s for several reasons: The work we do is less physically strenuous, our leisure activities are more sedentary, the food most easily and cheaply available to us is higher in sugar and fat. Each of these factors is the result of some market force: outsourcing, the rise of home video games and highspeed internet, and (among other things) agricultural subsidies and new efficiencies. Like most other social problems, obesity is the consequence of a market failure. While pursuing other ends, the market has produced a negative consequence. And it’s a negative consequence in part because obesity is uncomfortable for its victims and in part because it is tied to long-term costs increased death and--more expensively--morbidity.

Did liberals invent the problem of obesity? Nope. Obesity has arisen as a formerly unpriced cost--a hidden market failure--of deindustrialization, agricultural subsidy, and the changes in our leisure activities driven by the various home entertainment industries. I can’t speak for all liberals, but I think government has a role in evaluating the sources of the problem of obesitty, trying to price the effects accurately, raising the money in taxes and then setting about fixing it.

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