Friday, May 28, 2004

Tax & Spend versus Spend and spend and spend and spend....


It has been obvious since Reagan's time that the classic definitions of "liberal" and "conservative" have no real meaning in American politics. Even as compared to recent history, the definitions are shifting. A few years ago, a political conservative would have been expected to be a fiscal conservative - concerned with the growth of the government, fiscal responsibility, and balanced budgets. Now, thanks to G.W. Bush, we have a new definition of "conservative" which scoffs at the notion of restrained spending, balanced budgets, and governmental bloat. While this new brand of "conservative" still uses the tired cliche of the "tax and spend Democrat", this new "conservative" can perhaps be fairly described as the "spend and spend and spend and spend and spend and spend Republican".

So is the objection of the "GW Bush Conservative" that Democrats are too fiscally responsible? They are too focused on raising revenue before spending the nation into an oblivion of oversized deficits? Or is the objection that the Democrats spend on the "wrong things" - that, rather than offering staggering subsidies to corporate interests and engaging in a huge military build-up, the Democrats want to spend money to improve America for the average, and even the disadvantaged, American? Increasingly, I think the objection is both: The "GW Bush Conservative" wants to see a tax policy that puts pretty much the entire burden of financing the nation and the servicing of the exploding national debt on the working masses, but wants a spending policy which almost exclusively favors the wealthiest Americans and the largest corporate interests.

As he complains about "income taxes", why doesn't Bush want to address payroll taxes, and the absurd double- and triple- taxation of the wages of working men and women? Why doesn't Bush want to address the Alternative Minimum Tax (AMT), which will soon rake back most or all of the meager tax benefit his "reforms" have provided to the working masses? It isn't Bush's fault, I suppose, that so many wage earners are ignorant of what the term "income tax" means, don't know the difference between "income tax" and "payroll tax", and have never heard of the AMT - a lot of the fault for that lies with the media's abysmal coverage of these issues - but he certainly takes advantage of their ignorance in pitching "tax reforms" that overwhelmingly favor the rich, while refusing to even consider reforms which would truly benefit the working masses.

5 comments:

  1. Aaron,

    I'd go further back than Reagan: Nixon's wage and price controls certainly stretched the limits of any intelligible notion of "fiscal conservatism."

    As to your questions about how to parse the expression "tax and spend Democrat," I think you got carried away in a little rhetorical flourish there :)

    Certainly there would be disagreement about spending priorities, along the lines you've indicated. But I think the way you posed the difference entails a false dichotomy: *if* a military engagement really flows out of due concern for national security - or more broadly, "national interests" - then that's to the benefit of all of us, as we each have an interest in being secure and safe.

    And,I would argue, protecting the nation from malefactors within and without is a *primary* function of government - other ends are more remote/marginal.

    When you mention a reduction in the payroll tax, do you mean the employee's contribution, or both employee's and employer's? If the former, I suppose you'd shift the difference onto the employer's shoulders - or are you willing to see a reduction in Social Security and Medicare funding?

    So long as we maintain the national delusion that Social Security and Medicare are run actuarially, then on its face I think it makes sense for the employee to continue making a co-equal (or even greater) contribution towards his/her retirement-age needs. But I'd be happy to see the payroll tax *in toto* reduced, as I favor across-the-board tax relief, and I think we need an entirely different approach to provisioning for superannuation.

    As to the whole matter of deficit spending, over the last 50 years most administrations have run deficits of some kind - though, as you indicate, they began assuming gargantuan proportions under Reagan. But, for my money, the usual Democratic "solution" to the deficit is a nostrum: balancing great spending with equally great taxation.

    Although I can't claim to know Bush and Co.'s rationale, I can imagine a deliberative process under which the (admittedly dangerous) course they've undertaken financially could seem reasonable. After 9.11, two opposed imperatives had to be fulfilled: preventing economic collapse, and undertaking costly military action. If you're a free-marketeer, the former has to entail - though not necessarily be limited to - tax relief; no matter what you are, the latter is enormously costly.

    Hence deficits would have to be run in the short(er) term to manage some kind of accomodation between the twin goals. The gamble would then trade on the tax cuts fulfilling supply-side expectations of ultimately increasing government revenue, so that inlays would progressively reduce the proportion of expenditure to tax revenues, without increases in taxation (and/or phasing in spending reductions as such become practicable politically and absolutely). I wouldn't endorse such a scheme with any enthusiasm, but I think it's defensible, albeit fraught with peril.

    My wish is for a permanent reduction in spending and taxation - but I'm not naive enough to believe that there's any nascent movement in the country towards that state of affairs. But that, I'd say, is part of "our" collective problem.

    Paul (Craddick)

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  2. Paul, your comment on Nixon's wage and price controls is certainly fair observation on "conservative" fiscal policy. And thanks for noticing my rhetorical flourish - one hates to think that one's flourish goes unnoticed. ;-)

    I haven't actually presented a false dichotomy. The Clinton military acquitted itself admirably in Iraq - at a level far beyond that seen in the first Gulf War a decade earlier. It would of course be a false dichotomy to suggest that the alternative to reckless overspending is defunding, but I didn't suggest that, nor can I recall a President of either party who would have endorsed such an idea. The national defense is, of course, a central task for the federal government, despite the initial misgivings of our founding fathers about a standing army.

    As for the payroll tax, Medicare and Social Security, no. I would "call a spade a spade", recognize that they have become something very different than originally intended, observe that the so-called "Social Security trust fund" exists only in the hypothetical, and proposed honest taxation and honest spending. That is, I would merge "payroll taxes" into a single income tax, ideally of a progressive nature, and eliminate "matching taxes". Even if I couldn't get Congressional support for the initial reform (after all, the "spend and spend and spend and spend and spend party" controls both Houses, and disfavors tax reforms which benefit the working masses), I would try to get the mythic "matching tax" reflected honestly on workers' pay stubs - so they can see what their employers really pay them, and what is really taken out in taxes.

    After all, isn't the "matching tax" a bad joke? From the employer's perspective, isn't the matching tax (and any job benefits) part of the total "wage" paid to the employee?

    I don't recall any Democratic administrations who balanced the budget through "great taxation". Perhaps you have an example in mind? And as for Bush's fiscal irresponsibility over the past three years being "temporary" - whether in response to emergency, a fiscal stimulus, or both - I would love to learn how his *present* fiscal and taxation policy will do anything but ensure that deficits grow larger, and become permanent.

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