Sunday, January 13, 2002

Jim Henley says he draws different conclusions that I do from my blurb about tax cuts below. That's a bit odd, since I don't think I drew any conclusions at all, really; the most that the short-form blog entry allows for, as a literary(?) form, is to drop a few hints.

That said, I'm not sure I disagree with either of his alternative conclusions:

1) It's shrewd grand strategy by antigovernment visionaries - empty the expansive state tank of its fuel now, forcing it to shorten its trips and carpool more later. 2) It's the sort of chicanery politicians are reduced to when they haven't got the guts to make the case for reducing government.

I actually see parallels between the current Bush tax cut strategy and the original Reagan tax cut strategy, which was famously described in pretty nearly those terms by his first budget director, David Stockman, who was forced out after a controversial interview was published in the Atlantic Monthly.

I haven't got the Atlantic article handy, and I haven't got time to reread Stockman's book in toto ("The Triumph of Politics", 1986), but I have just gone through the book's prologue again. By itself, it's an astonishing piece of writing in several ways, not the least of which is his description of the goal of the "Reagan revolution":

Behind the hoopla of the Kemp-Roth tax cut and my thick black books of budget cuts was the central idea of the Reagan Revolution. It was minimalist government --- a spare and stingy creature, which offered even-handed public justice, but no more. Its vision of the good society rested on the strength and productive potential of free men in free markets. It sought to encourage the unfettered production of capitalist wealth and the expansion of of private welfare that automatically attends it.

Clearly, a libertarian vision, though he doesn't use the term. And he also clearly anticipated that that reduction in the size of government, on which his tax cuts were predicated, would traumatize the country (his word):

A true economic policy revolution meant risky and mortal political combat with all the mass constituencies of Washington's largesse --- Social Security recipients, veterans, farmers, educators, state and local officials, and many more. ... It meant complete elimination of subsidies to farmers and businesses. It required an immediate end to welfare for the ablebodied poor. It meant no right to draw more from the Social Security fund than retirees had actually contributed, which was a lot less than most were currently getting.

The enactment of that program, further, butts up against some facts of life in our system which ideologues of all stripes have trouble facing up to:

The true Reagan Revolution never had a chance. It defied all of the overwhelming forces, interests, and impulses of American democracy. Our Madisonian government of checks and balances ... and infinitely splintered power is conservative, not radical. It hugs powerfully to the history behind it. It shuffles into the future one step at a time. It cannot leap into revolutions without falling flat on its face.

But, even though he calls this the "Reagan revolution", he then turns around and says that Reagan himself was unsuited to the program:

He was a consensus politician, not an ideologue. He had no business trying to make a revolution because it wasn't in his bones.

and, further, that he never really bought into it; that an exaggerated faith in the Laffer curve had led him to believe that simply cutting taxes would generate enough revenue to pay for most of the existing government structure, and that his most influential aides in the White House functioned effectively as salesmen who didn't care much about the intellectual basis of the program, and still less about its intellectual integrity, but were just concerned with how to sell it.

Stockman's account of these matters is certainly self-interested. But the fiscal upshot is clear, regardless. The original Reagan tax cut, we can now say for certain, could only have been paid for with massive cuts in politically sensitive programs. When the tax cuts happened and the cuts did not, the result was deficits in the hundreds of billions and national debt in the multiple trillions --- numbers theretofore unimaginable, which Stockman claims were popping out of his projections as early as late 1981. And the conclusion he draws from his experiences (having space to do so)?

The fact is, politicians can be a menace. They never stop inventing illicit enterprises of government that bleed the national economy. Their social uplift and pork barrel is wasteful; it reduces our collective welfare and wealth. ...

There is only one thing worse, and that is ideological hubris. It is the assumption that the world can be made better by being remade overnight. It is the false belief that in a capitalist democracy we can peer deep into the veil of the future and chain the ship of state to an exacting blueprint. It can't be done. It shouldn't have been tried.

The only way to destroy the welfare state within our system, if that's what you want to do (as Stockman did, by his own testimony) is the way the system will allow for, which is the way the programs were built up: incrementally, piece by piece, shaving off benefits and programs piecemeal until the government that's left is one that you can live with.

(And by the by, the country only really started to get its fiscal house in order when governed by a politician, Clinton, who appeared at times to have no principles whatever, but who was skilled at practicing the art of the possible, and willing to confront the consequences of the math).

Why go through all this? Because the Reagan experience, whatever you think of it, is the elephant in the Ways and Means committee room that no one is talking about. Again we have a large tax cut based on projections which are quickly being revealed as over-optimistic. Again we have no clear way to pay for it. (The Bush administration has already announced they'll be projecting deficits for the rest of his term). And on top of that, we have promises of new entitlements; far from shrinking the medical insurance entitlements, for instance, they're talking about tossing in drug benefits.

You'd expect the national dialog to center around what happened the last time we were in this situation, but it's on the periphery at best. Even Paul Krugman, who has been preaching on hidden agendas in the Bush tax cut proposals from almost the moment Bush entered office, hasn't made much of the last time around. I find this absolutely astonishing --- particularly since the Bush II White House has so many names and faces in common with Reagan's.

We are ignoring history. We are condemning ourselves to repeat it.


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