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Beltway Confidential

Is libertarian populism just a way for Republicans to dodge fiscal issues?

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Beltway Confidential,Conn Carroll,Housing and Urban Development,Republican Party,Fiscal Policy,Analysis,Libertarian Populism

Salon‘s Brian Beutler doesn’t want to speak for other critics of libertarian populism, but what bothers him most about the project, is that he thinks it is a “swindle” designed to distract from established unpopular conservative fiscal policies. Beutler writes:

Libertarianism has always benefited from the fact that some of its precepts appeal to strange bedfellows. To the extent that pot legalization and sexual freedom are defined as libertarian ideas, a lot of young people will describe themselves as libertarians, even if they might more accurately be called libertines.

Libertarian populism is designed to replicate this phenomenon at a more elite level. So it’s no coincidence that its success likewise depends on saying nothing about “all the other stuff” — or more specifically, what to do with the hundreds of billions of dollars libertarian populists want to cut from government, supposedly in service of leveling the playing field for the little guys.

Silence is supposed to be a feature, not a bug. If the controversial stuff isn’t on the agenda, maybe people won’t notice the gaping hole in the libertarian populist governing platform. It also means critics have to make educated assumptions about what libertarian populists really believe about fiscal policy, and that allows them to accuse critics of bad faith. But that’s too clever by half.

Beutler is right … to an extent. Those that call themselves libertarian populists do tend to write more about non-fiscal issues. But that in no way means libertarian populism is an attempt to change or dodge the subject. It’s just that on the spending side, the party has already united on House Budget Committee Chairman Paul Ryan’s, R-Wis., spending plan, and on the tax side, there is no consensus yet.

Yes, the House did have to pull the Transportation and Housing and Urban Development bill last month. But the core issue in that dispute was the community development block grant program, which epitomizes the earmark and waste culture the Tea Party has been changing since 2010. If CDBGs are the spending programs liberals want to make the budgets fights about, then that is a fight libertarian populists are very ready to have.

On the tax side, Beutler is right that I am not a huge fan of Sen. Rand Paul’s, R-Ky., flat tax. (I don’t think Tim Carney or Ben Domenech are either, but they can speak for themselves.) As Robert Stein has written in National Affairs, it is not 1980 anymore, and top marginal rates are not the salient issue they once were:

It is also important to recognize that repeating Reagan’s feat — using the tax code to boost incentives for the highest-earning workers to the same degree — would be simply impossible today. Even starting from a top income-tax rate of nearly 40% (which we can expect once President Bush’s tax cuts expire in 2011), income taxes would have to go to zero — and not be replaced by any other tax system, like a sales tax — to generate the kind of positive work incentives the original Reagan cuts produced.

Repeating something like Reagan’s feat today would therefore require not simply imitating the particulars of his tax reform, but rather advancing its underlying aim: eliminating gross distortions that stifle economic growth and punish workers across the income scale. Today, most of the middle class finds itself in a 15% income-tax bracket that adjusts annually for inflation — and so proposals that focus on cutting marginal rates simply will not resonate as they did in 1981, when most middle-class families had been watching their marginal tax rates steadily increase for years.

Stein advocates eliminating the Alternative Minimum Tax and all itemized deductions except for the mortgage interest and charitable donations, which he would then limit. He’d then institute to tax rates (at 15 and 35 percent), and he’d create a new $4,000 per-child credit.

This isn’t my ideal tax plan. I’d like to see mortgage deduction ratcheted down to nothing over say, 10 years. And instead of a new child credit, I’d like to see payroll taxes cut for everyone. But Stein’s plan is a deal I would take.

And I am not the only one. Stein’s work is popular on Capitol Hill among some real hard-core conservatives. I haven’t gotten anyone to go on the record yet, but there are backbench conservatives working on a tax plan along these lines.

Beutler and his liberal allies seem to want a full fledged CBO-scored fiscal plan to attack right now. But agendas just don’t gel that quickly. To the extent that libertarian populism is a thing, it is still growing, still gaining champions outside of just Rand Paul, and there just isn’t a consensus on every issue (not even the non-fiscal ones).

This doesn’t make libertarian populism a “dodge” or a “swindle.” Just an honest effort by movement conservatives to identify a policy alternative for the Republican Party that isn’t just “a bidding war over who can run the life of Julia more efficiently.”

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