Regardless of your opinion of libertarianism, at its core is a philosophical and moral commitment to individual freedom and, hence, to scaling government way back. Accepting the political reality of the welfare state might be good politics, even for a rejuvenated G.O.P., but it is not genuinely libertarian.
Also, if I understand what Rauch is arguing, even if it is politically pragmatic to accept the welfare state, it does not follow that taxes should not be cut. Unless Rauch is willing to argue that Uncle Sam’s $3-plus trillion dollar budget is largely full of worthwhile programs and spending, he can argue for maintaining the welfare state and for tax cuts: get rid of the gargantuan amounts of wasteful (indeed, harmful) spending and transfer it instead to welfare programs. Problem solved.
If Rauch does not agree that most of Uncle Sam’s current budget is wasteful, then he’s not remotely close to being a libertarian. (I don’t know Rauch, but I admire his work and believe that he probably truly is a libertarian. So he should recognize that government can get more revenue for program A not only by raising taxes but, instead, by cutting spending on programs B and C.)
(HT Karol Boudreaux)
Podcast RSS Feed
Full EconTalk Text
{ 20 comments }
Don,
I think Rauch's article is irrelevant to what is going on and more important to anything that may happen in the next ten years. The relevant fiscal issues are (1) how BHO will prevent the huge expected deficits for the next two FYs to increase further in order to solve the financial crisis (the estimates he is going to present this coming week do not include additional funds for this purpose); (2) how BHO will finance those huge expected deficits (other than threatening the Chinese with falling together if they stop buying US securities) while avoiding the US to become a banana republic in the process of financing them; and (3) how state and municipal governments, starting with California, will reduce their deficits and finance the remaining deficits in the next few years. You can add any other issue you want to this list but you know there is little room to reallocate funds, to reduce expenditures and to increase taxes.
If everything goes fine, perhaps in ten years the discussion of the long-term size of government becomes relevant.
Barandiaran or Dr. Boudreaux or anybody,
So how does Obama's proclamation today of cutting the deficit in half, primarily through raising taxes on the rich jibe with all this spending? Truly. I'm asking as a non-economist.
RickC: Personally, I don't think the rich are going to have as much to tax away as Obama thinks if this recession continues, especially if they know in advance that whatever they make is just going to be taxed away anyway. Plus, I'm disturbed that he thinks it's okay to stop at a 500 billion dollar per year deficit, which he bizarrely described as "sustainable." The only truly sustainable solution is to cut spending so that the deficit is entirely gone.
That said, even as a libertarian I'll agree that increasing taxes might be a good idea, with the understanding that the extra revenue is used solely for the purpose of paying down the national debt. The national debt is essentially just a tax waiting to happen, so it's a responsible pro-liberty position to get rid of it now. Unfortunately, we can't really trust our politicians to do this correctly. I'd suggest some sort of Constitutional amendment which simultaneously prohibits deficit spending under "normal conditions" and imposes a temporary tax to pay down any national debt that may exist during periods of "normal conditions." As it is, it's too easy for politicians to keep punting the problem two/four/six years into the future.
RickC, at this very moment any announcement is irrelevant. Is BHO going to tie himself to the mast to show his commitment to whatever he announces? It is very difficult to predict what will happen with the budget and in particular with the budget deficit and its financing in the next four years. No politician will commit today to any particular policy; they know they will have to negotiate much harder than usual to get whatever they want to get.
Love for Somalia, where government spending is zero and taxes are zero.
I can see that taxing current people for current spending is slightly more libertarian than taxing future people without their consent.
I suggest to read this paper
http://www.brookings.edu/~/media/Files/rc/papers/2009/0219_fiscal_future_gale/0219_fiscal_future_gale.pdf
written by two well-known economists, one from UC Berkeley and the other from the Brookings Institution.
Hereâs Daniel Mitchellâs take at CATO.
Those that don't want to read the paper I suggested can sing this
"The Treasury says the national debt
Is climbing to the sky
And govermnent expenditures
Have never been so high.
It makes a feller get
A gleam of pride within his eye,
To see how our economy expands,
The country's in the very best of hands."
You can read the story in this post
http://rsmccain.blogspot.com/2009/02/instapundit-does-show-tunes.html
in turn motivated by this other post
http://pajamasmedia.com/instapundit/70842/
The article by Cato's Daniel Mitchell linked by Mesa Econoguy, tells it exactly like it is:
"But, as Milton Friedman famously warned, governments will always spend whatever they collect in taxes plus whatever amount of borrowing they think is politically and economically feasible. So every time the right capitulates to a tax increase, the left has more leeway to increase spending -"
Do we know this is what will happen, or is it just theory.
It isn't just theory because that is exactly how people and politics work. You can see it in the people's attitudes towards speed limits (to draw a comparison).
One of the more recent examples of this escalation of speed limits that will also parallel spending increases and resultant taxes was illustrated by the adjustments of speed limits on our Southwest freeway as it entered our central loop.
The speed limit was 55MPH, but the average traffic flow in business hours was 65. Over the years numerous people received tickets for speeds from 60 to 65, and political pressure was put on the city/state to do something. Our politicians said, well we will raise the speed limit to 65 and that will encapsulate the speeds people are driving and everything will be fine.
My comment was, "No it won't. What will happen is that people will immediately begin to drive 75MPH. Because no matter what people will push the envelope no matter what the envelope is."
I am certainly no genius but I was right. The average speed through the same area immediately became 75MPH plus.
Exactly the same thing will happen with taxes if they are rasied to cover over- spending. As Daniel Mitchell says, there is no reason for the spenders to restrain themselves when they know they are going to be able to raise taxes with the help of compliant conservatives.
Jonathon Rauch has left the reservation with this BS, no longer to be trusted.
Go to D.C., cordon it off, drain the cesspool inside the beltway, fill it in, sod over it and then scorch the Earth so that nothing ever lives there again.
That will reduce spending.
I remember seeing J. Stiglitz on TV and he said that government was so underfunded that the levees in New Orleans could not be maintained. The fallacy there is the implication that every program less important than ensuring the survival of a major American city has been eliminated.
Love for Somalia, where government spending is zero and taxes are zero.
Posted by: T L Holaday | Feb 22, 2009 4:23:06 PM
The implication here I guess is that anyone who thinks that the US govt should spend less that $3,000,000,000,000 per year necessarily supports genocide. ROFL.
The propagandists just love to purport the tired old adage that goes along the lines of: X amount of people cannot be wrong.
Vidyohs is spot on in his analysis.
do you mean your opening sentence the way it is constructed or do you wish to put the parenthetical expression after believes? In other words do you mean that it is wisely suggested or who believes (wisely, it is suggested)?
I don't know. I've seen people who work at CATO, and are presumably libertarian, argue for higher taxes.
There is a tension between the "small government libertarians" and those who favor whatever is in the interests of business. These days the latter category is not insignficant. Hell, CATO is owned and run by a wealthy busnessman. And the often mindless disciples of Ayn Rand think businessmen can do no wrong.
".. he should recognize that government can get more revenue for program A not only by raising taxes but, instead, by cutting spending on programs B and C."
Of course a real libertarian should favor smaller government as an end in itself, regardless of it's impact on government revenue or even on the economy. The "big government ibertarians" are people who value a growing economy over all else and see (correctly) that the state can play a role in attaining that goal.
That's the real split in the libertarian movement – between those who prefer less government and those who prefer economic growth. Those things are not always working in tandem.
"So every time the right capitulates to a tax increase, the left has more leeway to increase spending -"
People we are accustomed to think of as being on "the right" will often go along with or even press for tax increases. The VA Chamber of Commerce fought for tax increases in that state to pay for more infrastructure to support more business.
And the US Chamber of Commerce lobbied for the Democrats recent 0.75 trillion dollar spending bill, which will require higher taxes at some stage. No doubt this made good short term sense from the standpoint of that groups membership.
"So every time the right capitulates to a tax increase, the left has more leeway to increase spending -"
What we have seen with the current crisis is the complete divorce of spending from taxes. To use the analogy of an earlier poster, we didn't just raise the speed limit from 55 to 65, we declared that the patient must be rushed to the hospital and speed limits be dammed.
Spending is now justified on its own terms and seems unfettered by the need to collect taxes or balance a budget – at least in the present.
The "big government ibertarians" are people who value a growing economy over all else and see (correctly) that the state can play a role in attaining that goal.
That's the real split in the libertarian movement – between those who prefer less government and those who prefer economic growth.
What role is that?
If the wrong role is chosen, or taken, will there not be perverse results?
Does anybody factor in human nature in devising their political-economic theories?
What happens when you give (or allow) people political power?
Is there anything such as a political state that does not use its power to grow itself?
I can see that taxing current people for current spending is slightly more libertarian than taxing future people without their consent.
I'm sorry, I don't remember giving my consent for being taxed now. How is that more libertarian then?
That said, even as a libertarian I'll agree that increasing taxes might be a good idea,
even assuming (and I realize you don't) that government uses additional tax revenue to pay down the deficit, it won't raise taxes on all citizens equally. It is political poison to raise taxes on anyone below the 5th quintile (maybe the 4th as well). This means that the more productive will be punished excessively for daring to be more productive. So, they will be less productive – particularly traditional economic drivers: entrepreneurs. Tax increases during the Great Depression had a negative effect on investment.
Rauch has a libertarian streak, but he is not a libertarian, as he will be the first to tell you.