My Latest Column: The Tricky Politics of Taxes

by Reihan Salam

My latest column for Reuters is live on the site. I tried to walk through a number of pretty complex issues, so I hope it’s reasonably fair and clear. 

To build on a theme that is mostly implicit in the column, I think that both parties suffer from a contradiction at the heart of their respective agendas.

Democrats make the case that government can do a great deal of good and that we need to preserve a robust safety net and we also need to increase public investment levels in a few discrete but important areas. This is not a crazy view by any means, though I tend to think that the traditional Democratic approach to the safety net and public investment tends to exacerbate cost growth, undermine work incentives, etc. To pay for this approach to government, Democrats want to make the tax burden both heavier and more progressive, an approach that will likely prove more economically damaging than, say, an emphasis on relatively flat consumption taxes. 

Republicans generally embrace good and worthwhile ideas on how to make government more responsive and efficient, including choice and competition in the provision of public services and giving public sector managers more discretion when it comes to setting the terms of public employment. These ideas aren’t always perfect, and concerns about risk selection and implementation are totally valid. My general sense, however, is that this market-oriented, decentralized approach is more likely to yield the kind of productivity-enhancing business model innovation that we need to contain costs while still offering high-quality services.

But Republicans also undersell the extent to which the way we deliver services has to change before we can really contain costs, and the extent to which we might need government to actually retrench on the promises it has already made to keep us anywhere near our historical tax burden. I don’t see this kind of retrenchment as the end of the world — I actually think it would have good and healthy consequences given time — but we shouldn’t be surprised that many non-conservatives, and a not inconsiderable number of self-identified conservatives, balk at the idea.