There has been a great deal of talk about how the Taxpayer Protection Pledge championed by Grover Norquist of Americans for Tax Reform is losing its alleged stranglehold on Republican lawmakers. The following is from Aaron Blake of the Washington Post:
Norquist, a zealous, self-promoting Washington icon who presides over a weekly meeting of top conservative players, has quietly amassed an extraordinary amount of power in the Republican Party without ever being elected to office. The 56-year-old president of Americans for Tax Reform is a former Reagan-era operative who launched his pledge in 1986, wheedling and cajoling so many GOP lawmakers into signing it over the years that it has become a Republican rite of passage. He keeps the source of his power, the original signed pledges, in a secret fireproof safe.
But now some Republicans are openly pining for the days when Norquist’s specter didn’t loom over their budget dealings.
What I find frustrating is that it has become common to associate resistance to tax increases with one man and his influence, but of course the resistance to tax increases is rooted in the fact that many if not most conservative voters are opposed to tax increases. This opposition is often characterized as irrational, but it is rooted in a very straightforward notion that William Voegeli captures in “Not a Penny More,” a City Journal essay that appeared earlier this year:
When they refuse to raise taxes, Republicans force Democrats to make a deeply unpersuasive argument. Major expansions of the welfare state are indispensable, this argument goes; but the $5.08 trillion of federal, state, and local government outlays in 2010—35 percent of GDP—is already being spent on its very best uses; therefore, our new government endeavors will require corralling more of the 65 GDP percentage points that now roam contentedly beyond the fence.
Such a platform would be helpful for any candidate seeking the presidency—so long as it was the presidency of the American Federation of State, County, and Municipal Employees. But no Democratic politician will ever use it successfully to win over a large, diverse electorate residing outside our blue ghettos, which is why Democratic presidential candidates avoid it and instead promise not to raise taxes. This silence is a deafening testament to Democrats’ morose conviction that Americans don’t like their party’s agenda enough to give it the only endorsement that really matters: voting to pay for it. It’s hard to see what incentive Republicans have to extricate Democrats from this dilemma.
And the strength of the Taxpayer Protection Pledge was greatly enhanced by the 1990 budget deal, which Ryan Ellis of Americans for Tax Reform has described in NR:
In October of 1990, Pres. George H. W. Bush agreed to a five-year, $137 billion tax increase. In exchange, House speaker Tom Foley (D., Wash.) and Senate majority leader George Mitchell (D., Me.) promised to cut spending by $274 billion over the FY1991–1995 period. In total, this $2-for-$1 deal was supposed to cut the budget deficit by $411 billion over this budget window. Almost three-quarters of the House GOP conference — 126 representatives — voted against their president’s deal, citing the promise they had made to their constituents when they signed the then-new “Taxpayer Protection Pledge” maintained by Grover Norquist of Americans for Tax Reform. It was not enough. Washington had won, and taxpayers had lost.
So what happened next?
Surely, though, all those spending cuts must have done some good; after all, the deal promised twice as much in spending cuts as it delivered in tax increases. Think again. The Congressional Budget Office (CBO) projected before the deal that 1991–1995 spending would total $7.07 trillion. In fact, total spending for this period was $7.09 trillion. In other words, in return for agreeing to tax hikes, Republicans got $22 billion in extra spending rather than the promised $274 billion in cuts. This was despite the fact that there was another “spending cut” deal in 1993 — the Clinton tax-increase budget.
Sadly, this wasn’t even the first time this happened. Back in 1982, President Reagan agreed to $3 in spending cuts for every $1 in tax hikes. Inflation projections make the analysis difficult, but it seems clear (and President Reagan believed) that almost none of the promised spending cuts materialized in real terms.
There is a clear lesson from these budget deals: Tax increases are real — they become law immediately — but promised spending cuts are illusory. There is always an S&L bailout, a Hurricane Andrew, or a Gulf War — or a financial meltdown, a string of tornadoes, and a three-front War on Terror. After a while, the spending-cut promises are forgotten, and all that remains is higher taxes on the American people.
That is, the 1990 budget deal seems to have confirmed and reinforced conservative skepticism about grand bargains. The rejoinder to this skepticism, which I generally embrace, is that conservatives should be willing to make concessions on revenue in exchange for structural reform of entitlement programs. Structural reform is designed to change the basic architecture of programs like Medicare and Social Security to make them more sustainable, which is to say more affordable, over time. Medicare, for example, might be restructured as hybrid of a defined benefit and a defined contribution program to encourage the emergence of more efficient provider networks. Social Security might be restructured as a flat universal benefit coupled with a larger pre-funded savings component. There is no guarantee that these structural reforms will yield significant savings, but that is the bet that conservative policymakers are willing to make to forestall a much larger increase in public social expenditures.
There are at least two problems with this line of thinking, however. The first, as Matt Yglesias reminds us, is that Republican voters generally like Medicare as it is and they are very wary of reforms that might entail significant changes to its basic workings, hence the insistence of the Romney-Ryan campaign that no Americans over the age of 55 would be impacted by their proposed reforms. This is why Republicans find themselves in a serious substantive bind: it is very hard to construct a scenario in which we leave Medicare untouched while also keeping revenue levels at the postwar historical average without creating massive fiscal deficits for the next twenty years or so.
The second problem is that Democrats are even more resistant to structural entitlement reform. Republicans should not make concessions on taxes lightly, yet Sen. Dick Durbin (D-IL) is shrewdly putting down a marker, per a recent CNN appearance:
Senator Dick Durbin (D-IL) tells CNN’s Soledad O’Brien that entitlement programs should not be on the negotiating table to avoid the fiscal cliff and “mandatory spending cuts in other areas” and tax revenue are the best options. When O’Brien asks how he can assure entitlement programs will be reformed after the fiscal cliff negotiations, Sen. Durbin says that she has “a right to be skeptical.”
Sen. Durbin says, “The Social Security is a separate thing. It does not add a penny to the debt. We should deal with its long term survival and solvency. We can do that in a separate setting other than this last minute fiscal cliff negotiation. I will put Medicare into the long term negotiation here because, as I said, it runs out of money in 12 years.”
In other words, Sen. Durbin is asking conservatives to trust him: sure, we’ll get to entitlement reform. But for now, we just have to get these tax increases out of the way.
Update! One other issue comes to mind. Ellis notes that the costs associated with the Gulf War, Hurricane Andrew, and the S&L bailout were part of why promised spending cuts failed to materialize. It occurs to me, however, that in light of these unexpected expenditures, which conservatives as well as liberals endorsed, the spending record of that era is best seen as a mixed bag rather than an entirely negative one. Ellis’s basic point — that these “unexpected” expenditures will always arise, and that responsible budgeting requires making room for them by restraining other expenditures. When we make allowances for these “exceptions,” spending discipline is undermined.
Yet this raises an interesting question for the future. Essentially, mandatory spending is going to crowd out discretionary spending as the population ages. And so budget-cutters will be left with a shrinking margin of error — the only cuts that will really make a difference will be cuts from programs that benefit influential political constituencies. Fiscal shocks — recessions, but also disasters and financial meltdowns — will hit an increasingly brittle fiscal budget. One is reminded of a challenge facing two-earner households: these households consume at a level consistent with two incomes, and they’re obligated to make various expenditures that allow for two incomes, e.g., they pay for more than one automobile, etc. When one spouse loses her or his job, the households finds itself in a tight spot. Single-earner households, in contrast, have a reserve army in the face of a potential second-earner that can help insulate the household against shocks.
Basically, we’re budgeting for best-case scenarios. Fairly realistic developments, e.g., a continuation of recent increases in longevity for over-65s, a fiscal collapse of state governments, etc., could make the fiscal picture look much worse than it already does.