The Corner

Don’t Drink the Inside-the-Beltway Fiscal-Cliff Kool-Aid

Given the alternatives that are being bandied about in Washington, there can be no doubt that, from a policy perspective, going over the fiscal cliff is the far superior option. Temporary extensions of tax cuts don’t do much for the economy; temporary extension of unemployment benefits retards job-seeking; and the whole grab-bag of accounting gimmicks allows Congress to avoid owning up to the true scale of the budget deficit, a budget deficit that will get cut in half if we go over the cliff.

The most common conservative rejoinder to these arguments is political: that Republicans will be blamed if we go over the cliff, and that will cost them in the next election. I don’t agree with that argument, as I’ve written previously, for two reasons: (1) the next election is as far away as an election can be; (2) Republicans will never be able to build a political case for less spending if most Americans are insulated from the cost of that spending.

I was glad to see Marc Thiessen make a very similar argument today in the Washington Post. Going over the fiscal cliff, Marc writes, is “a development conservatives should welcome.”

Americans cast their ballots for big government. Now it’s time to pay for it.

Until now, the growth of government under President Obama has not hit the pocketbooks of most Americans. DuringObama’s first term, federal spending grew to more than 24 percent of GDP — the highest it has been since 1946. Yet almost no one in the country (except smokers and those who frequent indoor tanning salons) saw their taxes rise. Quite the opposite: 160 million Americans saw their payroll taxes reduced from 6.2 to 4.2 percent.

How can we expect people to care about the growth of government if it doesn’t cost them anything?

It’s a very good question. Indeed, the only possible way for conservatives, over the long term, to build a case for shrinking government is to cease shielding Americans from the cost of growing government. To do anything else is to embrace ephemeral near-term polls at the expense of the broader conservative cause. Extending the Bush tax cuts, Marc points out, did much to ensure Obama’s reelection:

It might well be that the biggest mistake Republicans made during Obama’s first term was forcing the president to extend the Bush tax cuts. At the time, it seemed like a major victory by the newly elected GOP House. But in truth, it was a victory for Obama. Extending the tax cuts shielded the economy from the full brunt of Obama’s economic failures and allowed him to put off job-killing tax increases till his second term. It’s ironic. Obama never passed up an opportunity to blame President Bush for his economic woes, yet he rode the Bush tax cuts to reelection.

Extending the tax cuts also shielded Americans from the costs of Obama’s spending spree. Shopping on a credit card is fun until the bill comes due. But if the bill never arrives, what incentive do people have to stop the spending?

Big government is great if you don’t have to pay for it. Well, now it’s time to pay the bill. Maybe when the costs of the stimulus, Obamacare and exploding entitlements are finally deducted from their paychecks, Americans will rediscover the virtue of smaller government. If they don’t like paying higher taxes to allow for more spending, there’s a simple solution: Demand that politicians in Washington cut taxes and spending instead of expanding them. And if they won’t do it, elect men and women who will.

Until then, Republicans need to stop protecting Americans from the consequences of their decisions to elect profligate politicians.

John Boehner’s “Plan B” is, in this strategic sense, also counterproductive. The U.S. already has the most progressive tax code in the developed world; making the tax code even more progressive will make it even harder to enact future spending cuts.

Principled conservatives in Congress should reject the consensus of the political class and stand firm. Unless Democrats are willing to sign onto serious, far-reaching restructuring of entitlement spending, we should go over the fiscal cliff. The most viable — and principled — way to shrink the size of government is to ask more Americans to take responsibility for its cost.

Avik Roy is the President of the Foundation for Research on Equal Opportunity (FREOPP.org), a non-partisan, non-profit think tank.

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