The Agenda

Tyler Cowen’s Anti-Anti-Tax Argument

Tyler Cowen makes an important point:

Cutting $10 in spending for every $1 in tax increases would result in $9 in net tax reduction. That’s because lower spending today means lower taxes tomorrow, and limiting the future path of government spending does limit future taxes, as Milton Friedman, the late Nobel laureate and conservative icon, so clearly explained. Promising never to raise taxes, without reaching a deal on spending, really means a high and rising commitment to future taxes.

But where Tyler and I might disagree is over the scope for improving the cost-effectiveness of public services. It would be sheer madness, in my view, to turn down a $10 in cuts for $1 in tax increases deal, provided the cuts in question were real cuts. Most of the real-world proposals we’ve heard present far less favorable ratios, particularly when we exclude decreases in interest payments and savings generated from winding down our military presence in Iraq and Afghanistan. In the interim, it would be very useful indeed for public policy scholars to pay more attention to the design of public service delivery at all levels, with an eye towards lowering cost and improving quality.

It’s worth noting, however, that conservatives haven’t devoted nearly as much attention to public service delivery as is appropriate given their intellectual and political commitments. One reason could be pure cynicism, as Tyler suggests:

The more cynical interpretation of the Republican candidates’ stance on taxes is that they are signaling loyalty to a cause, or simply marketing themselves to voters, rather than acting in good faith. It could be that candidates are more worried about having to publicly endorse tax increases than they are about the tax increases themselves. If that’s true, it is all the more reason to watch out for our pocketbooks; it means that the candidates are protecting themselves rather than the taxpayers.

That is, many Republicans (and conservatives) might actually think that tax increases are okay as long as someone else takes the blame for them. The key thing to do is to pass the buck. Chris Christie and Mitch Daniels represent exceptions to this very common approach.