Anti-tax Republicans: the dangerous friends of the rich

Early in Western democracy, conservative parties favored old money over new money and new ideas. Coaxed along by Disraeli and, in America, by Lincoln and the Roosevelts, they learned to protect private property and free enterprise by governing competently and accommodating change. They were wealth’s best friend, but not its plaything.

Great entrepreneurs, with their own image makers and large libraries, didn’t necessarily like conservative politicians or admire their profession. They were risk-takers and often dreamers, and conservative politicians generally were neither.

However, the rich feared ideas on the left far more than the absence of ideas on the right. So, they left politics to tactically adept conservative politicians. They favored inconspicuous elite deal-making in foreign policy and economic development and didn’t put their faith in populist manipulators.

The compromisers, so-called Wets and RINOS—Eisenhower, Churchill, Nixon, and George Bush Sr. along with others—were central to the twin success of capitalist growth and mass democracy, of brutal economic change in societies that wanted ever-greater personal security and material improvement.

That was then.

Can our civilization now succeed without them?

As Congress’ super-committee struggles vainly to address the untenable US deficit, the question of greatest urgency is not whether money is politically powerful but why the friends of money today are so reckless?

Tim Dickinson has written a devastating article on the new Republican Party’s obsessive efforts to cut taxes.

Click on: www.rollingstone.com/politics/news/how-the-gop-became-the-party-of-the-rich-20111109

He makes a powerful case that White House and Congressional Republicans favor the richest of the rich. However, the Rolling Stone headline “How the GOP became the Party of the Rich” confuses the story in an important way.

The Eric Cantors of the Republican caucus may see themselves as spear carriers for Ayn Rand and American entrepreneurship. They are, however, making their own mistakes in Washington and are not operating according to a secret blueprint written in America’s greatest boardrooms.

Indeed, it is questionable whether the boardrooms that are driving globalization and America’s slow recovery are well served by their efforts.

The refusal of these new Republicans to better align tax revenues with inexorably rising federal expenditures is a geek’s game of chicken: if they can’t slash Washington’s spending pressures in the US political arena, let the Chinese do it by cutting off America’s credit. This is not the kind of political gamble the privileged like to make.

The lack of public disclosure of the billions of private dollars financing US national politics will corrupt democracy. However, corporate money isn’t organized on behalf of one extravagant idea—never new taxes—and doesn’t explain the growing fanaticism of American right-wing politics.

Over the last decade and over recent months of escalating national peril, big money has been extraordinarily passive. They grumble about not being appreciated and pine for a time of fabulous returns and less risk. One thing they haven’t been doing, however, is intelligently advancing their economic interests in Washington. The debt ceiling crisis, the super committee’s imminent collapse, and across-the-board tax cuts on top of a structural deficit are Washington concoctions. Business has largely sat on the sidelines, while its activists and eccentrics have made Herman Cain, Rick Perry, and Sarah Palin household jokes.

The collapse of the super-committee is of immeasurable significance to those interests that do not want the US to change radically, or shrink. It offered moderates their last big opportunity to end run extremists by taking a divisive fiscal mess off of next year's election agenda.

Having failed to find a compromise, there is nothing to stop the next election from being a crude showdown on income and economic inequality—except the conservative temperament of Barack Obama.

Congress’ economic agenda: a pathway and a precipice

“The best thing would be for Congress to pass a plan now that will reduce deficits when the economy is back to normal. History shows that well-designed backloaded plans are credible . . .  Such backloaded deficit reduction would not hurt growth in the short run—and could raise it. If uncertainty about future budget policy is harming confidence, as some business leaders suggest, spelling out future spending and tax changes could be helpful . . . ”

—Christina Romer, former Chairwoman of President Obama’s Council of Economic Advisers, “Now Isn’t the Time to Cut the Deficit,” The New York Times, October 23, 2010

Click on: http://www.nytimes.com/2010/10/24/business/24view.html?_r=2&ref=business

Last week the first shoe fell: the $4-trillion dollar debt-reduction plan of the President’s National Commission on Fiscal Responsibility and Reform. Tax reform, as well as spending cuts, including cuts in social security and —defense, are now being discussed. After fifteen years, low tax clichés are sharing air time with concrete ideas about raising revenues and cutting expenditure. The “$4 trillion thing,” as one analyst on PBS described it, is too big to ignore or chase out of the room with Pollyanna growth and revenue forecasts.

Leaders who used to get away with talk about “scenarios” are starting to look at ideas again. Being pragmatic people, Americans won’t long tolerate grand talk about a problem without action.

What is emerging is a shift from a traditional liberal agenda to a traditional conservative agenda that will put Republicans as well as Democrats in jeopardy. The draft plan by Allan Simpson, a former Republican senator, and Erskine Bowles, an ex-chief of staff to Bill Clinton, is careful to do nothing to impede the recovery in the short run and insists that its reforms would more fairly share the burden of American government. If moderate Democrats can even talk about raising consumption taxes rather than raising the highest marginal income tax rate, Republican leaders and presidential aspirants will have no credible choice but to come to the table on defense cuts and revenue-increasing measures.

(Leaving the highest marginal income tax rate at 35% would not be an unprincipled comedown for Democrats. After all, Canada’s highest rate on taxable income is only 29% and we find the money for universal public healthcare and other social priorities that Democrats envy. A plethora of exemptions and overreliance on the income tax are the big problems with the United States’ revenue base. Moderates, including environmentalists and many corporate lobbies, should come together and help design a new national consumption tax. The British Conservative budget just raised their VAT to 20%. Canada’s latest Conservative budget happily projects nearly $30 billion in revenues from the Goods and Services Tax (GST) next year, more revenue than it will collect from corporate taxes.)

Obama has many ways to show leadership, at home and abroad. His presidency can recover without significant congressional cooperation. Unlike healthcare, when he pestered Congress to address his agenda, he can now be an interested party, helping congressmen and congresswomen address a looming challenge they said they sought office to address. He can support their efforts and give them political cover or, with other Americans, shake his head and do what he can on his own.