Wednesday, October 14, 2009

The Rise of Big Government Conservatism


Some time during the 1980s and 1990s the national Republican Party, which had long stood for balanced budgets and small government, discovered that opposition to tax increases was an especially popular position. In fact, the idea of a "taxpayer revolt" against big government was a powerful populist idea that helped connect conservative economic views to social conservative populism. Bruce Bartlett explains how the shift to an anti-tax philosophy ironically caused the Republican Party to become the party of big government, which was amply demonstrated during the George W. Bush Administration.
The supply-siders are to a large extent responsible for this mess, myself included. We opened Pandora's Box when we got the Republican Party to abandon the balanced budget as its signature economic policy and adopt tax cuts as its raison d'être. In particular, the idea that tax cuts will "starve the beast" and automatically shrink the size of government is extremely pernicious.

Indeed, by destroying the balanced budget constraint, starve-the-beast theory actually opened the flood gates of spending. As I explained in a recent column, a key reason why deficits restrained spending in the past is because they led to politically unpopular tax increases. But if, as Republicans now maintain, taxes must never be increased at any time for any reason then there is never any political cost to raising spending and cutting taxes at the same time, as the Bush 43 administration and a Republican Congress did year after year.
Although Bartlett does not mention it, this reasoning puts conservative criticism of Bush's father, George H.W. Bush, in an interesting light. In 1988, the elder Bush ran on a "read my lips" pledge not to raise taxes-- which was the emerging conservative mantra. He discovered midway during his term that higher taxes were unavoidable because of legal commitments to deficit reduction in the Graham-Rudman-Hollings budget bill, which reflected an older conservative philosophy of achieving smaller government through deficit reduction. The two sides of conservative politics had run into each other, and faced with Democratic control of both Houses of Congress, George H.W. Bush had little choice but to raise taxes in 1990. Conversely, Bill Clinton, a Democrat, who raised taxes at the beginning of his term, soon faced a Republican Congress implacably opposed to tax increases, which eventually led to a successful push for deficit reduction.

However, once Republicans gained control of Congress and the Presidency during (most of) George W. Bush's 8 years in office, political pressure for tax increases to constrain the federal deficit was all but eliminated, and the newer anti-tax philosophy of the Republican party dominated the older budget-balancing philosophy. Large tax cuts combined with new domestic spending, combined with a defense build-up and expenditures for two wars quickly eliminated the balanced budgets of the Clinton era and caused deficits to skyrocket. This was not really a surprise to anyone, including most anti-tax Republicans, even though they continued publicly to stress the values of smaller government and the need to control budget deficits. Nevertheless these values of an older version of Republican politics had become fiscally impossible given the combination of a hawkish foreign policy and a philosophy that reviled taxation and favored ever new forms of tax breaks and tax credits to favored constituencies.

From this perspective, Bill Clinton, a moderate Democrat, looks very much like a liberal Republican of the 1960s, combining a moderate liberalism on social issues with a policy of deficit reduction. It is no small irony that this last representative of an older vision of the fiscally prudent Republican Party was impeached by representatives of the newer anti-tax Republican Party, an ironic commentary on the progress of the modern conservative movement.

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