Thursday, December 21, 2017

The Tax Bill and Constitutional Rot


Previously I argued that the Republican attempt to pass a tax cut in the form of a health care bill was evidence of constitutional rot-- the descent of the United States into a system that is less democratic (responsive to popular will), less republican (i.e., one in which representatives act to further the public good) and increasingly oligarchical. that The new tax bill is further evidence.

The basic problem is that the contemporary Republican Party is largely controlled by its wealthiest donors. To stay in power, Congressional Republicans must please these donors, regardless of any promises made to actual constituents. Some of the ways that you please donors involve ideological symbolism and low-profile deregulation, but others are essentially cash transfers.

Using the apparatus of government to pay off the people who keep you in power is pretty much the whole point of oligarchy. This explains why Republicans must say one thing to their constituents but actually do something very different in their legislation, and why they must disregard the judgment of economists and budget analysts about what the tax bill actually does and will do. The public justification of the bill has--and indeed, must have--relatively little connection to the point of the bill, which is to please the relatively small class of powerful and wealthy people who keep the Republican Party in power. These people support Republicans because they want something in return; what they want in return is cash on the barrel head. The public would not support a bill designed on these terms; hence Republicans had to rush the bill through with no hearings, and dissemble publicly about the nature and effects of their legislation.

While it is possible to imagine tax bills that lower tax rates in the service of public-spirited goals, this tax bill is not one of them. The tax bill is not an attempt to close loopholes in exchange for a general lowering of the corporate and individual rates. The tax bill does not simplify the tax code as promised; it does add provisions that will benefit specific donors and pad the wallets of individual Congressmen and Senators (not to mention President Trump himself). This last feature is doubly worrisome; not only are Congressmen and Senators paying off their donors, they are also paying off themselves. The bill is enormously unpopular with the public, and it should be; the process by which the bill was passed is evidence of a guilty conscience.

The tax bill will create deficits, but the total additional deficits are still relatively small in proportion to the total amount the federal government spends. The problem is not the total amount of the deficit but that the bill shows that Congress has largely abandoned the goal of using tax and fiscal policy to further the public interest. That is, the Republican party has now become anti-republican. Instead, Congress seeks to pay off a small number of wealthy individuals and groups and personally enrich sitting Congressmen and Senators. If some of them lose their seats in the next election, they can retire secure in the knowledge that they have taken care of themselves in anticipation of their next careers in business and lobbying.

The point of tax and fiscal policy in a republican form of government is to raise and spend money to create incentives and purchase public goods that will benefit the public interest.  In oligarchical and autocratic governments, government officials constrict spending on public goods and allow government functions and services to atrophy; they distribute income from the broad base of the public to the wealthy, and they divert government revenues to pay off themselves, their family members, and the class of people who keep them in power. This is also a pretty good description of the new tax bill.

It is important not to be alarmist. The United States is still a wealthy country with a tax system that is still broadly progressive, and a government that still spends a considerable amount on public goods. It can absorb a pretty sizeable amount of corruption and self-dealing and still remain a viable democracy. But the current trend is worrisome. Upward redistribution from the poor and middle class to the wealthy since the end of the 1970s is not simply the result of the economic changes that emerged from globalization; it is also the result of the tax and fiscal policies of an increasingly oligarchical system. These policies have shifted risks away from the upper classes and sent them downward to the broad base of the public, even as they have shifted the proceeds from economic growth upward. The Trump era is simply the exaggeration of existing trends.

Yet if the current trajectory continues, we are likely to see an increasing degradation in government functions, a withering of social insurance programs that benefit the poor and middle class, and ever increasing upward redistribution and self-dealing. These are signs of a political economy that cannot support a vibrant democracy; they are evidence of increasing constitutional rot.

I am hopeful that the public will punish the Republican Party for the tax bill in the coming election cycle. Even so, the way our system of government works, it will be very difficult to undo the self-dealing and upward redistributive effects of the bill for some time.

A strongly polarized politics combined with our presidential system of government means that it is easier to use polarization to get in power, redistribute income upwards and get away with it. That is why polarization tends to work hand in hand with increasing income inequality: Inequality leads to popular outrage, which leads to faux populist candidates who stoke anger and distrust of government but actually pay off wealthy donors with legislation that shifts risks onto and income away from constituents. This produces even more unhappiness, distrust and polarization, and the cycle continues. This cycle of polarization and income inequality is also a feature of the constitutional rot of our current system of government.

Matters are far from hopeless. America lived through the First Gilded Age, generating the populist and progressive movements and the New Deal. Something like this might well happen as a result of this, our Second Gilded Age. But if history is any guide, it will be a long, slow, imperfect and fraught process.  My expectation, or rather my hope, is that we are actually fairly far along in this historical transformation, and that the next few election cycles will see a significant change in the terms of our politics-- for the better.

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