Topic: Government and Politics

Are Higher Taxes the Solution to Bloated Government?

I normally enjoy reading Jonathan Rauch and Bruce Bartlett. Rauch has written extensively about the failure of govenrment, and Republicans might not be in such terrible shape if they had paid more attention to Bruce’s book exposing Bush’s fiscal profligacy. Yet even though both of them seem to understand that excessive government is bad, they want to throw in the towel. Rather than redouble efforts to reduce - or at least restrain - bloated government, they argue that conservatives (and presumably libertarians) now should focus on how best to raise taxes to finance the welfare state. Here are excerpts from Rauch’s article, which seems almost entirely based on an interview with Bartlett:

For decades, everyone pretended to have a profound ideological disagreement about the size of government, but the reality was a comfortable standoff between 21 percent liberalism and 18 percent conservatism. In the end, both sides got what they most wanted: 21 percent spending for liberals, 18 percent revenues for conservatives – at the politically tolerable cost of a deficit averaging 2 to 3 percent of GDP. This result was handy for politicians and acceptable to the public. …Conservatives…face a doctrinal crisis. …Many conservatives insist that structural reforms of entitlement programs – benefit cuts, means-testing, privatization, and so on – could keep spending at or even below 21 percent of GDP going forward. Dream on, Bartlett says. …The only really workable option, Bartlett argues, is a value-added tax or its equivalent: a broad-based tax on consumption. “It’s the only way of preserving incentives and keeping the economy alive.” Because it taxes spending rather than saving or investment and is inhospitable to market-distorting loopholes, this kind of tax raises a lot of money at relatively low economic cost. Reaganites hate the value-added tax precisely because it is such an efficient cash cow. But Reagan, Bartlett contends, would have known better. Reagan was a conservative who admired FDR, and what he conserved was FDR’s welfare state. He understood that the most practical way to make government less economically burdensome was to grow the economy. …as Bartlett wrote recently in Politico, “Conservatives would better spend their diminished political capital figuring out how to finance the welfare state at the least cost to the economy and individual liberty.”

In effect, Rauch and Bartlett assert that the American right should copy the European right: Make peace with big government and raise taxes in order to keep the budget balanced. In the real world, though, that is a recipe for ever-growing government. What inevitably happens is that the left increases the burden of government, which leads the supposed right to acquiesce to higher taxes. But, as Milton Friedman famously warned, governments will always spend whatever they collect in taxes plus whatever amount of borrowing they think is politically and economically feasible. So every time the right capitulates to a tax increase, the left has more leeway to increase spending - which is one reason why the burden of government in Europe is significantly higher than it is in the United States. If the American right listens to Rauch and Bartlett, they will be like Charlie Brown in this youtube clip. Last but not least, I must quibble with this line from the article about Bartlett’s book:

Conservatives mistrust him because in the 2000s he broke publicly with President Bush, in a book called Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.

That’s not true. Republicans distrust Bruce because of this book. Conservatives distrust Bruce because he wants to be the tax collector for the welfare state. I’ve been buddies with Bruce for years, so I will not give up trying to help him see the truth. Fighting excessive spending with higher taxes is akin to pouring gasoline on a fire.

‘Tons of Jobs’ Opening Up in D.C.

Business Week reports that the national capital area is barely sensing the recession:

Washington is getting a boost from government spending to fight the recession and fix the financial system, as well as the ongoing expenses of fighting wars in Iraq and Afghanistan and promoting homeland security. While President Barack Obama pointedly left Washington for Denver to sign the $787 billion stimulus package on Feb. 17, locals expect the metro area to garner a big share of the dollars.

“Oversight alone will (mean) tons of new jobs,” enthuses Jill Landsman, a spokeswoman for the Northern Virginia Assn. of Realtors, who says the pace of home sales has picked up over the past year even as prices have continued to fall.

Cato analysts propose to slash jobs in Washington–at least 100 agencies and programs [pdf].  It’s no big mystery why tons of people in the capital oppose Cato proposals.

HUD the Dud

Last week I blogged on President Obama’s “stimulus” rally prop Henrietta Hughes — a.k.a. “the face of the economic crisis.” Ms. Hughes and her son, who were homeless, asked our messianic president to help them since they’ve been stuck on a two-year waiting list at the Fort Myers, Fl., public housing authority. Using the government’s own numbers, I was able to determine that Fort Myers and surrounding Lee County received almost $70 million in U.S. Housing & Urban Development (HUD) money in the past three years. Some $41 million — or $600 per man, woman, and child in Fort Myers — went to the city’s public housing authority alone.

I concluded that HUD’s inspector general should investigate what the housing authority is doing with all that taxpayer change. And if a story coming out of Las Vegas about its public housing authority is any indicator, there’s a good chance a lack of federal funding wasn’t the problem in Fort Myers. According to the Las Vegas Sun,

The North Las Vegas Housing Authority failed to spend up to $2 million on federal housing programs even as thousands of people were on lists awaiting that help, a recent audit has found… The total amount won’t be known until the city audit and a federal investigation are finished, but so far auditors have determined that at least $800,000 was misused, [North Las Vegas City Manager Gregory] Rose said. Still unclear is how the money was spent, who is responsible, and whether any crimes were committed, he added.

I keep hearing the Obama administration say the “stimulus” bill, which will be funding a plethora of notorious HUD programs, will come with transparency and accountability. The odds of accountability at HUD are somewhere around the odds of me taking off and flying after running really, really fast down the street.

In other HUD news this week:

  • A city in Ohio plans on using HUD Community Development Block Grant (CDBG) funds to purchase ball field back stops.
  • Tulsa’s city council wants to know more about the $1.5 million in CDBG money the city inappropriately used to pay for employee salaries. The city was to pay it back, but “In December, the city announced that HUD would allow the city to reapply for the $1.5 million to fund two projects it has deemed meet the required use of the funds.”
  • In New Jersey, “The [Franklin] township’s former housing coordinator and her plumber husband have been indicted on a variety of charges — including official misconduct, forgery and witness tampering — in connection with what authorities are calling a conspiracy to misappropriate more than $100,000 in federal housing rehabilitation funds.”
  • And in West Virginia, the Wheeling city council “voted 6-0 to spend $42,000 in CDBG money to install an outdoor modular floor at the Pulaski Playground tennis courts in South Wheeling.”

Omnibus Spending Bill in the Works - Unseen

GOP leaders are calling on the House majority to give them and the American people a look at the omnibus spending bill in the works. It’s likely to see votes in the next week or two. The bill will spend somewhere in the range of a half-trillion dollars on the operation of the government for the rest of the fiscal year.

Stimulus Lobbying Watch

Tim Carney has more details on some companies that hired lobbyists specifically to get a piece of the kitchen-sink spending bill:

For example, the National Association of Home Builders hired Baker & Hostetler a week after Barack Obama’s inauguration to lobby explicitly on the stimulus bill, which, in the end, included an $8,000 credit for home purchases.

Better Place Inc. is an electric car company that hired its first lobbyist — Steve McBee, a former staffer for House appropriator Norm Dicks, D-Wash. — to push for electric car incentives in the stimulus. The resulting cornucopia included an expanded tax credit for plug-in cars, $2 billion in funding for electric car batteries and $400 million to build an electric car infrastructure, complete with recharging stations.

Media giant Time Warner added to its lobbying army, hiring the firm Parven Pomper Strategies to lobby for broadband subsidies in the bill. These subsidies included $2.5 billion to underwrite loans to get broadband out to rural areas and an additional $4.7 billion in spending on other broadband projects. Similarly, network giant Cisco Systems lobbied for the broadband subsidies in H.R. 1.

Carney calls it “The Lobbyist Enrichment Act.” I wrote about “Obama’s K Street Recovery Plan” a couple of days ago.