Wisconsin Cong. Paul Ryan, Taxophobia & Ayn Rand

Jonathan Chait in Democracy:

Not long ago, House Budget Committee Chairman Paul Ryan—who enjoys unparalleled prestige on budget issues among conservatives of all stripes—railed against the deficit and was asked about the massive cost of extending tax cuts. He replied, “Keeping tax rates where they are, and preventing them from going up, is not spending, because that is people’s money in the first place.” What on earth could this mean? Here is the answer. Ryan has declared his deep intellectual debt to Ayn Rand (the obsessively anti-government author of Atlas Shrugged -ed.) He required all his staffers to read her work. When he responds to a question rooted in simple accounting with a moral claim (“people’s money in the first place”), he is saying that the arithmetic of revenue, outlays, and deficits does not matter to him. None of the pecuniary issues that he claims to care about so deeply ultimately matter. He is fighting a class war, which he views as a war for freedom itself. 

Rand’s passion and hate flowered in a postwar world in which the working classes were slowly drawing closer with the upper classes. The great irony of the recent triumph of her vision on the right is that it takes place in conditions just the opposite. The poor and working classes have languished for decades, while the rich pull in unimaginable sums. This is the atmosphere that has paradoxically given rise to the right’s fervid class warfare...

 Chait's piece digs deeper into the roots of the GOP's "Taxophobic" social nihilism:

When Bush cut taxes in 2001, supply-siders insisted that revenue would fall much less than conventional economists predicted. Harvard economist and occasional Republican adviser Martin Feldstein argued, “The true cost of reducing the tax rates is likely to be substantially smaller than the costs projected in the official estimates.” Conservative talking head and also occasional Republican adviser Lawrence Kudlow predicted, “Future surpluses will rise, not fall.” In fact, tax revenues collapsed. Moreover, the economy’s performance since Bush cut taxes has ranged from disappointing to disastrous, an outcome that has once again undermined the supply-side belief that low tax rates hold the key to economic growth.

And yet, as three decades of economic and budgetary data have repudiated supply-side belief time and again, its hold on the Republican Party has only strengthened. Robert Bartley, the late Wall Street Journal editorial page editor and fervent supply-side champion, once wrote, “Economists still ridicule the Laffer Curve, but policymakers pay it careful heed.” He meant this as a boast. Political support for supply-side economics appears completely impervious to data. If it were a person, it would be Bill Murray in Groundhog Day. “I have been stabbed, shot, poisoned, frozen, hung, electrocuted, and burned,” he boasted, “and every morning I wake up without a scratch on me, not a dent in the fender. I am an immortal.”

Moral Disgust at Redistribution

As you may have surmised, the political success of taxophobia has little to do with the intellectual merits of the supply-side idea. One clue about the marginal role of the idea is that, from the very outset, advocates of supply-side policies relied on a second rationale that is not only different from the logic of supply-side economics but mutually exclusive. This argument is known as “starve the beast.”

Unlike supply-side economics, starve the beast concedes that tax cuts reduce revenue, but insists that the reduction of revenue automatically produces a decrease in expenditures. Reagan offered this argument himself in a 1981 budget address. “[T]here were always those who told us that taxes couldn’t be cut until spending was reduced,” he asserted. “Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.” In 2001, coming off the longest economic expansion in American history, Republicans soft-pedaled supply-side claims about reducing the disincentive to growth, and relied more heavily on “starve the beast” justifications for tax-cutting. George W. Bush and other Republicans insisted repeatedly that, if the budget surplus were not dissipated as tax cuts, “it would get spent,” as if automatically.

Starve the beast is not an economic doctrine, or even a pseudo-economic doctrine, but merely an aphorism. Unlike supply-side economics, conservatives did not invest vast sums into legitimizing starve the beast as an actual theory. Those studies that have attempted to evaluate it have instead proven the opposite: Lower revenues have resulted in higher, not lower, spending. That result, of course, is easy to see with the naked eye. The tax hikes of 1990 and 1993 inaugurated a period of generalized fiscal restraint, in which revenue climbed and expenditure fell. The George W. Bush era smashed through the bulwarks of fiscal restraint established by the previous two presidents, resulting in falling tax revenue and dramatically higher spending.

Starve the beast failed in ways that even its proponents concede. Supply-siders still try to explain away Reagan’s deficits, the Clinton boom, and the Bush bust. Yet nobody even bothers to deny the failure of Bush’s starve-the-beast policies. Hardly a day goes by without conservatives lamenting that failure. The Bush Administration began with Republicans arguing that tax cuts were needed to prevent an explosion of spending. It ended with Republicans lamenting an explosion of spending, but vowing to maintain the policies whose stated rationale was to prevent that spending explosion.

When you see a party shifting between two mutually exclusive arguments for a policy, each of which fails spectacularly and repeatedly, you have to look for other reasons behind the policy other than the stated rationale.

One such rationale for supply-side’s pioneers was simple self-interest. In abandoning its traditional fiscal conservatism for tax-cutting, the GOP could now be offering goodies to voters rather than taking them away. Irving Kristol, who published Wanniski’s most influential essay in The Public Interest, later admitted in a memoir, “political effectiveness was the priority, not the accounting deficiencies of government.”

Yet political opportunism, too, only goes so far as an explanation. While people like tax cuts, they like other deficit-increasing policies—especially higher Social Security and Medicare benefits—even more. After leaving the Bush Administration, disgruntled Treasury Secretary Paul O’Neill published his assigned talking points for the 2001 tax-cut debate. One frankly conceded, “The public prefers spending on things like health care and education over cutting taxes. It’s crucial that your remarks make clear that there is no trade-off here.” Moreover, tax cuts for the rich tend to lack public support altogether. If mere vote-chasing were all that lay behind Republican tax-cut mania, you’d expect the party to embrace more broad-based tax cuts, as opposed to the sharply regressive tax cuts that lavish a majority of the benefit upon a small fraction of the populace.

There is one idea that explains Republican behavior: moral disgust at income redistribution. Since it doesn’t poll well, this is not an idea that you often find expressed in talking points or in other means of public persuasion. But occasionally this sentiment pops up in the form of a kind of raw royalism, usually from conservatives who don’t have to run for office. Former Bush economist Greg Mankiw endorses the belief that free markets are a flawless arbiter of income distribution. Republicans, he writes, believe that “in a free society, people make money when they produce goods and services that others value, and that, as a result, what they earn is rightfully theirs.” Adds American Enterprise Institute President Arthur Brooks, “[I]t is a moral issue to confiscate more income from the minority simply because the government can.”

When Republican elected officials pay fealty to these ideas, it is usually through oblique references. They often bemoan the fact that nearly half of all taxpayers pay no income tax (which ignores the burdens of federal payroll taxes) or that the top 1 percent is paying a rising share of the tax burden (which is true, but only because the top 1 percent is earning a higher share of the income). The underlying sentiment is that the practice of levying higher tax rates upon the rich amounts to an oppressive form of discrimination—democracy as mob rule. Conservatism’s commitment to flattening the tax code, so inexplicable to those outside the movement, is an inviolable principle within. And the necessity of keeping the core reason secret only adds to its moral urgency—so oppressed are the rich that those who seek to relieve their oppression dare not even speak openly.

This state of affairs helps explain the increasingly bitter partisanship of the American political debate. Opposition to the progressive income tax is at once a sacred and a hidden value for Republicans, and thus one that makes compromise nearly impossible. You cannot bargain with a partner whose stated goals are merely pretexts. A slow economy proves that tax cuts are needed, or a prosperous economy shows that tax cuts are affordable, or tax cuts will reduce the deficit by increasing revenue, or tax cuts will reduce the deficit by starving government of revenue. Vast swaths of public discourse are couched in nonsense...

 Read the entire piece HERE.  This entire issue of "Democracy: A Journal of Ideas" is devoted to "arguing the economy."