Once upon a time, liberals were somewhat principled in their pursuit of a utopian dirigisme. Sure, they always liked to play a bit of class warfare, but they fundamentally believed in taxing everyone. After all, if you want a cradle-to-grave government-run society, it’s got to be purveyed by the broad populace. There simply aren’t enough rich people to raise the requisite funds for a rapacious federal monstrosity. That’s why Walter Mondale openly campaigned on raising everyone’s taxes. “Look at em, we’re gonna tax their a**es off,” he declared privately after his 1984 convention speech.
However, three things transpired over the past 20 years that completely changed the dynamic. First, deficit spending has grown from just a supplementary to the welfare state to an equal partner along with tax revenue. Hence, liberals no longer need more tax revenue to grow government. They’ll borrow the money. Second, Republicans won the tax debate, imbuing hatred for more taxes in the hearts of the voters. Why should Democrats risk sowing the seeds of disquiet with tax increases, when they can accomplish the same goals with deficit spending? Lastly, thanks to the Reagan and Bush tax cuts, a number of people pay little or no income taxes. Liberals are wise enough not to mess with that, and in fact, seek to grow that demographic.
Taken as a whole, Obama and the Democrats decided to beat us by joining us. Not only have they eschewed their broad tax hiking agenda, they couch their plans in the parlance of tax cutting. Despite their public arguments about the need to raise revenue to deal with the deficits, they know that they can never raise enough revenue from the rich. Yet, they figure they can have their cake and eat it too. That’s why they pushed for tax hikes just on the “super rich.” To that end, they are able to continue their spending binge (through deficit spending) while focusing their tax hikes on such a small percentage of people, most of whom are unknown to the average voter.
It is clear that Obama wanted the $450,000 income threshold all along. He knows that $250,000 is not so much money, and will affect a large chunk of voters in high-cost regions of the country. Again, why sow the seeds of unrest with a broader demographic when you can accomplish the same thing with deficit spending, while still offering the façade to those low-information voters of sticking it to the rich and raising revenue? Obama only used the $250,000 threshold as a smart negotiating tactic of asking more than you want (something Republicans will never understand).
This was never about raising revenue; it was about growing government, while showing the public that government has the power to take what it wants, albeit – by choice – only from the super-duper rich.
Many Republicans view the fiscal cliff tax hike as a victory for conservatives. After all, the Bush tax cuts were extended for 99% of the population. Here’s what George Will had to say about the fiscal deal last Sunday:
“I think people will look back on this [as a] deal where liberalism passed an apogee and went into decline for the following reason: The Bush tax rates were passed in two tranches, 2001 and 2003. In 2001, only 28 Democratic members of the House voted for them. In 2003, only seven did. And they did it for only 10 years they were to expire. Under this deal, 172 House Democrats voted to make Bush rates permanent for all but one half of 1 percent of American taxpayers. What that means is that they can no longer tax the middle class.”
I firmly disagree. The fact that they will no longer tax the middle class is a serious problem. George Will is still living in an era when there was little deficit spending and most of the nourishment of the welfare state came from tax revenue. Were that dynamic to persist today, the fiscal deal would severely limit the ability of Democrats to grow government.
Unfortunately, we are living in a time when government is expanded through what politicians view as free money, especially with record-low interest rates on treasury bonds. They have no intention of taxing the middle class (directly) to grow government. They don’t need to.
Honestly, if we are going to live under an Obama utopian society, I’d like to see taxes go up on everyone. Let’s raise income taxes across the board. Let’s institute a VAT. Let everyone see the consequences and feel the pain of the federal leviathan. Then we’ll see how many people would like to continue on the current trajectory.
The reason why the fiscal deal was a triumph for the left is because they have solidified the belief that their expansive government-take-all society can persist on the backs of those who have too much money to know what to do with it. Moreover, the tax bill actually zeros out the tax liability of those who already paid little in taxes, and increases the net gains of those who already had a zero tax liability. It pleases the masses, while sticking it to a small group of people just to project the power of government. Yes, there are dozens of hidden taxes on the middle class in the form of regulations and market distortions as a result of the federal monstrosity, but those who understand that are already voting against liberals.
We might applaud ourselves for saving the middle class from tax hikes, but that is no longer where the battle for limited government is being fought. Democrats ceded that issue a long time ago, and have pursued their desires through permanent debt. For bonus points, they advocate raising taxes on the rich to masque their insouciance towards the debt and for the purpose of evincing a sense of righteous empathy towards the middle class.
That’s why we can no longer starve the beast with less tax revenue. We must force transformation reductions in government. With the debt ceiling and CR battle around the corner, that time is now.
Cross-posted from The Madison Project