Dollars and Sense

Ezra Klein:

Mark Schmitt reminds, correctly, that the country will need more than an acceptance of moderate deficits over the next few years: It'll need revenue increases. Whatever enthusiasm John Edwards generates for rejecting fiscal conservatism should be tempered by the knowledge that, without tax increases, he'll have very little room for social spending. Relevant here is a question asked at the press conference following his announcement speech. The reporter asked whether tax increases would be necessary to fund Edwards' social spending. Edwards replied:

Well, I'll give you a few examples: We ought to be patriotic as americans, not just as a government, though the government plays a critical role in helping to rebuild New Orleans. We ought to be patriotic in doing something about global warming. And I don't mean in an abstract way -- we walked away from Kyoto unilaterally which was a very serious mistake...[long digression on global warming, which I don't have the energy to transcribe]

Q: Taxes, Senator?

Oh, I'm sorry, the answer to that question is, we do need, in my judgment, to get rid of some of the taxes cuts thats have been put in place, particularly for people at the top. I think it may be necessary to put in place a tax on some of the windfall profits the oil companies are making in order to put in place some of the changes I've just talked about [on global warming], I think it's also really important to be honest with people: we've gotten into a deep hole in terms of our deficit, we have investments that need to be made, I've talked about some of them: investments to strengthen the middle class, investments in poverty, universal health care, which I'm completely committed to do, some of the energy proposals I've talked about today -- these things cost money. So we're going to have to invest if we're going to transport America the way it needs to be transported to be successful in the 21st century, which is going to require rolling back some of these tax cuts.

So Edwards sort of dodged initially, then answered that he'd roll back the tax cuts and possibly impose a windfall tax on oil companies. Even assuming the latter is a good idea (and I'm not really sure about that), it'll generate a paltry amount of revenue, so we're really looking at a rollback of the tax cuts. Add in redeployment in Iraq and he'll have some extra money to work with, but not an extraordinary amount, particularly not early in his hypothetical term. But a real term might be different than a hypothetical one.

Were I advising Edwards, I'd sooner quit than sign off on him pulling an early Mondale. The American electorate remains enamored of low taxes and high spending, and since your political competitors won't join in a spontaneous explosion of fiscal truth-telling, he can't, either. Nevertheless, Edwards, in his deficit reduction answer, said that his top priority -- well, below that of getting elected -- is investment, and he appears serious about that. So not proposing tax increases doesn't necessarily mean he won't seek them, it means he thinks he can't sell them.

That said, I'm a little less certain than others that taxes are intrinsically unsellable. Dedicated taxes -- a VAT for health care, say, or a gas tax for renewable energy research -- seem somewhat more politically defensible than mere increases in marginal rates. If the American people know precisely what they're getting, it's a bit more concrete a conversation -- more like a purchase than a donation, and there's a fair amount the government can sell that the public may want. Too often, taxes are but a vague plea to fund government, which seems far more wasteful in the abstract than it does in the specific, and so they're easy to trump with the concrete promise of money in your pocket; you know, after all, where that money will go. Conversely, payroll taxes, which directly fund Social Security and Medicare, have been far safer than general revenue in recent years. When politicians try and cut them, they're cutting something voters can see and feel and touch. That's harder. And so I'd think it'd be proportionally easier to sell taxes in the same way.

On the other hand, I don't actually have to win any elections, so I've the freedom to muse optimistically about tax increases. Three cheers for the fourth estate!

Howie question: Are bloggers the fifth estate?