Democrats Want to be Economic Populists. Why Are They Clinging to a Flawed Reagan-Era Tax Credit?

TUESDAY’S PRESIDENTIAL DEBATE confirmed that the Democratic Party’s center of gravity has fundamentally shifted. The contenders projected a willingness to abandon the long-held shibboleths of liberal economic policymaking, embracing measures like universal child care, free college, public health care, and debt cancellation. Even the most moderate candidate on stage, Minnesota Sen. Amy Klobuchar, said she was open to a wealth tax. All of them lamented the yawning gap between rich and poor in America. Yet most of the candidates’ plans to fight economic inequality rely on expanding an anti-poverty program that has come under increasing fire for not living up to its promises — and excluding the neediest Americans.

The earned income tax credit is the benevolent ghost of American tax policy. With little fanfare, the EITC redistributes tens of billions of dollars to low-income workers and their families, lifting more than 5 million people out of poverty each year. Because it reserves benefits for those who earn an income, the EITC is also widely credited with incentivizing millions of poor people, especially single parents, to get jobs.

With the exception of Andrew Yang, who supports a universal basic income of $1,000 per month for every citizen over the age of 18, all the Democratic candidates who qualified for the October debate have expressed support, publicly or in correspondence with The Intercept, for expanding the EITC. On Tuesday, California Sen. Kamala Harris touted her EITC expansion plan, which would give some working families as much as $6,000 per year. New Jersey Sen. Cory Booker alluded to his plan to cut child poverty in half by expanding both the EITC and the conceptually similar child tax credit. Julián Castro has his own ambitious EITC expansion plan.

These proposals are designed to reward and encourage low-wage work. You’re only eligible if you earn income, and you get a higher benefit for each hour worked, up to a certain ceiling. In other words, the EITC “phases in” and then “phases out” at higher incomes. In the minds of many policymakers, the EITC is superior to unconditional cash transfers like basic income for exactly this reason: The EITC draws people into the labor market.

New research suggests that the EITC does not actually draw people into the labor market.

There’s one big problem: New research by Princeton University economist Henrik Kleven suggests that the EITC does not actually have this effect. Contradicting the consensus literature, Kleven finds that the EITC was not the main reason a large group of single mothers joined the workforce in the 1990s — a fact that is typically cited as proof of the policy’s efficacy.

This finding — as yet unconfirmed — has the potential to remake poverty policy as we know it. As it stands, the EITC excludes the poorest Americans by design. Nonworkers, meaning those who do not earn any income, make up around 75 percent of poor people in America. As Matt Bruenig of the People’s Policy Project has found, the overwhelming majority of nonworkers are either children, elderly, have disabilities, or in school. Kleven’s research, Bruenig said, undermines the only justification for excluding these people from the benefit.

“If EITC doesn’t even incentivize labor supply,” said Bruenig, “then basically we’re just giving a big middle finger to poor people.”

There is an easy fix for this problem. If Democrats want to continue using tax credits to redistribute income, they can keep their EITC policies intact and simply lop off the phase-in — including the requirement to have an income — and thereby, in effect, create a basic income for poor people. There’s a bill in Congress that does just that. Introduced in June by Rep. Rashida Tlaib, D-Mich., and co-sponsored by Rep. Alexandria Ocasio-Cortez, D-N.Y., and Rep. Ayanna Pressley, D-Mass., the Building Our Opportunities to Survive and Thrive, or BOOST, Act takes Harris’s plan and makes the full credit available to everyone, including those who earn no income from work. As Dylan Matthews explained at Vox, “Under Harris’s plan, if you earn $0, you get $0. Under Tlaib’s plan, if you earn $0, you get $3,000 per person. No exceptions.”

THE TAX CREDIT — which currently maxes out at $3,500 per year for married families with one child, and $6,500 for those with three or more — is an artifact of an earlier era when the welfare state was under attack. Tax credits became the preferred policy for redistributing wealth downward precisely because they do so discreetly. Instead of justifying a welfare expenditure, lawmakers got to boast about cutting taxes. Instead of a handout, the credits rewarded hard work.

“The EITC was supposedly the perfect income-support policy because it got the incentives right,” said Marshall Steinbaum, an assistant professor of economics at the University of Utah and former senior fellow at the Roosevelt Institute.

A series of studies, focused primarily on a large expansion of the EITC in 1993, found that the EITC worked as designed: When the tax credit was expanded, the labor force participation of poor mothers spiked. But Kleven’s paper, by controlling for the idiosyncratic economic factors of the 1990s, finds otherwise. A wave of single mothers did join the workforce, but they probably did so for other reasons — namely, because the economy was booming and many were kicked off cash benefits by then-President Bill Clinton’s welfare reform, the Personal Responsibility and Work Opportunity Reconciliation Act.

Arindrajit Dube, an economist at the University of Massachusetts Amherst, cautioned against “drawing strong policy conclusions” before the findings can be rigorously confirmed, but said that Kleven’s research seems to weaken the arguments against “basic income” or targeted tax credits for low-wage earners.

“If it turns out EITC is not very effective at [encouraging labor market participation], it strengthens the argument for providing a substantial credit to those who need it most (i.e. the poorest),” said Dube.

Bob Greenstein, founder and president of the Center on Budget and Policy Priorities, expressed doubts about Kleven’s analysis. “The idea that his study settles the issue is clearly not correct,” Greenstein told The Intercept. Moreover, Greenstein fears the political consequences of abandoning the phase-in. “If a unified Democratic government pushed through — over Republican opposition — [a bill] making the EITC available to people without earnings, I fear it would convert the EITC, in the conservative worldview, into some ‘bad welfare program.’ And the next time Republicans had power, they’d come after it with hammer and tongs.”

Greenstein instead advocates expanding the Supplemental Security Income program and liberalizing the child tax credit to reach the non-earning poor. (Supplemental Security Income augments the income of the elderly and disabled, while the child tax credit is a partially refundable tax credit that can now be claimed by families with over $2,500 in earnings.) “Having been in too many EITC battles over the years, I’m just scared politically,” Greenstein said. “It’s not primarily a policy objection, it’s about political strategy.”

“It’s a perverse way to do redistribution,” said Steinbaum. Liberal policymakers, Steinbaum said, continue to be captured by right-wing fantasies about the moral defects of poor people. Ronald Reagan stigmatized single mothers who depended on cash benefits as “welfare queens,” and conservative economists falsely claimed that welfare exacerbated the innate pathologies of the poor, breeding laziness and dependency.

“The ‘culture of poverty’ thesis was invented by enemies of the welfare state,” Steinbaum said. “There was never any empirical support for it.”

Indeed, a vast literature debunks the idea that simply giving money to poor people significantly disincentivizes work or generates “dependency.” Rather, in many cases, unconditional cash transfers have been found to be more effective at alleviating poverty than means-tested and in-kind welfare programs.

The EITC, by excluding non-earners, unnecessarily perpetuates an insidious division between the “deserving” and “undeserving” poor, explained Steinbaum.

“No one chooses to be poor,” Tlaib, the Michigan Democrat and lead sponsor of the bill that would eliminate the EITC’s phase-in, told The Intercept. “If someone comes to me and they’re in need, I’m not going to say, ‘Why aren’t you working?’ I’m going to say, ‘How can I help?’”

Instead of blaming the poor for their poverty, Tlaib encourages her colleagues to look in the mirror. “I think we need to take some responsibility for failing them,” she said. “We haven’t done enough to combat poverty in our country. We hardly even talk about the ‘p word.’ We only ever talk about the middle class.”

Tlaib was familiar with Kleven’s research, but, she said, it wasn’t the motivation for her bill, the BOOST Act. “We wanted something like the earned income tax credit on steroids,” Tlaib, whose district is the third-poorest in the country, said. “Too many of our residents are caretakers of their elderly parents, disabled veterans, students trying to better themselves, or seniors who aren’t working. I put my residents first, and this is what they asked for.”

FOR NOW, PROPOSALS like Tlaib’s have seen limited support from presidential candidates. Many have signed onto the American Family Act, which would make the child tax credit fully refundable — in effect, providing a modest child allowance to families under a certain income cap.

A campaign spokesperson for Sen. Bernie Sanders, I-Vt., said that the senator supports Tlaib’s bill. “As we’ve seen in the two decades since the EITC was popularized among both center-right and center-left thinking as the way to raise wages and help workers,” a Sanders aide told The Intercept, “the profit shares of major corporations have just grown higher and higher and wages have not budged at all.”

Though Sanders has signed on to various EITC expansion bills, his aide made clear that creating a “fundamental shift in how Americans engage with work” is more important to the Vermont senator. “We really want to be talking about putting workers at the table, having workers set their agenda, their wages, their schedules, their benefits,” the aide said. This week Sanders released a plan to increase the power of workers in corporate decision-making and stimulate cooperative ownership.

“There should be no distinction when it comes to helping working poor and non-working poor.”

That, however, still leaves questions about where nonworkers fit into the socialist campaign’s syndicalist vision. In the past, Sanders has been criticized for an overly work-centric approach to addressing poverty and inequality. Sanders often says, “Nobody who works 40 hours a week in America should be living in poverty.” Critics of this might suggest that no one should be living in poverty. A more generous EITC could lift more full-time workers out of poverty, but it wouldn’t help very poor children, the elderly, or people with disabilities who don’t work. Pressed on this subject, the Sanders aide said, “There should be no distinction when it comes to helping working poor and non-working poor.”

“We’re designing a platform to eradicate poverty,” the aide said, perhaps alluding to policy proposals to come. “That’s the goal of Bernie’s platform.”

IT REMAINS TO be seen whether Democrats will finally recover from their Reaganite hangover and embrace universal policies that do not attempt to police the morality of the poor. Such policies may even have political benefits in the long run.

The same qualities which attracted Democrats to the EITC may also undermine its political efficacy. “This is the double-edged sword of the tax credit. The opacity is deliberate,” said Bruenig of the People’s Policy Project. “It convinces timid politicians they can get away with it. But, on the other hand, the opacity means they aren’t rewarded for it electorally.”

Part of what it will take to achieve social democracy in America, Bruenig suggests, is building a constituency that knows what social democracy feels like. Discreet redistributive policy won’t build a sturdy constituency for redistribution.

Tlaib’s bill is a step in that direction, and her constituents have taken notice. “It’s the most popular policy we’ve proposed,” Tlaib told me. “Residents yell at me ‘BOOST, Rashida!’ and I say, ‘Yes, you deserve it.’”

WHY WASN’T A TAX CUT WITH RARE BIPARTISAN SUPPORT PART OF TAX OVERHAUL TALKS?

Reagan called the Earned Income Tax Credit part of the ‘best anti-poverty bill’ ever but it was never considered in the recent tax debate.

How to Get Americans to Love Capitalism Again

There are better solutions than wealth taxes, ‘Medicare for all’ or universal basic income.

American capitalism is at a serious inflection point. Many Americans, including the two of us, are alarmed by enormous levels of inequality and by declining economic mobility. We are concerned that in many cases American markets are no longer the most competitive in the world. And, we worry that our country’s long-term economic strength will slowly deteriorate because of an unsustainable fiscal trajectory that leaves future generations worse off.

The solution is not to upend the system. A market-based economy, for all its flaws, is still the best way to achieve broad economic prosperity and to ensure that living standards continue to rise over time. But the answer is not to maintain the status quo, either.

Radical change or complete inaction seem to be the only types of solutions that are being debated in today’s marketplace of ideas. Americans can’t afford to restrict our thinking based on political ideology and the false equivalency of having to pick one extreme or the other. That’s a recipe for stalemate.

Since founding the bipartisan Aspen Economic Strategy Group more than two years ago, our focus has been on bringing together leaders with different perspectives to highlight the importance of evidence-based policymaking. Earlier this week, 38 of our members signed on to a statement of principles that should guide the development of a new economic policy agenda. We also believe we must rigorously analyze some of the proposals that are being put forward in today’s policy debates, including universal basic income, “Medicare for all” and direct taxes on wealth.

Based on research from the newest book from the Aspen Economic Strategy Group, the two of us are more convinced than ever that those policies are fundamentally misguided and would result in economically harmful outcomes that could put our economy on an unstable and precarious path, harming the very people they are intended to help.

The collective work to identify specific policy solutions, however, also suggests to us that there are still many ways to ensure more that many more people can participate in America’s successes. And while there are no silver bullets, nor will there ever be complete agreement about every policy detail, we see many excellent ideas that are ripe for bipartisan collaboration and that can begin the process of adapting our economic policies so that they work for far more people.

First, we must aggressively invest in our human capital. That starts with addressing the supply side of the education market, including investments in community colleges to provide more students the option to obtain a high-quality education and complete their degree. This ensures that more American workers have the skills they need to compete in a global economy. Just as important, investing in education will increase economic productivity, which will help drive the wage growth needed to reduce income inequality.

There are other steps we can take to further address the distribution of economic opportunity and wage growth. But as Melissa Kearney and Magne Mogstad have argued, universal basic income is not a viable solution. It directs resources away from the neediest individuals and fails to address the underlying factors that contribute to inequality. Instead, we should look at more targeted and efficient approaches to encouraging work by supplementing the wages of low- and middle-income Americans, such as expanding the earned -income tax credit or enacting a wage -subsidy program.

Finally, we have to confront the uncomfortable truth that our country is on an unsustainable fiscal trajectory. Spending priorities such as education, infrastructure, and high-value research and development are underfunded, while our commitments to entitlements continue to rise indefinitely. Restoring the sanity of our fiscal position will require raising more revenue, slowing the rate of growth in health care spending, and making Social Security sustainably solvent.

Returning to fiscal responsibility through spending reform alone is neither just nor possible. The United States needs to reform its tax code in a manner that is more progressive and produces more revenue. But there are better approaches than a wealth tax, which would be highly distortionary and is unlikely to capture nearly as much revenue as its proponents claim. Making the income tax code more progressive and reforming estate and gift taxes to eliminate the loopholes that allow wealthy Americans to pass on wealth to their children at very low tax rates would be a better first step.

Whatever path policymakers choose, it is clear that we need to move away from theoretical arguments and wishful thinking and into the arena of pragmatic policy solutions that can actually be enacted. There is a plethora of policies that already enjoy broad bipartisan support, and these policies can be enacted only through effective government, which will require leaders to engage in principled compromise and make decisions grounded in facts and analyses.

The cost of inaction is severe and grows each day, as inequality undermines our economic strength and more Americans become disillusioned with the capitalist system that has made upward mobility a pillar of the country’s identity since its founding.

 

The Case for the Wage Subsidy

Americans across the political spectrum should focus on how best to spend government money already slated to go out the door.

.. The controversial subsidies that New York and Washington offered Amazon to attract its “HQ2” are not some novel approach to economic development. Last year, Wisconsin offered a larger package of incentives to entice electronics supplier Foxconn, assembler of iPhones, to build a $10 billion manufacturing facility in Wisconsin. Annual payroll for 13,000 workers would exceed $700 million, and Wisconsin expected the plant to generate annual state and local tax revenue of $181 million and lead to the creation of 20,000 additional jobs. Critics panned the deal as corporate welfare, to which Governor Scott Walker fired back, “That’s fine, but I think they can go suck lemons.”

.. The value of the subsidy would be set relative to a “target wage” of, say, $15 per hour and would close half the gap between the market wage and the target. A worker would initially receive a subsidy of $3 per hour in this case, equal to approximately $6,000 per year if he worked full-time.
.. This differs from most programs that transfer resources to lower-income households, including the EITC, which phase out as the household’s total income rises; for every additional dollar earned by the household, the worker loses some of the benefits he was receiving. With the direct wage subsidy, the worker receives the same subsidy for every hour worked at a given wage, no matter how much total income he earns. He can take a second job and earn the subsidy for each of those hours. His wife can take a job and earn her own subsidy, too. The value of the subsidy declines only as workers become more productive, earning promotions and raises.
.. First, the wage subsidy is the appropriate mechanism for redistributing gains from the economy’s “winners” to its “losers.” It comes closest to doing this directly, by taking tax revenue drawn from higher earners and inserting it directly into the paychecks of lower earners.
.. Second, the wage subsidy offsets subsidies given to foreign producers and moves the cost to employers for domestic workers closer to parity with what firms pay foreign workers living in sharply different social and economic contexts. The benefit is largest for industries where the work is most labor-intensive and relies on the lowest-cost labor — in other words, the industries under greatest pressure from globalization. But it does this through a neutral structure
..  A community lacking the ability to export (even to the rest of the nation) must rely on government transfer payments to fund the resources it requires from the outside world — the community is literally exporting need. The existing American safety net conditions those transfers on very low incomes — often, no work at all — and channels them primarily toward consumption of health-care services. With a wage subsidy, work, rather than unemployment, draws government support, and that support can flow to a fuller range of productive activities in the community. In this model, a services economy can still thrive disconnected from a tradeable sector — not an ideal arrangement but one far better than today’s.

This invites the question, Isn’t the wage subsidy just another form of redistribution, like all the safety-net programs we already have? Yes and no. Yes, it is redistribution. And yes, high-income taxpayers will finance it. But unlike with government assistance disconnected from work, the value of a productive job through which someone supports her family and contributes to her community is not diluted if it yields a paycheck into which the government has put in more than it takes out. Certainly a society of thriving and perfectly self-sufficient families would be preferable. But America is nowhere near such a reality today, and for some people, it may never happen. If we can at least make redistribution a tool for creating jobs and promoting work, we will be moving the labor market in the right direction and delivering better outcomes for those who need support.

.. They might accept a subsidy as a replacement for existing safety-net programs, but if cutting safety-net spending is on the table, many would prefer to spend that savings on a growth-generating tax cut.
.. What really infuriates Democrats, meanwhile, is the possibility that employers might benefit. Factually speaking, they have a point. If the government offers a $3 subsidy atop a $9-per-hour job, the result will not necessarily be a $12-per-hour job. The employer might instead cut the market wage to $8, to which the government would add $3.50 — half the $7 gap to the target wage of $15 — leaving the worker with $11.50. Both worker and employer are better off than without the subsidy, but the entire benefit is not the worker’s.
.. roughly 75 percent of the financial benefit accrued to workers. In general, employers have to benefit at least somewhat. A central premise of the wage subsidy is to pull more prospective workers into the labor force. Other things held equal, if the supply of workers increases, then employers will be able to offer lower wages — even as, thanks to the subsidy, workers take home more... Remember, the wage subsidy’s goal is not only, or even primarily, to transfer resources into the pockets of low-income households. It is also to connect more workers with employers in permanent jobs. The task requires employers to do the hard work of hiring and training certain employees whom they otherwise would not, and this benefits society greatly.

A central premise of the wage subsidy is to reward employers sufficiently so that they choose to do more. By contrast, just wishing that firms would create more and better jobs when they have no economic incentive to do so is futile; it has zero bearing on what will happen in the actual labor market.

.. Note that this need to create incentives for the employer is no different from what happens in any other effort at assisting low-income households in a market economy. When people use food stamps at the supermarket, the supermarket benefits. When they use housing vouchers to pay the rent, the landlord benefits. Unless the government wishes to produce everything itself, or order market participants to take actions against their own interests, efforts to deliver results that the market will not deliver for low-income households always benefit the businesses that choose to participate in the transactions. Otherwise, they wouldn’t participate!

.. It is a strange consequence of our commitment to individuals as consumers that we unthinkingly pay hundreds of billions of dollars each year to hospitals and universities to provide treatment and education to customers whom they otherwise would turn away but that we shrink from the idea that society might pay anything to an employer to hire someone he otherwise would not.

.. Just as the Republican party’s relative disinterest in the labor market is made apparent by its preference for a tax cut over a wage subsidy, a good distillation of the Democrats’ core attitude toward the labor market emerges from comparing a wage subsidy to their preferred approach: the minimum wage. Raising the minimum wage is the quintessential left-of-center labor-market policy. Unsatisfied with the market outcome, Democrats suggest decreeing a different one. The outcome it professes to deliver is widely desired. It seems “free.” And then it damages, rather than strengthens, the labor market.

.. The minimum wage and the wage subsidy both aim to raise the earnings of low-wage workers, but whereas the wage subsidy asks taxpayers to make up the difference, the minimum wage asks employers to

.. The wage subsidy injects funds from outside the labor market to boost the formation of employment relationships and encourage greater investment in labor-intensive businesses. The minimum wage does the opposite, operating as a tax on low-wage employment that employers have to pay for every low-wage hour they use.

.. The roughly $200 billion price tag for a wage subsidy might require some new tax revenue, but its funding could come largely from the existing safety net, which already dedicates more than $1 trillion annually to low-income households

 

Crushing it for whom, Mr. Kudlow?

Last week, one of President Trump’s top economic advisers, Larry Kudlow, argued the U.S. economy is “crushing it,” posting boom-like numbers in key areas, all thanks to the leadership of the president.

Evaluating such claims usually begins with assessing whether the president should get credit for an economy he inherited in year eight of a solid expansion. But the fact that Trump is claiming credit for trends that were largely ongoing before he took office is one of the few ways in which he is not much different from former presidents.

.. Who is actually getting ahead in the Trump economy?

.. . In contrast, corporate profits and equity markets truly are crushing it, both on a pre- and especially, given the large business tax cuts, a post-tax basis.

.. There is also no evidence of an investment boom, suggesting the recent, above-trend growth in GDP is Keynes, not Laffer — meaning the deficit spending is providing a temporary boost but will not have lasting, positive impacts for long-term economic growth.

.. Starting with wages, since Trump took office, the real hourly wage for the 82 percent of the workforce that is blue collar in factories and non-managers in services is up half-a-percent, an extra 11 cents per hour.

.. the growth of mid-level pay has picked up a bit, as we’d expect with such low unemployment. But inflation, largely driven by higher energy costs, has also sped up, canceling out any real gains.

.. If energy prices come down and unemployment continues to fall, real wage growth for mid-wage workers will improve. But the magnitude of their gains will likely be nothing close to the administration’s claim that the tax cut would add at least $4,000 to annual earnings within a few years of the legislation.

.. In President Barack Obama’s second term, real annual wage growth for mid-wage workers was about 1 percent, so call that the baseline.

.. Sticking with the tax cut, its proponents main claim was the big corporate cuts would generate more business investment, which would lead to faster productivity growth, which would position us for higher paying jobs. So far, every link in that chain is broken.

.. Business investment is growing, as we’d expect in an economy operating close to full capacity. But its growth rate is not faster now than at various points earlier in the expansion.

.. There has been a modest uptick in investment in structures (such as plants, offices, wells, mine shafts, warehouses) in the first half of 2018, but, as economist Dean Baker has shown, the growth in such investment was due to higher energy prices generating increased investment in mining for oil and natural gas.

.. While mining investment has increased by 36.7 percent over the last year, it rose by 47.3 percent from the second quarter of 2009 to the second quarter of 2010, when the Obama administration was still enforcing environmental laws. In both cases, the key factor was rising world oil prices.

.. It takes time to plan investments, so it is too soon to conclude the tax cuts have not made a difference. But none of the surveys of companies’ investment plans show any plans to ratchet up capital spending

.. What is clear is firms are using their tax windfalls to boost share prices through buybacks, which, along with strong corporate profits, are fueling a historical bull market for stocks.

.. instead of borrowing $2 trillion to finance the regressive tax cut, Congress could have put more money in the pockets of working Americans and made investments for our economic future.

.. First, we should have expanded the Earned Income Tax Credit to compensate for decades of stagnant wage growth. The Brown-Khanna plan, calling for a $1.4 trillion EITC expansion, would have provided working families making up to $75,000 with up to $8,000 more in take home pay.

.. the best way to raise pay for ordinary Americans is to do so directly as opposed to pretending it will come through the largesse of executives and shareholders.

.. Second, we should have put billions to expand the National Science Foundation’s Advanced Technological Education program, linking employers to technical schools to develop credentials that respond to the needs of our cutting-edge industries.

.. Third, we should have provided hiring incentives for anchor companies to create jobs in places left behind such as Paintsville, Ky., or Flint, Mich. If a company is willing to hire in places where people do not have enough access to high-wage jobs, then they should get support for doing so.

.. Fourth, we should have invested in bringing high speed Internet to every corner of America. Providing fiber broadband to every corner of the United States is the modern equivalent of rural electrification.

.. Larry Kudlow’s right: The Trump administration is crushing it for its donor base, which is in turn handsomely rewarding them.

.. But it has done nothing for the forgotten Americans and nothing to make sure America is a winner in the 21st century. We do not need more sugar highs for those already doing well. We need to give lasting pay raises to those struggling to pay the bills and then focus on the forward-looking investments that will finally reconnect GDP growth to broadly shared prosperity.

Liberaltarians

The conservative movement—and, with it, the GOP—is in disarray. Specifically, the movement’s “fusionist” alliance between traditionalists and libertarians appears, at long last, to be falling apart.

.. Libertarian disaffection should come as no surprise. Despite the GOP’s rhetorical commitment to limited government, the actual record of unified Republican rule in Washington has been an unmitigated disaster from a libertarian perspective: runaway federal spending at a clip unmatched since Lyndon Johnson; the creation of a massive new prescription-drug entitlement with hardly any thought as to how to pay for it; expansion of federal control over education through the No Child Left Behind Act; a big run-up in farm subsidies; extremist assertions of executive power under cover of fighting terrorism; and, to top it all off, an atrociously bungled war in Iraq.

This woeful record cannot simply be blamed on politicians failing to live up to their conservative principles. Conservatism itself has changed markedly in recent years, forsaking the old fusionist synthesis in favor of a new and altogether unattractive species of populism.

.. The old formulation defined conservatism as the desire to protect traditional values from the intrusion of big government; the new one seeks to promote traditional values through the intrusion of big government.

.. Just look at the causes that have been generating the real energy in the conservative movement of late: building walls to keep out immigrants, amending the Constitution to keep gays from marrying, and imposing sectarian beliefs on medical researchers and families struggling with end-of-life decisions.

.. the conservative embrace of a right-wing Leviathan has left libertarian-minded intellectuals feeling left out in the cold.

.. New York Post columnist Ryan Sager bemoaned the rise of big-government conservatism and warned that excessive pandering to evangelicals would rupture the movement.

.. Andrew Sullivan denounced the right’s fundamentalist turn in The Conservative Soul: How We Lost It, How to Get It Back.

.. 13 percent of the population, or 28 million voting-age Americans, can be fairly classified as libertarian-leaning.

.. Back in 2000, this group voted overwhelmingly for Bush, supporting him over Al Gore by a 72-20 margin.

.. Markos Moulitsas of Daily Kos fame caused something of a stir by proposing the term “Libertarian Democrat” to describe his favored breed of progressive.

.. Governor Brian Schweitzer of Montana, fellow Montanan Tester, and Virginia Senator-elect Jim Webb—have sounded some libertarian themes by being simultaneously pro-choice and pro-gun rights.

.. if Democrats hope to continue appealing to libertarian-leaning voters, they are going to have to up their game. They need to ask themselves: Are we content with being a brief rebound fling for jilted libertarians, or do we want to form a lasting relationship? Let me make a case for the second option.

.. the prevailing ideological categories are intellectually exhausted. Conservatism has risen to power only to become squalid and corrupt, a Nixonian mélange of pandering to populist prejudices and distributing patronage to well-off cronies and Red Team constituencies.

.. Liberalism, meanwhile, has never recovered from its fall from grace in the mid-’60s.

.. Conservative fusionism, the defining ideology of the American right for a half-century, was premised on the idea that libertarian policies and traditional values are complementary goods.

.. But an honest survey of the past half-century shows a much better match between libertarian means and progressive ends.

.. many of the great libertarian breakthroughs of the era—the fall of Jim Crow, the end of censorship, the legalization of abortion, the liberalization of divorce laws, the increased protection of the rights of the accused, the reopening of immigration—were championed by the political left.

.. capitalism’s relentless dynamism and wealth-creation—the institutional safeguarding of which lies at the heart of libertarian concerns—have been pushing U.S. society in a decidedly progressive direction.

.. The civil rights movement was made possible by the mechanization of agriculture, which pushed blacks off the farm and out of the South

.. Likewise, feminism was encouraged by the mechanization of housework.

Greater sexual openness, as well as heightened interest in the natural environment, are among the luxury goods that mass affluence has purchased.

.. secularization and the general decline in reverence for authority, as rising education levels (prompted by the economy’s growing demand for knowledge workers) have promoted increasing independence of mind.

.. Yet progressives remain stubbornly resistant to embracing capitalism, their great natural ally.

.. Knee-jerk antipathy to markets and the creative destruction they bring continues to be widespread, and bitter denunciations of the unfairness of the system, mixed with nostalgia for the good old days of the Big Government/Big Labor/Big Business triumvirate, too often substitute for clear thinking about realistic policy options.

.. the rival ideologies of left and right are both pining for the ’50s. The only difference is that

  • liberals want to work there, while
  • conservatives want to go home there.

.. Both generally support a more open immigration policy. Both reject the religious right’s homophobia and blastocystophilia. Both are open to rethinking the country’s draconian drug policies. Both seek to protect the United States from terrorism without gratuitous encroachments on civil liberties or extensions of executive power. And underlying all these policy positions is a shared philosophical commitment to individual autonomy as a core political value.

.. their conceptions differ as to the chief threats to that autonomy.

  • Libertarians worry primarily about constraints imposed by government, while
  • liberals worry most about constraints imposed by birth and the play of economic forces.

.. At the same time, some of the resulting wealth-creation would be used to improve safety-net policies that help those at the bottom and ameliorate the hardships inflicted by economic change.

.. Progressive organizations like Oxfam and the Environmental Working Group have already joined with free-market groups in pushing for ag-policy reform.

.. the current subsidy programs act as a regressive tax on low-income families here at home while depressing prices for exporters in poor countries abroad—and, to top it off, the lion’s share of the loot goes to big agribusiness, not family farmers.

.. the president of Cato and the executive director of the Sierra Club have come out together in favor of a zero-subsidy energy policy.

.. cut taxes on savings and investment, cut payroll taxes on labor, and make up the shortfall with increased taxation of consumption. Go ahead, tax the rich, but don’t do it when they’re being productive. Tax them instead when they’re splurging—by capping the deductibility of home-mortgage interest and tax incentives for purchasing health insurance. And tax everybody’s energy consumption.

.. Gore has proposed a straight-up swap of payroll taxes for carbon taxes

.. Greg Mankiw has been pushing for an increase in the gasoline tax.

.. libertarians’ core commitments to personal responsibility and economy in government run headlong into progressives’ core commitments to social insurance and an adequate safety net.

.. Spending on Medicare, Medicaid, and Social Security is now projected to increase from about 9 percent of GDP today to approximately 15 percent by 2030.

.. We can fund the Earned Income Tax Credit and other programs for the poor; we can fund unemployment insurance and other programs for people dislocated by capitalism’s creative destruction; we can fund public pensions for the indigent elderly; we can fund public health care for the poor and those faced with catastrophic expenses. What we cannot do is continue to fund universal entitlement programs that slosh money from one section of the middle class (people of working age) to another (the elderly)—not when most Americans are fully capable of saving for their own retirement needs.

.. Instead, we need to move from the current pay-as-you-go approach to a system in which private savings would provide primary funding for the costs of old age.