Monday, May 16, 2011

Republicans evolving their anti-tax obsession

These indications are notable as the U.S. Congress grapples with its debt problem:
Republicans are working hard to enforce their no-tax-increase-ever orthodoxy, but there are signs that the dam is beginning to break. On April 7, former Reagan budget director Dave Stockman said, “It is simply unrealistic to say that raising revenue isn’t part of the solution. It’s a measure of how far off the deep end Republicans have gone with this religious catechism about taxes.”

On April 17, former Federal Reserve Board chairman Alan Greenspan, who has been the Republican Party’s leading economist since the 1960s, said that raising revenues to deal with the debt is imperative and recommended letting all the Bush tax cuts expire. As he put it on Meet the Press, “I think this crisis is so imminent and so difficult that we have to allow the so-called Bush tax cuts all to expire [and] put the rates back to where they were in the Clinton administration.”

Even those representing the GOP’s conservative wing are starting to question the party’s anti-tax obsession. On April 19, former Arkansas governor Mike Huckabee told his radio audience, “I never understood when it became a mark of conservatism to run up debt on your children’s credit card instead of biting the bullet and paying your own bills.” He further noted, correctly, that Ronald Reagan supported many tax increases in the 1980s.

There is some evidence that House Republicans are starting to get the message that their tax position is crumbling. On May 11, a senior Republican staffer told Atlantic reporter Derek Thompson that his party’s position on taxes is intellectually dishonest. “There are two worlds,” the aide said. “One world is political and the sole objective is to maintain party message. The other world is real and in the real world fixing the deficit is a matter of national survival. When you get down to the real world decisions, it’s not about whether to raise taxes; it’s about the ratio of spending to revenue increases.”

Press reports say that Senate Budget Committee Chairman Kent Conrad is preparing a budget resolution that will propose a 50-50 split of higher taxes, including a surtax on millionaires, and spending cuts to reduce the deficit. With the Republican zero tax increase option rapidly falling apart, a workable deal might be put together in which there are $2 of spending cuts for every $1 of tax increase.
I would normally say as the Republicans go, so may go Canadian Conservatives given how much of their agenda is imported from the U.S. But I wouldn't hold my breath in the near future. We are not where the Americans are in terms of our debt being a question of national economic peril, no matter how historically large and how structural our present deficit situation is. It is pressing. And it is still a mystery as to how the Conservatives will hack $4 billion a year from $80 billion of pretty firmly committed government spending.

We are, however, nearer to the beginning of our ride on that failed American orthodoxy under a Conservative majority government.