Tom Firey: How the GOP won the tax battle ... but lost the war on big government

November 21, 2012|By TOM FIREY

In his acceptance speech for the 1984 Democratic presidential nomination, Walter Mondale made a bold promise: He would raise Americans’ taxes and cut the federal deficit. His justification: “These deficits hike interest rates, clobber exports, stunt investment, kill jobs, undermine growth, cheat our kids and shrink our future.” That year, the deficit was $185.4 billion  and the national debt was $1.57 trillion — quaint numbers compared to today’s $1.1 trillion  and $16.2 trillion.

Mondale suffered a historic defeat in the general election, losing to Ronald Reagan by 18.2 percent of the popular vote and 512 electoral votes. Republicans had won the political fight: Americans liked lower taxes, not to mention the growing prosperity and relative peace of the Reagan years. But Mondale got some consolation a decade later when Bill Clinton raised taxes and used the “peace dividend” from the Cold War’s end to close the deficit. By 1998, in the words of President Clinton, “If we maintain our resolve, we will produce balanced budgets as far as the eye can see.”

Alas, we didn’t.

When George W. Bush became president in January 2001, he understood that Americans like low taxes. He also understood that Americans generally like government services. So he provided both, cutting taxes in 2001 and 2003, while increasing federal funding for schools, ramping up domestic security following the 9/11 attacks, launching wars and nation-building in Afghanistan and Iraq, expanding Medicare and creating a slew of new subsidy programs. To accomplish this, he rang up $4.9 trillion in debt during his eight years in the White House. 

Americans generally didn’t question Bush’s expansion of government, in part because it didn’t affect their pocketbooks. The result: lower taxes and bigger government.

President Obama also understands that Americans like low taxes and government services. He’s followed Bush’s strategy, cutting taxes in each of his four years in office,  while ramping up government spending. So far, he’s racked up $5.6 trillion in federal debt. 

More low taxes and more government.

Now Obama proposes to end some of Bush’s cuts, raising taxes on the top 2 percent of earners and yielding nearly $1 trillion in tax revenue over the next 10 years. Some members of his administration have suggested other tax increases that would yield an additional $500 billion. That sounds like a Mondale-esque turn toward fiscal responsibility, except that the Congressional Budget Office has estimated the federal debt will grow $8.5 trillion over the next decade. In other words, even if President Obama gets all the new money he envisions, the federal deficit will still average $700 billion a year. And if he gets far more than he envisions — if he really, really socks it to “the rich” — the United States will still rack up annual deficits as bad as the worst of the Bush years.

So the Bush-Obama strategy will continue: low taxes, bigger and bigger government.

Taxes are important for two reasons. First and obviously, they fund government services. Second, they force taxpayers to consider whether those services are worthwhile, and to cut or avoid programs that don’t measure up.

Or, at least, taxes should do that — if taxpayers were to pay the full cost of the government services they receive. But current taxpayers aren’t paying the full cost. Over the last decade, the United States has pushed nearly a quarter of government’s cost onto future taxpayers — including more than 40 percent in the years 2009-11. Right now, no one — rich or poor — is paying his “fair share” for government.

Republicans won the battle on taxes, but that victory deprived them of a potent weapon in the war on big government: people’s tax bills. Yet, just like Walter Mondale, there is consolation for the GOP: Sooner or later, everyone’s federal taxes will go up, by a lot.

Higher taxes — and perhaps smaller and better government.

Thomas A. Firey is a senior fellow for the Maryland Public Policy Institute and a Washington County native.

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