Marching Orders From the Power Elite

Recently by Robert Wenzel: In Defense of Walter Block’s Call of Support for Wisconsin Union Thugs

Huh, some Republicans must be getting carried away with the cut government down to size mantra. Scott Walker and other Republicans just got marching orders from the grand manipulator, Karl Rove. In today’s WSJ, Rove writes to Republicans that they can’t win with just a message of austerity.

Rove tells Republicans:

… dangers lurk for Republicans. If they focus only on austerity and neglect to offer a pro-growth message, their attempt to tame the budget will be of limited appeal and could prove to be their undoing.

In actuality, danger would lurk for the elitists of every stripe, Republican or Democrat, if austerity was the only thing on the agenda. This, of course, is not what the elitists want. For them, government needs to be in the middle of everything. You can’t just leave things to the free market. Here’s Rove:

Americans today want to know what steps Republicans will take to create more jobs, bigger paychecks and greater prosperity.

Since the only thing government can do to "help" create jobs, bigger paychecks and greater prosperity, is to get the hell out of the way, whatever Rove wants to do here, it is not going to grow anybody’s bank account except that of the insiders.

And don’t think for a minute that Republicans will read Rove’s message here and decide that Rove is talking about getting government out of the way. Rove leaves enough clues to direct the conversation toward a hidden growing government. He doesn’t mention the idea of getting government out of the way even once in his entire column. What he does do is talk about is a new tax plan:

A good starting point for the GOP would be to outline a comprehensive tax reform that scrapes preferences out of the tax code and makes it simpler, flatter and fairer.

Notice, there is nothing here about cutting taxes, just the same tired rebalancing and shifting of the tax burden, which would keep lobbyists employed by special interests who will seek to gain a tax break for themselves. When you hear a call for "simpler, flatter and fairer" taxes, think more screwing of the average man.

In the column, Rove trots out Ronald Reagan, the hero of every free market speaking but interventionist acting Republican elitist on the planet. Rove says:

The political genius of Ronald Reagan is that in 1980 he added a pro-growth emphasis (supply-side economics) to his economic message.

Murray Rothbard explained what Reagan’s pro-growth, cut government down to size, cut taxes program really turned out to be:

There was no "Reagan Revolution." Any "revolution" in the direction of liberty (in Ronnie’s words "to get government off our backs") would reduce the total level of government spending. And that means reduce in absolute terms, not as proportion of the gross national product, or corrected for inflation, or anything else. There is no divine commandment that the federal government must always be at least as great a proportion of the national product as it was in 1980. If the government was a monstrous swollen Leviathan in 1980, as libertarians were surely convinced, as the inchoate American masses were apparently convinced and as Reagan and his cadre claimed to believe, then cutting government spending was in order. At the very least, federal government spending should have been frozen, in absolute terms, so that the rest of the economy would be allowed to grow in contrast. Instead, Ronald Reagan cut nothing, even in the heady first year, 1981.

At first, the only "cut" was in Carter’s last-minute loony-tunes estimates for the future. But in a few short years, Reagan’s spending surpassed even Carter’s irresponsible estimates. Instead, Reagan not only increased government spending by an enormous amount – so enormous that it would take a 40 percent cut to bring us back to Carter’s wild spending totals of 1980 – he even substantially increased the percentage of government spending to GNP. That’s a "revolution"?

The much-heralded 1981 tax cut was more than offset by two tax increases that year. One was "bracket creep," by which just inflation wafted people into higher tax brackets, so that with the same real income (in terms of purchasing power) people found themselves paying a higher proportion of their income in taxes, even though the official tax rate went down. The other was the usual whopping increase in Social Security taxes which, however, don’t count, in the perverse semantics of our time, as "taxes"; they are only "insurance premiums." In the ensuing years the Reagan Administration has constantly raised taxes – to punish us for the fake tax cut of 1981 – beginning in 1982 with the largest single tax increase in American history, costing taxpayers $100 billion.

Creative semantics is the way in which Ronnie was able to keep his pledge never to raise taxes while raising them all the time. Reagan’s handlers, as we have seen, annoyed by the stubborn old coot’s sticking to "no new taxes," finessed the old boy by simply calling the phenomenon by a different name. If the Gipper was addled enough to fall for this trick, so did the American masses – and a large chuck of libertarians and self-proclaimed free-market economists as well! "Let’s close another loophole, Mr. President." "We-e-ell, OK, then, so long as we’re not raising taxes." (Definition of loophole: Any and all money the other guy has earned and that hasn’t been taxed away yet. Your money, of course, has been fairly earned, and shouldn’t be taxed further.)

Income tax rates in the upper brackets have come down. But the odious bipartisan "loophole closing" of the Tax Reform Act of 1986 – an act engineered by our Jacobin egalitarian "free market" economists in the name of "fairness" – raised instead of lowered the income tax paid by most upper-income people. Again: what one hand of government giveth, the other taketh away, and then some. Thus, President-elect Bush has just abandoned his worthy plan to cut the capital gains tax in half, because it would violate the beloved tax fairness instituted by the bipartisan Reganite 1986 "reform."

The bottom line is that tax revenues have gone up an enormous amount under the eight years of Reagan; the only positive thing we can say for them is that revenues as percentage of the gross national product are up only slightly since 1980. The result: the monstrous deficit, now apparently permanently fixed somewhere around $200 billion, and the accompanying tripling of the total federal debt in the eight blessed years of the Reagan Era. Is that what the highly touted "Reagan Revolution" amounts to, then? A tripling of the national debt?

This is the kind of "pro-growth," "fairer" tax plan that Rove has in mind. It’s a combination of happy talk and free market rhetoric to increase government’s role in the economy for the benefit of the insiders.

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2011 Economic Policy Journal