Tuesday, June 1, 2010

The Free Lunch

From her cult classic "demon sheep" ad to her more recent attacks, Carly Fiorina has persistently slammed Tom Campbell in the CA Republican primary for his openness to raising taxes. Campbell has, for example, refused to sign the "Taxpayer Protection Pledge," in which a candidate pledges to vote against any and all tax increases. If recent polling is to be believed, attacks such as this (and Sarah Palin's endorsement of Fiorina) have been effective in pulling down Campbell's numbers and lifting Fiorina into the lead in the primary.

The Campbell situation reproduces in miniature a kind of fiscal policy myopia that has all too often afflicted GOP debates about taxes. Fiscal conservatism, or, more to the point, fiscal sobriety, does not depend only upon taxes taken: it also depends upon spending. There are certainly times for deficit spending, but a persistent disregard for deficit spending---a fetishizing fear of tax increases above all else---risks leading to fiscal insanity.

One of the key ideas of conservatism during its intellectual resurgence in the 1970s was the belief that there should be a price. Market reforms have always stressed the importance of paying a price; it is the pain of pricing that helps keep a market efficient.

Well, taxes are a government's price. If citizens do not pay the price for the services and protections that they desire, they will feel less compelled to ensure that that these services and protections are used efficiently. In the short term, a government can (and sometimes should) push the price of a given service off to later years, but the price does, eventually, have to be paid.

Most people (Republicans, Democrats, and independents included) enjoy free lunches. It's very easy to vote for new schools or roads or pensions or other goodies if you don't have to pay for them. Unfortunately (such is our limited state), someone does have to pay for them, and eventually the tab catches up with a free-spending government. Fiscal sanity is recognizing this fact.

If fiscal conservatism is to stand as a kind of fiscal sanity (a very worthy aim), an openness to raising taxes should not be viewed as an excommunicative offense. The emphasis should be upon what taxes are raised, what spending is increased, what cuts are made, etc. These are questions of practice, perhaps too mundane for the world of faxable pledges, but crucial questions nevertheless.

Tom Campbell has thought long and hard about the benefits of various kinds of taxes and how to cope with the current fiscal mess of California and the nation as a whole, as this proposal from last year shows. Campbell's precise advice may be wrong, and maybe he isn't the best standard-bearer for Republicans in California (though he may be the most electable). Or maybe he is the best candidate---I'm not saying one way or the other here.

But it is, I think, a bridge too far to disqualify him for refusing to oppose every single tax increase. The road of perpetually cutting taxes while also increasing spending not only leads to bankruptcy but also undercuts the incentive for reducing the size of government. If new entitlement programs are to be passed and spending programs are to proliferate (a policy seemingly endorsed by both President Obama and his Republican predecessor), a price must be paid for them, either by us or by later generations.

A free lunch is a good campaign slogan, but it's not the best foundation for fiscal policy.

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