Commentary: Modern Political Economy and Public Policy

Abstract

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This article directly and bluntly challenges traditional thought by casting aside conventional wisdom regarding the national economy, replacing it with Modern Political Economy and Public Policy. American national policies, I argue, should always, whenever possible, be universal, not targeted toward specific groups. Moreover, policies need to be crafted to achieve their goals, not to fit within budgetary constraints. The least government is the worst, not the best, and a miserly approach to spending is not “wise use of the taxpayers’ dollars.” The national government controls the currency, paying its bills in dollars. It issues dollars as needed, in whatever amount it chooses, and is unrestrained by the need to “find the money” or “pay-as-you-go.” Taxes are useful for purposes of regulation and control of income inequality, but are not relevant to expenditures. “Anything that is technically feasible,” I claim following Kelton and coauthors, “is financially affordable,” and there is no need to fear inflation so long as spending does not exceed the productive capacity of the economy. Despite conventional wisdom to the contrary, and regardless of the widely used jargon of politicians, when government spends, it is not using “The Taxpayers’ Money.”

Keywords

Modern political economy public policy government spending budgets United States Ryan budget conventional wisdom

There is vast misunderstanding among the public regarding the functioning of America’s political economy. This misunderstanding extends even to the formulation and implementation of its public policy, and those who are misled include many otherwise sound thinkers. No one should find this to be surprising. A chorus of misinformation permeates public comments from people who present themselves as being well-informed. “When times are tough,” so a popular mantra goes, “families have to tighten their belts. Government has to tighten its belt too.” Even so sophisticated a thinker as President Obama said something similar to that, which only demonstrates the power of conventional wisdom to shape understanding, even when—as in this case—it is completely wrong. As I have written elsewhere, prevailing public opinion (or, as the late John Kenneth Galbraith so graphically termed it, “the conventional wisdom”) can be so powerful as to function effectively as a censor, not only to expression, but even to thought, itself (Skidmore 2001).

Moreover, once any opinion becomes widely accepted—especially one congenial to conservative interests—it often persists even in the face of compelling evidence to the contrary. Consider the widespread belief that raising the minimum wage creates unemployment. The vast body of research from the famous Card and Krueger (1994) study onward indicates that it does not. That study examined fast food jobs in the Philadelphia metropolitan area, which crosses the state line from Pennsylvania into New Jersey. Since one state, New Jersey, increased the minimum wage and Pennsylvania did not, it was well situated for a study of the effects of minimum wage increases. Liberal economist, Paul Krugman (2015), a Nobel laureate in economics, wrote in his New York Times column that he, along with most other economists, had assumed that employment would be negatively affected by minimum-wage increases. That changed, however, with the conclusions of the Card and Krueger (1994) study. Krugman said that it, and many subsequent studies, demonstrates that “there’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America.” Conservatives, of course, argue to the contrary, and have attacked Krugman, but one should consider that the economics profession “is biased toward assuming such an effect, which may influence the studies its journals accept for publication” (Skidmore 2018).

Another example, an especially striking one that perhaps is even more revealing, arose from a highly influential study published in 2010 in the American Economic Review, “Growth in a Time of Debt.” The authors were two prominent Harvard economists, Carmen Reinhart and Kenneth Rogoff (2010). They asserted that their examinations of the economies of numerous countries made it clear that debt levels greatly damaged economic growth, even reducing it to negative rates, when debt levels reached the deadly level (not their term) of 90 percent of Gross domestic product (GDP).

This immediately became conventional wisdom. Representative Paul Ryan (now former representative), in his pre-speaker days as chair of the House Budget Committee, used the article’s findings to buttress his well-known role as an Austerian ideologue, and cited them as a foundation for his budget recommendations (Ryan 2013, 78). Some writers came to call the 90 percent debt figure a new “law of finance,”¹ but within two years, reasonable observers recognized that, rather than being a “new law,” the dreaded 90 percent figure not only was called into question, but had crumbled into little more than dogma (see Rabin-Havt and Media Matters for America 2016, 80–81).

Thomas Herndon, a doctoral student at the University of Massachusetts—geographically near Harvard, but far from it in prestige (and a mere student, rather than an august professor)—had examined the Reinhart and Rogoff study and demonstrated conclusively that the authors had made fundamental errors in their calculations (Rabin-Havt and Media Matters for America 2016, 78–79). Krugman (2013) examined the resulting controversy in a review essay for the New York Review of Books, and found nothing in the data that made a 90 percent debt figure significant. He cited Paul De Grauwe, a Belgian Nobel laureate in economics, and concluded that the significant factor was whether countries “had their own currencies, and borrowed in those currencies” (Skidmore 2017, 89–90; see also Rabin-Havt and Media Matters for America 2016, 80–81). Because such countries could create money as needed, they can “carry large debt levels without generating crises” (Rabin-Havt and Media Matters for America 2016, 80; Skidmore 2017, 89–90). Regardless of the errors that the authors themselves conceded, the 90 percent figure still finds its way into budgetary considerations.

The key question should be that how an academic study with such obvious errors could lead to “economic misinformation” that came to “infect the political process at such a staggering level?” (Rabin-Havt and Media Matters for America 2016, 81). The answer certainly is that it was such a convenient fit, and was so congenial to the conservative conventional wisdom, that no one thought to examine it—or wanted to. Erskine Bowles (quoted in Rabin-Havt and Media Matters for America 2016, 88), for example, revealingly said that the errors did not change his views, because of his own “common sense,” and his experience that debt is always an “enormous risk factor.” Sometime later, John Cassidy (2013), a thoughtful and perceptive staff writer who deals with politics and economics for the New Yorker, wrote “The Reinhart and Rogoff Controversy: A Summing Up.” Pointing out what should have been obvious, Cassidy (2013) noted the “enormous damage to Reinhart and Rogoff’s credibility, and to the intellectual underpinnings of the austerity policies with which they are associated.”

Keep that key question above, and Cassidy’s observations below, in mind when we deal with cost aspects of planning policy. Although it may seem counterintuitive, it is irrational to be preoccupied with costs when crafting policy. What is important is to give priority to the overall effects of the expenditures, not to what their level will be, nor to how much the program will cost. The fundamental question should be: to what extent do the expenditures meet public needs; how will they affect the people? The obsession with Pay-as-You-Go may appear reasonable, but at the national level in reality it is based on the crumbling foundation of ideology, not on sound finance. The comment above from Bowles demonstrates that he does not appreciate the distinct difference between private finance—say, as applicable to a corporation—and that of a sovereign nation with control of its own currency. In that, he certainly is not alone. Virtually all Republican politicians, many Democrats, and TV “pundits” continue to raise fears as to how the country can pay for its programs. The late billionaire, Peter Peterson, was only the most prominent deficit hawk, there are others as well, but he founded, and funded, numerous organizations to encourage austerity, such as the Concord Coalition, the Peter G. Peterson Foundation, and Fix the Debt.

There are substantial differences between “family economics” and government financing at all levels. At the national level, however, the differences are so profound as to be entirely of a different order. Cities, counties, and states can overspend and run out of money. For many reasons, they must live within their budgets. They do depend upon taxation for funds to operate, at least partly, but they also borrow, as when they issue bonds. In addition, they receive huge amounts from the federal government. Certainly, they are limited in what they can spend by the amount of dollars available to them from taxation, plus funds from all other sources, including the U.S. government, and from borrowing.

That restriction on overspending literally does not, and cannot, apply to America’s national government, despite what budget hawks consistently warn. Cities, counties, states, and U.S. territories cannot create dollars to pay their bills (witness the economic distress of Puerto Rico, and the horrible consequences that it suffered, and continues to suffer, from Hurricane Maria as the Trump administration neglects its people, mentioning them, if at all, only to condemn). For example, Bloomberg News reported in January 2019 that “Puerto Ricans Seethe as Trump Considers Raiding Disaster Aid for Wall.” There still were “people living under tarps,” the article said (Rivera and Levin 2019).

At the national level, however, regardless of fevered comment from budget hawks, no economic circumstance, regardless of deficit or debt, could make the United States “become Greece,” or make its economy duplicate that of a country in the Euro zone. Bluntly put, it simply is not possible.

The United States creates dollars, and it uses dollars to pay its bills. Thus, since it controls the sovereign currency, it can always generate any number of dollars it needs. In fact—and this is so counterintuitive that it is difficult to make people understand, but will be explained below—at the national level, there is no necessary relationship at all between government spending and government income.

The Need for Regulation

The common, unsophisticated, American attitude toward “government” can make many people accept as plausible the most irrational of propositions. For example, there was no wave of vocal opposition to one of Mr. Trump’s policies, loudly stated when he assumed the presidency: his requirement that for every new regulation, two previous regulations should be eliminated.

The obvious assumption here is that the fewer the regulations, the better. Regulation, itself, goes the assumption, is bad. The functions regulations perform are irrelevant. The only important factor is the number of regulations, not their effect. This is the typically simpleminded Trump approach. Any observer who thought through the issue should have recognized that adopting a bad regulation while eliminating two good ones is poisonous policy. Bad regulations should of course be eliminated, regardless of whether a new one is considered. Unquestionably, there can be legitimate disagreement regarding the desirability of any given regulation—that is up to the political process to determine—but to assume that regulation per se is undesirable is beyond silly. Do people really want to risk e-coli or arsenic in their food, corrosive agents in their cosmetics, cribs that smother infants—or, one might ask, sleazy strip clubs in the midst of ultra-affluent, gated, residential neighborhoods? If not, then they should recognize the necessity of regulation.

The United States relies heavily on regulation, rather than on the practice of government ownership that prevails in socialist countries. Regulation is essential to provide the checks and balances that the Founders so revered. Privately owned corporations must be regulated to ensure that their pursuit of profit is not permitted to cause unlimited pollution, destruction of competition, elimination of personal freedom, and the like. An old, and sound, principle of political philosophy is that no person should be the judge in his or her own case.² Regarding corporations (whether legally “persons” or not), because of the vast power they exercise, permitting them to be judges in cases affecting them is even more dangerous than permitting individuals to be sole judges in their own cases. The obvious, and essential, answer is regulation.

Minimal Government

President Theodore Roosevelt—the “Republican Roosevelt,” as John Morton Blum (1954) famously described him in his landmark study—had no objection to wealth, nor to bigness. Nevertheless, he recognized the obvious truth that economic resources generate power. He, therefore, insisted that “malefactors of great wealth” must not be permitted to use their wealth to the detriment of the public good (Blum 1954). Hence, the vital importance of regulation. President Roosevelt was well aware that, without regulation, human beings—and most especially those with great potential power—could not be trusted to act appropriately, or in any way unselfishly. Government in a democratic republic is the one agency powerful enough to counter private corporate interests, and the only one that has a real potential to be responsive to the public will. Thus, power in government is essential.

Theodore Roosevelt was correct in decrying selfishness early in the 1900s. He was correct then, and human nature certainly has not now improved in the 21st century. Governmental regulation is a necessary part of the American political system. It is essential to protect the environment, to provide personal privacy, to ensure civil rights and civil liberties, to safeguard individual freedom, and to ensure that the economic system is compatible with political democracy. No well-meaning, reasonable, and well-informed, person could believe that it would be acceptable to have a society in which any agent, private or public, had the unlimited freedom to spread toxic wastes (including nuclear) into the air, soil, and water; to harass individuals or groups, or to destroy their lives; to prevent citizens in general from voting or from participating in civic affairs; to restrict their abilities to choose and practice their religions; to select their politics or criticize political leaders; or to have an economy that rewards only the elite, and forces all others to live at no more than subsistence levels. A free society that protects all thus requires regulation, and that requires—to use language from a key Founder, Hamilton—an energetic government.

It may sound heretical to American ears, but the best government does not govern the least. Even less does it govern not at all. The program designed with the foremost priority of operating at the lowest cost, rather than operating to provide the best service, will be a poor program. The program designed to operate with the highest priority given to the strongest police function—one that puts elimination of waste, fraud, and the like ahead of providing benefits to the people—will be a harsh program. The voting requirements designed primarily to make it the most difficult to vote, rather than making it the easiest, will be the least democratic and thus will subvert democracy itself. A democratic system will ensure that the maximum number of people can vote, that voting will be easy, simple, and accessible. The purpose of voting in a democracy is to obtain votes from the largest number of people. Of course, the system should be designed to discourage fraud, eliminating it if possible, but harsh penalties in individual cases can never be justified. The purpose of voting is to hear from the most people. If the system operates otherwise, if it puts any goal above providing easy and convenient access to the ballot, the result will be to suppress the people; that clearly is the result whenever any “anti-fraud” measure discourages qualified citizens from voting.

The government that governs least, then, is like the program designed for efficiency first, rather than for policy purposes. It is like the program designed primarily to make sure that every participant follows the rules, rather than the one designed to hear from, and to benefit, the greatest number. Such a government, the one that governs least, is a government almost assuredly designed to function badly.

Program Planning Should Ignore Costs

Could anything be more counterintuitive than to ignore costs when planning a program? Regardless, the more program planning involves costs, the less satisfactory any resulting program is likely to be. Considering costs during program planning inevitably causes inferior programs, or worse, prevents programs even from going beyond the consideration stage. To achieve the best programs, it is essential actually to plan for the best programs, and that means to ignore the bean counters.

This is not the first statement of this principle: a principle that is valid, however much it may be counterintuitive. An excellent example may be seen in the recent, and most thoughtful, work co-authored by David Blumenthal, a physician and health administrator, and James A. Morone, a political scientist. In the Heart of Power, Blumenthal and Morone (2010) studied the manner in which various presidents dealt with health policy and questions of health care. They asserted, correctly, that “many American presidents have dealt with health care issues, but none with LBJ’s passion” (Blumenthal and Morone 2010, 165). He did it in such a way as to provide health care that several of his predecessors wanted, but none had achieved. Moreover, his Medicare program went far beyond health care. It delivered a powerful blow against racial segregation in a south that was still reeling from his Civil Rights Act. It was Medicare that desegregated hospitals throughout the old Confederacy. Lyndon Johnson achieved what he did because of passion and skill, and because, over and over again, as Blumenthal and Morone stress, he “muzzled his economists.” He forbade his staff from dealing with numbers, and directed them to ignore long-term costs. “The net effect was to say”: they wrote, “Let’s do expanded coverage now, and worry about how to afford it later” (Blumenthal and Morone 2010, 204).

Stephanie Kelton, a brilliant economist and the leading exponent of Modern Monetary Theory, recently (along with co-authors Andres Bernal and Greg Carlock) puts the same principle in blunt terms when dealing with a different subject: the proposal for a “green New Deal” (Kelton, Bernal, and Carlock 2018). Their piece in Huffington Post dealt with efforts to combat climate change, but made it clear that the point is valid across the board.

Anything that is technically feasible is financially affordable. And it won’t be a drag on the economy—unlike the climate crisis itself, which will cause billions of dollars’ worth of damage to the economy. . . . We must give up our obsession with trying to “pay” for everything with new revenue or spending cuts. (Kelton, Bernal, and Carlock 2018)

To be sure, taxes can be important. They can “shape incentives and help change behaviors within the private sector. Taxes should be raised to break up concentrations of wealth and income, and to punish polluters.” This can be useful “not because we need ‘to pay for it’ but to end polluters’ harmful behavior” (Kelton, Bernal, and Carlock 2018).

Lest this seems impracticable, leading to the unsustainable, there are two notable examples that clearly demonstrate the contrary, that Kelton and her co-authors are correct when they say that “anything that is technically feasible is financially affordable” (Kelton, Bernal, and Carlock 2018, emphasis added). As the second example indicates, certain segments of American government actually have operated this way for decades.

First, let us examine Medicare Part D, the prescription drug benefit that became law under the George W. Bush administration. Democrats had supported drug benefit programs previously; President Clinton, for example, had proposed it in 2000. It was not adopted until President Bush signed it into law in December 2003. Democrats then opposed the Bush plan, because Bush pushed his measure through Congress with no provision for financing. It passed only because Republicans had control of both the House and the Senate, and the Bush administration used procedural maneuvers to coerce Republican budget hawks, and to overpower the minority Democrats.

It was an awkward plan, and clearly was designed to provide a windfall to Big Pharma. It also incorporated the irrational, and strange, “doughnut hole” that halted all benefits temporarily for beneficiaries after they had received a certain amount of benefits. These flaws, however, can be corrected. In fact, the Affordable Care Act (the infamous—but quite beneficial—“Obamacare”) is actually closing that doughnut hole. One may consider the flaws to be a form of “collateral damage,” because after a clumsy beginning the program began to work well, and in any case provides a huge and very valuable benefit to millions of beneficiaries. The flawed program is filling a gap that badly needed filling. The Democrats were correct that it was an enormously expensive benefit that had no funding mechanism attached. In retrospect, however, they were wrong to have opposed it. To be sure, a better program could easily have been designed, but to have insisted on funding would likely have caused the program to fail, despite majority party support. The benefits Part D provides make it worth accepting flaws that can be corrected. Moreover, there is no doubt that the economy can “afford” it, as the discussion below will demonstrate.

The second example comes from military expenditures since the Second World War. Certainly, there have been complaints regarding waste of money, and certainly a budget hawk now and then protests. In general, however, “normal” budgeting has not been applied. Never does Congress allocate a certain level of spending, and order the Pentagon to work rigidly within those limits. Instead, Congress more or less funds whatever the military requests, with some occasional reductions. The result has been astronomical deficits, especially since the Reagan administration. Regardless of President Reagan’s assertion as a candidate that he would “balance the budget,” his policies generated the highest deficits in history up to that time. He added US$1.86 trillion to the debt; the first such addition in the trillions, although he was third in percentage terms, with F. D. Roosevelt (Depression and Second World War) ranking first, and Wilson (First World War), second (see Amadeo 2019)—and not once (despite hypocritically calling for a balanced budget constitutional amendment, which, fortunately for the country was never seriously considered) were any of the budgets he submitted to Congress ever balanced.

Thus, those who argue that it is essential to “pay as you go,” and that no other way is sustainable, completely ignore military funding; in fact, they completely ignore the realities of national government finance. Vice President Cheney is not an authority most liberals would be comfortable citing, but when he was reported to have said something to the effect that “President Reagan proved that deficits don’t matter” (CBS News 2004) he essentially was correct. Never mind that this violates all dogma of American political parties—especially conservative, and most especially Republican conservative, dogma.

Disregarding the risks of repetition, I shall take the liberty of quoting myself when I made this argument recently in another article. My point was to argue against “economic fundamentalism.” I believe that consideration sufficiently important to be brought into this discussion:

When cost is the prime criterion, any resulting program is likely to be entirely inadequate. As counterintuitive as it sounds, the way to achieve good programs is to plan the program that best meets the needs, and only then plan for cost; cost is a secondary consideration.

This will be resisted strongly. Every dollar the government spends, say the economic fundamentalists (and, one must concede, most others as well), must come from taxing the people, or else from borrowing, thus running at a deficit. Not putting costs first, they argue, is irresponsible, and would create a situation that is unsustainable. The answer to this is simple, and should be obvious: concentrate on outcomes, all things considered.

First, examine Medicare, Part D . . .

Second, consider military expenditures. The very people who would argue that costs must be demonstrated to be “sustainable” when planning for social legislation never think to provide a set sum to the Department of Defense, and then say “work within those limits.” Rather, the practice always has been—at least since it began during the Second World War—to provide the military with that which military officials say they need, and worry about paying for it later, if at all.

The security of the American people, in other words, is deemed important enough to violate the principles of economic fundamentalism. Certainly, one should think, the health security and economic security of the people are equally important and thus should be considered accordingly. (Skidmore 2018, 524–42)

Programs Whenever Possible Should be Universal

Programs targeted at the poor, or any deprived group, tend to have difficulties that universal programs almost never have to face. Programs for all automatically have an enormous constituency. Those aimed solely at redressing deprivation specific to some group are unlikely to have strong, organized, support. Any group consisting of the poor, the deprived, or otherwise made up of those requiring remedial measures, tends by definition to be relatively powerless. Certainly, such a group is unlikely to be organized, or to have significant political power. Thus, programs designed for them are almost assuredly destined to fall behind inflation, to be vulnerable to benefit reductions, and even to be in danger of elimination.

Social Security and Medicare are consistently popular; they benefit virtually everyone. No one has to demonstrate “need,” or to undergo humiliating procedures that surrender all pretense of privacy and dismantle any semblance of dignity to secure benefits. Thus, there is no stigma associated with using benefits from Medicare, or receiving payments from Social Security. Everyone is part of the group; no one is cast out as “the other.”

The moral here is that, insofar as possible, all programs should be open to all, and should welcome all. Benefits should be considered to be a part of human rights. Their goal should be maximum benefit, and not minimum cost. Social Security, for example, was not designed specifically for the poor; it was designed for all, and continues to function as intended. Regardless, it clearly is the largest anti-poverty program in the country’s history. The point is that a program can be designed to provide broad benefits, and can at the same time significantly improve the status of a specific group, all the while maintaining broad popular support.

It’s NOT “The Taxpayers’ Money”

It is tempting to assume that when government spends, it is spending “the taxpayer’s money.” Politicians piously profess to safeguard what they always identify as that “taxpayers’ money,” especially those conservatives who vote repeatedly to reduce taxes on the wealthy—asserting all the while that the sharp tax cuts will be “revenue neutral” and will “pay for themselves.” When the inevitable happens and the cuts generate budget deficits, they then have an excuse to call for reductions in Social Security, Medicare, and various “entitlements” that work to enrich the lives of ordinary citizens, as opposed to the very wealthy. A simple glance at history will demonstrate that this has been a regular pattern with Republicans since the Reagan presidency. Reagan pioneered it, George W. Bush followed it, and it now is happening under a Trump White House.

Government spending does not require money from the taxpayers. If the national government has the power to create as many dollars as it wishes—and it does—then receiving a flood of taxpayer funds does not increase its capacity to do so; nor, conversely, does a lack of taxpayer funds reduce its ability to generate dollars as it needs them. Every time the U.S. government spends, it creates money. When it receives money in taxes, it takes money out of the system, thus effectively destroying it.

Kelton and her colleagues put it this way:

As a monopoly supplier of U.S. currency with full financial sovereignty, the federal government is not like a household or even a business. When Congress authorizes spending, it sets off a sequence of actions. Federal agencies, such as the Department of Defense or Department of Energy, enter into contracts and begin spending. As the checks go out, the government’s bank—the Federal Reserve—clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money.

This is precisely how we paid for the first New Deal. The government didn’t go out and collect money—by taxing and borrowing—because the economy had collapsed and no one had any money (except the oligarchs). The government hired millions of people across various New Deal programs and paid them with a massive infusion of new spending that Congress authorized in the budget. FDR didn’t need to “find the money,” he needed to find the votes. We can do the same for a Green New Deal. (Kelton, Bernal, and Carlock 2018)

She and her colleagues are correct. We could, and should, do the same for the Green New Deal. We could, and also should, go beyond that.

We should do the same for what FDR called for in his State of the Union message of 1944, an “economic bill of rights”; one that provided as a right, universal programs of health care, education (including higher education and training in trades), well-paying jobs for all who want to work, decent housing, and the like (Roosevelt 1944).

To add to FDR’s list, we could, and should, resuscitate America’s postal system, and do as many other countries do, charge it with providing basic banking services, especially to those with very little income, and perhaps charge it with regulating broadcast and other electronic communication media. Not everyone today can get a bank account, and middle-class people generally have no idea how difficult it can be in a modern economy to function without one. Such a system would permit lower income groups to participate in the economy to a degree not currently possible, and would supersede the ineffable, and inexcusable, payday loan industry. Clearly, some of Trump’s top economic officials are out of touch with today’s realities. Wilbur Ross, the secretary of commerce, recently indicated that he was puzzled as to why federal workers going without paychecks during the government shutdown would go to food banks, instead of merely “getting loans” from a bank. And Larry Kudlow, the economic adviser said the shutdown was “just a glitch” (see Rucker, Dawsey, and Paletta 2019).

In view of today’s pressing needs, when an unbelievably heavy burden is placed on both personal finances and the economy in general by student loan debt—greater, in the aggregate even than the amount owed on credit cards—we could easily, and should, buy up, and pay off, student loans. If lenders profit, so be it; heavier taxes on the wealthy could redress that imbalance. There could also be subsidies to those who have already paid off their loans to prevent their outrage at others receiving a benefit not then available to them. Purchasing student debt would ease pressure on the economy and directly benefit millions, while providing an economic stimulus.

But, what about inflation? Kelton and her colleagues explain that “despite lawmakers’ stated fears, larger public deficits are not inherently inflationary. As long as government spending doesn’t cap out the full productive capacity of the economy . . . it won’t spin prices out of control” (Kelton, Bernal, and Carlock 2018).

Social insurance programs, such as Social Security and much of Medicare, may be seen as an exception because they were created to stand alone, and to tie their benefits specifically to trust fund income. At the instant they receive dollars from payroll taxes, destroying them, they simultaneously add new ones to the trust funds, creating new ones, as though they merely flowed from taxpayers into trust funds. This is not necessary to successful systems, but does have a useful purpose in creating a sense of ownership of the benefits for which a beneficiary has paid, and in providing some restraints on politicians who might wish to harm or even eliminate the programs. Such restraints have obviously become less effective as the Republican Party has become more ideological, and as opponents of social insurance have convinced some of the public that the highly successful programs are “unsustainable” without drastic revisions—always in the form of benefit cuts, or program elimination.

Language is vital, and the manner in which the people use language matters. Consistently describing government payments as “The Taxpayer’s Money” serves to create resentment among taxpayers, who then quite understandably assume they are bearing the costs of benefits to others, many of whom they may dislike. Equally damaging is the devious description of any lowering of taxes as “tax relief,” thus implying that the taxed are suffering under a monstrous burden from which they need “relief.” A comparison of U.S. taxation with that in other advanced countries demonstrates that Americans pay at a relatively low level, even when all state, local, and payroll taxes are added to the national income tax. The Tax Policy Center of the Urban Institute and the Brookings Institution, for example, said as follows:

US taxes are low relative to those in other developed countries. In 2015, taxes at all levels of US government represented 26 percent of gross domestic product (GDP), compared with an average of 33 percent for the 35 member countries of the Organisation for Economic Co-operation and Development (OECD).

Among OECD countries, only Korea, Turkey, Ireland, Chile, and Mexico collected less than the United States as a percentage of GDP. Taxes exceeded 40 percent of GDP in seven European countries, including Denmark and France, where taxes were greater than 45 percent of GDP. But those countries generally provide more extensive government services than the United States does. (Tax Policy Center 2016)

Halting all benefits would not automatically eliminate taxes, nor would doubling, tripling, or any measure of benefit increases automatically raise them. This certainly would not eliminate all economic resentment, much of which is based directly on racial or religious prejudice, but it could make those prejudices more obvious—and, one may hope, make them socially unacceptable.

Conservative policies, as defined by Americans who call themselves conservative, have demonstrated time after time that they are extremely difficult, often impossible, to implement. When implemented, they satisfy no one, least of all their adherents. That is why I wrote Unworkable Conservatism (Skidmore 2017). Some of us are old enough to remember that even during the administration of the patron saint of modern American conservatism, Ronald Reagan, the pleas of his disappointed supporters, who could not bring themselves to criticize Saint Ronald directly, were that his advisers should “let Reagan be Reagan.”

The chaos of the Trump administration demonstrates that change certainly is needed. The 2018 election results suggest that change may be on the way. If it comes, and if the changes are in the direction suggested here, the political economy of the United States, and its public policies, will at last be reengineered to benefit the whole people of the United States, not the most powerful of economic elites, nor the fiercest of its ideologues.

Footnotes

1

See, for example, Bloomberg TV’s “conservative economic historian,” Niall Ferguson, quoted in , 76).

2

Nemo iudex in causa sua (“no man should be a judge in his own case”), most famously expressed in Locke’s Second Treatise.

About the Author

Max J. Skidmore, Curators’ Distinguished Professor, University of Missouri–Kansas City, has been Senior Fulbright Scholar, University of Hong Kong; and Distinguished Fulbright Lecturer to India (directing the American Studies Research Center and editing the Indian Journal of American Studies). He is the founding editor of the journal Poverty & Public Policy, and publishes widely in the United States and abroad. His most recent books are Maligned Presidents (Palgrave, 2014); Bulwarks Against Poverty (Westphalia, 2014); Poverty in America (Westphalia, 2015); Presidents, Pandemics, and Politics (Palgrave, 2016); Unworkable Conservatism (Westphalia, 2017); and, with John Dixon, Donald J. Trump’s Presidency (Westphalia, 2018).

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