Tax Analysts Blog

Experts and Inequality

Posted on May 15, 2009

In a recent article for the American Prospect, executive editor Mark Schmitt considers the role of experts in American politics. Specifically, he mulls President John F. Kennedy’s penchant for technocratic governance. Like many before him, he judges it a mixed blessing.

Some of Kennedy’s most notable failures, including the war in Vietnam, found their roots in technocracy. But so did some of his achievements. Schmitt cites, in particular, Kennedy’s embrace of Keynesian economics – solid science by the early 1960s, but still tenuous politics.

In Kennedy’s day, fiscal orthodoxy of the Calvin Coolidge variety retained a powerful grip on the public mind. Despite decades of research extolling the virtues of a thoughtful (and activist) fiscal policy, many Americans clung to the notion that the only good budget was a balanced one. As Kennedy told an audience at Yale University:

      The myth persists that Federal deficits create inflation and budget surpluses prevent it. Yet sizeable budget surpluses after the war did not prevent inflation, and persistent deficits for the last several years have not upset our basic price stability. Obviously deficits are sometimes dangerous--and so are surpluses. But honest assessment plainly requires a more sophisticated view than the old and automatic cliche that deficits automatically bring inflation.

Kennedy won the argument for activist fiscal policy, at least over the short run. As many observers have pointed out, we’re all Keynesians now. (At least most of us – GOP congressional leaders seem to harbor nostalgia for atavistic orthodoxies.)

But if the economic eggheads have carried the day in debates over countercyclical budgeting, how have they done on narrower questions of taxation? Do they rule the roost?

Not so much. Tax politics have remained a bastion of democracy, even as tax complexity has made the revenue system incomprehensible to nearly everyone. Indeed, complexity can be explained, at least in part, by the popular penchant for meddling with the tax laws. (There are lots of other explanations, too, like the growing financial and commercial complexity of the globalized world, but tax fiddling is a big part, too.)

Left to themselves, tax technocrats would craft a simple tax system – or at least a simpler one than we have today. They would resist the use of taxes to achieve most non-revenue goals (with a few important exceptions, like combating global warming). They might even prove less susceptible to the special pleading by narrow interests and paid lobbyists.

But the dispassionate, apolitical approach to tax policy – were it even politically possible – is not desirable. Many of the most important questions surrounding taxation are not susceptible to rigorous scientific analysis. In particular, issues of vertical equity are notoriously difficult to de-politicize. If history is any guide, redistribution is a vital and inevitable part of the American tax system. But settling on the degree of redistribution is an aesthetic, not a scientific, task. As the economist Henry Simons observed in 1938:

      The case for drastic progression in taxation must be rested on the case against inequality – on the ethical or aesthetic judgment that the prevailing distribution of wealth and income reveals a degree (and/or kind) of inequality which is distinctly evil or unlovely.

Experts have a vital contribution to make to debates over inequality. But only politicians can decide when the status quo has become sufficiently “unlovely” to justify a policy response. (Which is why the our Founders decreed that the formulation of tax policy should be dominated by the House of Representatives, the most representative of our three branches.)

The democratic nature of tax policymaking comes at an undeniable cost. Our tax system is more complex and less evenhanded than it probably would be if we handed it over to the experts.

But it would also be less fair, at least when measured by the only standard that matters: public opinion.

Read Comments (1)

Martin A. Sullivan's pictureMartin A. SullivanMay 15, 2009

Joe: You are right to say "economic eggheads" should play a limited role in
policy questions about inequality. In fact, one of the first things they teach
you at economics school is the difference between normative economics
(involving moral and philosophical issues) and positive economics (efficiency
issues), and about how little economics can contribute to the former. Sadly,
many economists pretend to be proffering economic wisdom when it really they
are only dishing out personal opinion or political bias in an economic wrapper.
You probably won't like this but I'll say it anyway: On most major policy
issues there is not enough economics in the debate. Economists--who fear being
called names like "egghead"--will often limit discussions to what they think
are politically realistic possibilities. They don't want to be considered

(I can remember former Ways and Means Committee Chairman Thomas chastising
policy wonks for not offering proposals he could actually use.) But the job of
the economist should not be to pre-filter the message for political relevance.
That's the politicians job.

The economist should educate to the point of nagging: The mortgage interest
deduction should be repealed, the gasoline tax should be one or two dollars a
gallon higher, etc. Sorry, nobody wants to hear things like that. But
unpleasant truths are still true. If economists don't continue to beat on
gross inefficiencies in our system, they give sleepy politicians an easy out
and they deny the few dynamic ones the opportunity to challenge of the status
quo. Of course public opinion and popular politics will--and should-- prevail.
But the public and politicians should always be reminded that much of what they
consider sacred comes at an economic cost.

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