Tax Analysts Blog

Liberals Should Take the Credit – And the Blame – for Big Government

Posted on Mar 9, 2017

Say you’re a liberal sort of politician and you want to build a durable government program. Is there some kind of formula for success? 

 “Keep it simple. Take credit.” That’s the advice of Jack Meserve, managing editor of Democracy. In a recent article for the magazine, Meserve tried to help Democrats make sense of Obamacare and its possible/probable/imminent demise.

 “The tendency to muddle and mask benefits has become endemic to center-left politics,” Meserve wrote. “Either Democrats complicate their initiatives enough to be inscrutable to anyone who doesn’t love reading hours of explainers on public policy, or else they don’t take credit for the few simple policies they do enact.”

Whatever you think of Obamacare on the merits, it’s hard to argue with that indictment. If you believe the polls, the Affordable Care Act is more popular today than ever before.  But what that really means is that the law is less unpopular than it once was: It still struggles to break 50 percent in many surveys.

The political failure of Obamacare is partly a function of poor messaging. Some of the ACA’s most popular elements – including the extension of coverage to adult children under 26, the coverage requirements for preexisting conditions, and the limits on age-rating of premiums – are only loosely associated with the rest of the law (which is typically, and reasonably, understood in terms of its principal achievement: the expansion of coverage to millions of previously uninsured Americans).

But the law’s political failure is also a function of the ACA’s basic design, which makes it reasonably easy to buy insurance but remarkably hard to figure out whether you qualify for tax credits to pay for it.

Similar failures have plagued other Democratic policy achievements during the last several decades. Meserve is particularly scathing when it comes to tax expenditures, which Democrats have used to advance a range of liberal causes, from education to retirement saving to child care.

These are all worthy concerns, but apparently not worthy enough to justify direct spending. Afraid to make the case on the spending side of the budget, Democrats have chosen instead to rely on tax incentives – even when direct spending might be more efficient.

Of course, tax expenditures became popular with Democrats out of necessity, not choice. After Ronald Reagan recast the contours of American politics, it became much harder to fund new spending with new taxes. (Unless, of course, those new taxes were aimed narrowly at wealthy taxpayers.) For more than a generation, tax expenditures have been the only train leaving the station.

Backdoor spending is usually bad policy and almost always bad politics. Among other things, it is always complicated. “Instead of making retirement benefits more generous,” Meserve wrote, “or college cheaper, or health care universal, we’ve created accounts upon accounts, each of which you have to have enough money to contribute to, remember to pay into, and jump through all sorts of other hoops to maintain.”

Meserve urges Democrats to radically simplify their approach to policymaking. No more savings accounts, no more cleverly hidden help that people won’t even notice, no more tax-preferenced, means-tested, government-monitored, website-reliant, bronze/gold/platinum-benefits-so-long-as-you-apply-during-open-enrollment. Just give people the stuff they need.

That’s probably good advice, but it’s not enough. Democrats should certainly simplify their approach to building social programs; they should make visibility a priority, not an afterthought.

But would-be builders of a larger welfare state should also take ownership of the costs associated with new programs. It may seem like political genius to trumpet benefits while obscuring price tags, but it’s just the opposite. People value things they pay for – and they don’t value the things they get for free. That can be a problem when new programs come under attack. After all, if something isn’t worth paying for in the first place, it’s probably not worth defending, either.

That’s why the most durable elements of the American welfare state have all had dedicated taxes associated with them. Think Social Security most obviously, but also Medicare. Neither program has been completely “bought and paid for” by its beneficiaries. (Medicare in particular was designed from the start to rely heavily on general revenues, as well as its earmarked payroll tax.) But both Social Security and Medicare have always required a meaningful – and visible – contribution from beneficiaries. And the sacrifice inherent in that contribution has helped sustain both programs for decades.

Economists are often skeptical of “benefit” arguments as a foundation for modern governance; too many state functions are hard to value, and it’s even harder to allocate costs among taxpayers. But that doesn’t mean politicians can ignore the link between taxes paid and benefits received. At its heart, the social compact that underlies fiscal policy (and government itself) is a value proposition. 

Voters pay taxes, as Oliver Wendell Holmes famously observed, to buy “civilization.” Originally, that civilization was defined somewhat narrowly: national defense, law enforcement, and other vital services. But in the 20th century, “civilization” has come to include a wide range of social programs. And these things, too, have to be paid for with taxes.

By hiding that uncomfortable truth, liberals in the late 20th and early 21st century have eroded the value proposition that might otherwise sustain their view of government and social welfare. They may learn to regret their timidity – if they don’t already.

Read Comments (1)

Mike55Mar 10, 2017

Great article, containing excellent advice for left-leaning policy makers. As good as all of this is, I don't think it could have saved Obamacare.

Perhaps moderates would have accepted a new/expanded government program to subsidize the healthcare costs of sick people. That's not what Obamacare does. Obamacare transfers wealth to HEALTHY people on the basis that, statistically, several of them will become sick in the future. That is a bridge too far for moderates and always will be. It doesn't matter how simple you make it, or how you pay for it, or even how you brand it; the underlying premise fails.

Obamacare supporters have of course developed a counter-argument to my point, which can be paraphrased as follows: "it's too expensive to help people only AFTER they get sick -- preventive care is much cheaper than catastrophic care -- so subsidized insurance is the only option." This assumes subsidized healthcare is mandatory. It's not. Even if one accepts the premise that inequality has grown unsustainably large so greater wealth transfers are required, there's zero reason the form of those transfers must be healthcare subsidies. Here in the U.S. there's still plenty of "whitespace" for progressive transfers (education, housing, etc.), making the "but this is the only way!" argument a complete non-starter.

But again, great ideas generally that apply to pretty much anything and everything except Obamacare.

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