Not Your Father's Republicans, Part N

I've recently hit upon a way of describing the problems of the current Republican Party (actually, I devised this when talking politics with someone who got paired with me and my dad for a round of golf the other day). In the past, you could describe the party as being basically the Capitalism 101 Republicans. That is to say, standard introductory economics textbooks are often filled with lots of paeans to the way that free markets work, and assorted well-intentioned but misguided liberal schemes for interfering with the market to help people would end up being problematic. For instance, the standard little diagrams about how minimum wages or rent control do more harm than good. Combined with an implicit understanding that maximizing real GDP is the only valid economic policy goal, i.e. turning a blind eye to any and all issues of distribution, this leads us to a kind of standard right-of-center platform.


Modern Republicans are not like this. Their conservative economics are almost entirely divorced from this kind of Capitalism 101 platform. It becomes sloganeering: government bad, free markets (meaning lack of government regulation, which isn't really the same thing!) good, inflation bad, strong dollar good, etc. The Fed is evil! Et cetera. Well, a recent quote from Charles Koch that's making the rounds reminds me of this tendency to abandon the simple "let's just be good capitalists" philosophy. In response to Warren Buffett's plea for higher taxes on, well, himself:

"Much of what the government spends money on does more harm than good; this is particularly true over the past several years with the massive uncontrolled increase in government spending. I believe my business and non-profit investments are much more beneficial to societal well-being than sending more money to Washington."

His argument here, and it's one I remember hearing George W. Bush make, is that the money he makes does more good in his private coffers than if it gets sent to the federal Treasury and used to fund whatever it is that the government does. This is not the explanation for being skeptical of high tax burdens that I remember from my intro econ book (written by Greg Mankiw, a perfect example of a Capitalism 101 Republican, I'd say). Indeed, when calculating the gains or losses from imposing certain kinds of taxes (and it did almost always add up to a loss), my econ book declared that it couldn't care less whether a given dollar went to a consumer/producer as surplus from a transaction or to the government as a tax dollar. The point was that taxation of economic activity reduces economic activity. If you levy a consumption tax, then some people won't make purchases they otherwise would have. If you levy an income tax, then (supposedly) some people decide to work less than they otherwise would (though I doubt this very much). The problem isn't at all that the government can't make good use of your tax dollars, it's that in order to collect those tax dollars it needs to create incentives against economic activity. (Barring the poll tax, that is, but such things are seen correctly as being wildly unfair these days.)

Actually, this feeds into an earlier point I made about how conservatives have gotten "size of government," which ought to be measured in units of liberty, and "government spending," obviously measured in dollars, confused. Government, we are told, is bad, and we should want as little of it as possible. Moreover, we should measure the size of government not by what it does but by how much money it spends. Therefore, an increase in government spending is bad. Therefore, Charles Koch is right that his tax dollars would be better spent by him, because after being taken by the IRS they serve only to increase the size of government (spending) and in so doing, destroying our liberty!!!

A Capitalism 101 Republican would not see things this way. Instead, they would say that a great many forms of government regulation are a bad idea. Rent control, pesky environmental laws, etc., all distort the market and slow economic growth. The government shouldn't do them. Likewise, a Capitalism 101 Republican might think that for the government to attempt to generate too much tax revenue is unwise, and will likewise become an impediment to growth especially if those taxes are designed poorly. Therefore, this person would probably agree that all else being equal it's nice if government spending is rather modest compared to the size of the economy. But you wouldn't confuse the aversion to big-government regulation and the aversion to big-government spending. Spending on good things is still good, as long as you can get the money without undue harm to the economy. And individuals don't have any inherent right to their money (that's a question for political theorists, after all!), and nor are they presumed to spend their money in ways that are better for the world than if the government spends those same dollars. The tax code should be set up not to maximally allow people to keep their own money and spend it wisely, but to maximally balance the desire to fulfill certain (costly) communal needs through the government and the desire for economic growth.

Just a thought.