Could This be a 1946 Election?

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When it comes to Congressional Elections, the foremost expert in the country is Michael Barone who has been studying these elections district by district for 50 years.  His Almanac of American Politics, which you may browse on line here , is the reference work for political professionals and political junkies.   He sees signs that the Congressional elections this year might resemble the Republican sweep in 1946.

Recent polls tell me that the Democratic Party is in the worst shape I have seen during my 50 years of following politics closely. So I thought it would be interesting to look back at the biggest Republican victory of the last 80 years, the off-year election of 1946. Republicans in that election gained 13 seats in the Senate and emerged with a 51–45 majority there, the largest majority that they enjoyed between 1930 and 1980. And they gained 55 seats in the House, giving them a 246–188 majority in that body, the largest majority they have held since 1930. The popular vote for the House was 53% Republican and 44% Democratic, a bigger margin than Republicans have won ever since. And that’s even more impressive when you consider that in 1946 Republicans did not seriously contest most seats in the South. In the 11 states that had been part of the Confederacy, Democrats won 103 of 105 seats and Republicans won only 2 seats in east Tennessee. In the 37 non-Confederate states, in contrast, Republicans won 246 of 330 seats, compared to only 85 for Democrats.

There are some intriguing similarities between the political situation in 1946 and the political situation today.

First, Democrats were promising (or threatening) to vastly increase the size and scope of government. Government’s share of gross domestic product had risen to over 40% in World War II, and it was obvious that there would be some scaling back. At the same time, the Allied victory in World War II had enhanced the prestige of the state, just as the 1930s Depression weakened faith in free markets. In Britain, the 1942 Beveridge Report urged creating a welfare state after the war, and the Labour Party won a resounding victory in the July 1945 election and promptly proceeded to adopt the Beveridge recommendations and more.

In the United States, Franklin Roosevelt in his January 1944 State of the Union address echoed the Beveridge Report. As I pointed out in my 1990 book Our Country: The Shaping of America from Roosevelt to Reagan, he called for “steeply graduated taxes, government controls on crop prices and food prices [and] continued controls on wages . . . Government should guarantee everyone a job, an education, and clothing, housing, medical care, and financial security against the risks of old age and sickness.” “True individual freedom,” Roosevelt said, “cannot exist without economic security and independence.”

Roosevelt, who declared after Pearl Harbor that he was no longer Dr. New Deal but was now Dr. Win the War, was clearly contemplating returning to his former role after the war was over. This despite the fact that in his second term the New Deal was proving unpopular. Gallup polls from 1937 to 1940 saw majorities opposing Roosevelt’s never-enacted “Third New Deal” and supporting cuts in government spending, favoring curbs in the power of labor unions, and opposing welfare programs. Majorities said that New Deal programs were deterring businesses from creating jobs. Roosevelt was evidently calculating that government’s success in the war effort would transform public opinion, as it indeed did in Britain.

His successor Harry Truman took the same view. In September 1945, less than a month after the surrender of Japan, he called for continued price controls, a full-employment bill, a higher minimum wage, a public- and private-housing bill, and only limited cuts in the high wartime tax rates. In December 1945 he called for national health insurance.

The Congress elected in 1944 had Democratic majorities in the Senate (57–38) and the House (242–191). But relatively few of these Democrats were ardent New Dealers. Most Southern Democrats favored farm price supports but opposed much of the rest of the New Deal agenda—and were adamantly opposed to Truman’s call to make permanent the wartime Fair Employment Practices Committee. Many Northern Democrats were products of big city machines with no firm commitments on public policy. Other Northern Democrats were from rural areas that had supported the more Jeffersonian, pre-Roosevelt Democratic Party but opposed big-government programs. As a result, little of the Roosevelt-Truman policy agenda became law. Congress did pass the full-employment bill in 1946, which established the president’s Council of Economic Advisers and contained language that suggested but did not require the government to run budget deficits to maintain full employment. The minimum wage was not increased, the housing bill failed to pass, and Congress did not seriously consider government-provided healthcare.

One price controls Truman and the Democratic Congress wavered. Truman removed controls on building materials in September 1945 and reimposed them in December. Meat rationing was discontinued in December 1945. Truman got Congress to continue the Office of Price Administration past its expiration date of June 1946, but the government wobbled on meat price controls. The law lifted them from June to August, then reimposed them—leading to a meat shortage and much public opposition, which prompted Truman to lift them again in October 1946.

The similarities between the policy choices facing Congress in 1945–1946 and those facing it in 2009–2010 are obviously far from exact. Nevertheless, there are some. In both cases a Democratic president was proposing and a Democratic Congress was considering proposals to substantially increase the size and scope of government beyond previous peacetime limits. The Democratic 79th Congress did not come as close to passing such proposals as the more heavily Democratic 111th Congress has done, but the prospect existed then as it does now that a more heavily Democratic Congress might do so.

The second similarity is that the Democrats in 1945–1946 were closely allied with labor unions, which were deeply involved in politics and were avidly seeking more members and more bargaining power. At the end of World War II, labor unions represented 27% of the civilian labor force, up from 7% in 1934. This was primarily the result of government action. The Wagner Act passed in 1935 stimulated the growth of Congress of Industrial Organizations (CIO) unions, which through sitdown strikes (which were plainly illegal) and other tactics organized the major auto, steel, and tire manufacturers between 1937 and 1941. Wartime government regulations encouraged unionization in defense industries. Wartime regulations banned strikes, and John L. Lewis’s United Mineworkers was the only union to defy it. But after the war, anticipating inflation, union leaders demanded sharply higher wages and workers went out on strike. The United Steelworkers got a handsome settlement in February 1946, the United Auto Workers (UAW) did so in March, and in April the railroad unions and the United Mineworkers went out on strike. Truman called for a law allowing the drafting of strikers in May but vetoed legislation to restrict unions’ powers in June. The number one strike year in American history turned out to be 1946. Some 4.6 million workers, more than 10% of the work force, were on strike at one point or another during the year, and strikes accounted for 1.4% of total working time—more than double those in the next highest years, which at that point were all in the future.

Go here to The American to read the rest.

Barone ends his article with this observation:  The parallels between the political situation in 1946 and 2010 are limited but instructive. Americans once again are faced with proposals that would vastly expand the size and scope of government. And they are faced by proposals to increase the power of labor unions. Public opinion polls show that in 2010, as in 1946, most Americans reject such policies. Republicans in 1946 were prepared to advance policies that turned America away from such policies. The question is whether Republicans in 2010, with the prospect but not the assurance, of winning a majority in the House and perhaps a majority in the Senate, are similarly prepared.

I actually think the Republicans, if the economy stays in the tank, could gain more than 55 House seats.  Of course, winning the election in November will be only the start of the challenge for the Republicans.  They must perform if they gain control of Congress.  A majority of the public clearly are dissatisfied with Democrat rule.  The country is experiencing hard times and the public mood will demand performance from the Republicans or 2012 could be as bad for the GOP as 2010 will be good.  Business as usual will not cut it in these increasingly turbulent times.

42 Responses to Could This be a 1946 Election?

  • Donald R. McClarey says:

    Force Obama to veto popular legislation time and again. This is assuming that Obama does not do a Bill Clinton and trim his sales as Clinton did after 94. I doubt he will. I think Obama is far more ideologically driven than Clinton who, I think, was only committed to Bill Clinton. If Obama is willing to work with a Republican Congress on fiscally responsible legislation then they should work with him, while dodging the flying pigs.

  • My concern, though, would be: Do the Republicans actually have lots of popular legislation to pass (and force Obama to veto or agree to) or would a spare GOP majority get itself involved in one of the “national priorities” like Cap & Trade for new financial regulation to “protect main street from wall street.”

    Goodness knows, I want Pelosi’s majority out, but even if we got both houses my concern would be we’d have a majority without a plan. We haven’t exactly seen Contract With America level thinking lately.

  • Art Deco says:

    I recently turned on C-SPAN to see speaking a fellow from the American Enterprise Institute. He told a tale of speaking to a Republican congressional candidate (whom he did not name) and asking him about what the pathway for Social Security should be. In his telling, the man ruled out a tax increase or raising the retirement age and said he wanted to go after “waste, fraud, and abuse”. The AEI fellow said here’s the problem with the political class: “they are not serious”.

    A generation ago, Jack Beatty (then literary editor of The New Republic defined a quality he called ‘unseriousness of mind’: 1.) the inability to recognize a logical contradition; 2.) the inability to relate acts and consequences; and 3.) the unwillingness to change course when events defy expectations.

    Paul Ryan has a plan. The anxiety is that the rest of them will default to ‘hey, let’s have a tax cut’. (A default setting which is Mr. Reagan’s most salient legacy, alas).

  • Blackadder says:

    Donald,

    What popular legislation do you you have in mind? From what I can tell, the extent of the Republican agenda right now is that some of them want to repeal ObamaCare while some do not.

    Republicans managed to win 55 House seats and a majority in 1946, but they didn’t do much with that majority, and two years later they lost 74 seats (and, of course, the Democratic President was re-elected).

  • Art Deco says:

    but they didn’t do much with that majority

    Legislation generally requires Presidential assent.

    Wartime price controls and rationing were dismantled fairly rapidly in the United States, while remaining in effect in Britain until 1955. Likewise, initiatives on the part of factions within the Democratic Party to render the political economy more thoroughly corporotist and mercantilist than it had been were frustrated. The Taft-Hartley Act rendered industrial relations in this country significantly different than was the case in Britian or Austria.

  • Blackadder says:

    Legislation generally requires Presidential assent.

    In that case the Republicans are in trouble, as we are going to have a Democratic president in 2011-12.

  • Obviously, I want the GOP to win, they are “my team” to the extent that anyone is in the political process. But there is a sense in which I wonder if it might be better for our long term political prospects if we remained in the minority but only by 10-20 seats in the House and 2-3 in the Senate and then could run against both the White House and the Congress in 2012. One hardly wants to see Obama’s 2012 argument being, “Don’t you want a two term Democrat to balance out that crazy new GOP congress” a la 1996.

    On the other hand, arguments that nothing succeeds like failure always seem a little odd. And in 2012 we may be hampered by a less than ideal presidential nominee. Hard to say.

  • John Henry says:

    I don’t think, really, that any specific argument about Congress or the Presidency is going to make the difference in 2012; the economy will decide the election. Winning back Congress in 2006 didn’t seem to hurt the Democrats any in 2008. Clinton won in 1996 not primarily because of any argument he made about controlling Republicans in Congress, but because people liked him and the economy was humming along (plus Dole was a terrible candidate).

  • Art Deco says:

    On wild card in all of this is the stupefying behavior of the Administration and Congress. Proposing to increase in nominal federal expenditure by a third over a triennium when nominal domestic product might increase by 5% even though there was an extant deficit and the political class had conspired to socialize much of the country’s outstanding mortgage debt beggars belief, but it has happened. Compounding this by adding another massive entitlement program when the extant programs remain actuarially unsound defies one’s capacity for description. One can only imagine that Dr. Bernanke and various others have remained in place only because they fear what might come after them. These goons are poised to do far more damage than Clinton, Gephardt, and Daschle ever dreamed of.

  • Donald R. McClarey says:

    “Republicans managed to win 55 House seats and a majority in 1946, but they didn’t do much with that majority, and two years later they lost 74 seats (and, of course, the Democratic President was re-elected).”

    Truman ran successfully against the Do-Nothing-Congress, not the biggest lie he ever told but it came close. The Republican Congress actually accomplished quite a bit. Here is a link on the 80th Congress:
    http://en.wikipedia.org/wiki/80th_United_States_Congress

    Unfortunately Dewey was the most uninspiring Republican candidate for President until John McCain took that title.

    In regard to what the Republicans should do, just a few ideas off the top of my head:

    1. Press for repeal of ObamaCare.

    2. Pass a balanced budget and force Obama to veto it several times.

    3. Begin investigations of the rampant corruption that no doubt has occurred between those who administer government bailouts and individuals in private enterprises which received bailout money.

    4. Push to make the Bush tax cuts permanent.

    5. Initiate legislation to defund the Leftist beneficiaries of government funds, and Planned Parenthood should be at the top of that list.

    6. Pass a package of tax incentives for those starting new businesses.

    7. Introduce legislation to reform the federal pension system.

    8. Pass legislation abolishing Congressional pensions and medical treatment for life for retired members of Congress.

    9. Pass legislation reducing the pay of members of Congress.

    10. Press for a balanced budget amendment to the Constitution.

  • Blackadder says:

    Donald,

    One of the problems I see with your list (or the major elements on it, at least) is that you can’t force the President to veto a bill unless you pass it first. While there is a slim chance that the Republicans could retake both the House and Senate in 2010, I don’t believe it’s possible even in principle for them to get a filibuster proof majority in the Senate.

    Not only that, but I doubt you’d be able to hold a lot of Republicans for some of the things you’re proposing. It’s great to rail against ObamaCare in the abstract. Actually repealing it, however, means repealing the popular parts (e.g. bans on pre-existing conditions) as well as the unpopular parts (e.g. the mandate, Medicare cuts). Likewise, submitting a balanced budget is not going to be possible without some combination of 1) substantial tax increases, or 2) substantial spending cuts. I know Republicans aren’t going to propose increasing taxes. Are they going to pass a bill with with massive cuts to entitlements and the military? Somehow I doubt it.

  • Donald R. McClarey says:

    “While there is a slim chance that the Republicans could retake both the House and Senate in 2010, I don’t believe it’s possible even in principle for them to get a filibuster proof majority in the Senate.”

    Let the Democrats filibuster popular legislation. For political purposes that is as good for the GOP as a Presidential veto. However, considering how many vulnerable Dems are up in 2012, and how shell-shocked I think the Dems will be after the November massacre, I doubt if they will be able to hold a filibuster against legislation that is popular enough.

    “Not only that, but I doubt you’d be able to hold a lot of Republicans for some of the things you’re proposing. It’s great to rail against ObamaCare in the abstract. Actually repealing it, however, means repealing the popular parts (e.g. bans on pre-existing conditions) as well as the unpopular parts (e.g. the mandate, Medicare cuts).”

    Repeal and replace I believe is the strategy that will be followed.

    “Likewise, submitting a balanced budget is not going to be possible without some combination of 1) substantial tax increases, or 2) substantial spending cuts.”

    Substantial spending cuts will be the order of the day. In normal political times I agree the Republicans would probably lack the stomach for such cuts. These are far from normal political times. Additionally the path we are on now is simply unsustainable, and I believe that a majority of Americans are realizing that. Government debt and spending simply has to be dealt with now. This I think is the issue that is becoming the new political reality as the Democrats are about to find out in November.

  • Todd says:

    Both parties are pretty entrenched, it would seem. And since 60 has become the new 51, there’s a broad swath of paralysis for corporations to enjoy.

    The GOP (and the Dems, too, of course) should thank their lucky stars for the two-party system. If there was a populist alternative to spending the country into oblivion while bleeding in Asia, one of the existing parties might well come in third in 2010. Or 2012 for that matter.

    I’d say it’s a pretty safe arena for politicians in the major parties. Nobody has any incentive for rteal reform–like protecting the unborn for example. Lip service and chip away at the fringes. Big business remains largely above the law. The citizenry can get distracted by the Scandal of the Week or how Kate and Buzz are dancing with the stars.

    As for spending, I’d say the American public still has more blame to pin on the GOP: two wars, plus half the bailout. If the Dems can’t sell that in November, I’d be rooting for them to take third place. They would deserve it.

  • Blackadder says:

    Donald,

    We are currently spending $3 trillion while taking in $2 trillion. I agree that this is a serious issue, but the idea that in current circumstances you could get a balanced budget in 2011 (particularly without raising taxes) is just not serious. For perspective, Paul Ryan’s plan has been described by friend and foe alike as being extremely tough minded about entitlement cuts. Most Republicans aren’t willing to sign on to his plan. The Ryan plan does balance the budget . . . in 2063.

    Here are my predictions:

    1) ObamaCare won’t be repealed (indeed, I suspect you’ll soon see Republicans start to redefine what they mean by ObamaCare so as to minimize their opposition).

    2) Any significant spending cuts will be accompanied by significant tax increases.

  • Art Deco says:

    Donald, I do not think your sums add up.

    Blackadder,

    The filibuster is a practice in parliamentary rules which can be discontinued. It can also be amended to require filibusterers to stand on their feet for 26 hour stretches, which is how it had to be done prior to 1975 or thereabouts.

    We are currently careering toward failed bond sales and quite possibly sovereign default. Congress doesn’t have until 2063.

  • Donald R. McClarey says:

    We will see BA. My predictions are that Obama will veto legislation that basically repeals ObamaCare and that he will also veto a Republican budget with steep decreases in spending and no tax increases. I see zero sentiment among Republicans in Congress for any tax increases.

  • Donald R. McClarey says:

    In regard to balancing the budget, a good start could be made by zeroing out the Department of Agriculture, the Department of Labor, the Department of Education, the Department of Health and Human Services, the Department of Homeland Security, the Department of Housing and Urban Development and the Department of Energy. These of course seem like radical proposals today. When we can no longer make money out of thin air, and that day is rapidly approaching, they will not seem so radical.

  • Donald R. McClarey says:

    Of course if we simply wanted to slash the deficit by about two-thirds we could return to the budget numbers of the Bush administration for fiscal year 2005.

  • Art Deco says:

    The Department of Homeland Security comprehends most of the federal police. Frills?

    I think if you add up the share of the federal budget devoted to the military, veterans’ benefits, Social Security, Medicare, interest on the public debt, and civil service and military pensions, you corral about 70% of the total. We can look it up though. The current circumstances abroad rather limit opportunities for economy in the military or veterans’ budgets. The elderly have limited opportunities to adjust to imposed alterations in their real income, so amendments there are properly gradual and implemented on a cohort-by-cohort basis. You cannot welsh on your interest payments, or country go blooey. I think interim tax increases will likely be the order of the day, and properly so.

    One thing I would like to see the Republicans pass is the placement of the retirement age on an appropriately rapid escalator. The Democratic Party would be atrociously demagogic about it. That would be the time for the public relations mavens they use (F. Luntz, et al) to start earning their retainers.

  • Donald R. McClarey says:

    “I think interim tax increases will likely be the order of the day, and properly so.”

    Give them more taxes Art and I guarantee you they will more than wipe out the tax increases by increases in spending. I also do not see it happening politically. The GOP will regain political power mostly through people fed up with government spending. Giving the Feds even more money would be political seppuku for the GOP.

    Increasing the retirement age for social security makes complete sense, and therefore I have my doubts as to whether such a measure could pass Congress. If it did I have no doubt that Obama would veto it.

  • I think that when we see real budgetary reform (serious spending cuts that stick) it will be only in coordination with some tax increases — perhaps in the form of a shift to a new approach to taxation (maybe not as complete as the fair tax or flat tax, but something.) My theory is basically that we’ll never see spending restraint until we return to a point where the majority of the population actually pays income taxes. Right now, the majority don’t, they only pay into the programs that (falsely) are seen as membership or account based (Medicare, Social Security). If 70%+ of the population actually paid income taxes, then we’d get serious about spending restraint, so I’d be in favor of a tax reform/increase which resulted in most people paying some amount of income tax — though in the case of many who currently pay none it might only be a few hundred dollars. (Just figured I’d cram all my heresies into one day.)

  • Donald R. McClarey says:

    “(Just figured I’d cram all my heresies into one day.)”
    :)

    In regard to the current income tax system it is now effectively a welfare program for a substantial portion of the population. I was stunned in examining the tax returns of a married couple who are my clients to see on an income of $27,000.00 they received a “refund” from the Federal government of $11,000.00.

  • Blackadder says:

    In regard to balancing the budget, a good start could be made by zeroing out the Department of Agriculture, the Department of Labor, the Department of Education, the Department of Health and Human Services, the Department of Homeland Security, the Department of Housing and Urban Development and the Department of Energy.

    Well the Department of Health and Human Services budget includes Medicare, Medicaid, and S-CHIP. I’m not sure if you meant to suggest that Republicans should or will just eliminate those programs. If so, then in the immortal words of Bagdad Bob, I regret to inform you that you are now too far from reality.

    As for the other Departments, I would be happy to see them eliminated. However, (1) you and I both know that’s not going to happen, and (2) the budgets of all of those Departments combined is less than 8% of the total budget.

    Of course if we simply wanted to slash the deficit by about two-thirds we could return to the budget numbers of the Bush administration for fiscal year 2005.

    Technically true but misleading. There are, for example, more retirees on Social Security and Medicare today than there were in 2005, and because of increases in health care inflation. So returning to 2005 budget levels today would mean cutting benefits below the level they were at in 2005.

  • Donald R. McClarey says:

    “So returning to 2005 budget levels today would mean cutting benefits below the level they were at in 2005.”

    Yes it would. People who benefit from government largesse will, sooner or later, be getting less from the overnment.

    “I’m not sure if you meant to suggest that Republicans should or will just eliminate those programs.”

    S-Chip most certainly. In regard to Medicare and Medicaid I think we could reduce expenditures by 25%.

    “However, (1) you and I both know that’s not going to happen, and (2) the budgets of all of those Departments combined is less than 8% of the total budget.”

    Actually BA I think slashing government spending to the bone is precisely what we will see in the years to come. “The dogmas of the quiet past, are inadequate to the stormy present.” I think that quote from Lincoln is apt to the times in which we live. The European model of an ever-expanding welfare state and economic stagnation is in the process of being decisively rejected here. The Obama presidency is one of great consequence but not for what he proposes but for the reaction that he is producing.

  • Art Deco says:

    My theory is basically that we’ll never see spending restraint

    If I am not mistaken, the ratio of federal expenditure to domestic product has tended, like your weight, to fluctuate around 0.21 for the last fifty-odd years. The country began running chronic deficits during the Kennedy Administration, because Congress just did not feel like doing it any differently.

    The composition of that spending has changed considerably, of course. During the years running from 1947 to 1961, military expenditure accounted for about 45% of the federal budget. I think at this time it is about 18% or thereabouts, and so forth.

    Blackadder is right. The low-hanging fruit do not constitute enough to close the deficit. Alas, the low hanging fruit are also often the pet projects of various and sundry ghouls in Congress. Remember Jimmy Carter’s effort to shut down several dozen crappy water projects. They never forgave him that.

  • Blackadder says:

    Actually BA I think slashing government spending to the bone is precisely what we will see in the years to come.

    I expect we’ll see some serious spending cuts at some point. I just think they will be accompanied by some serious tax increases (I also expect a fair amount of the spending cuts will come from the military). What I doubt is that we’ll see the elimination of the cabinet posts you mentioned. A lower budget for those departments maybe. But lots of countries have gone through spending induced crises, and I’m not aware of any that have responded in the way you suggest.

  • If I am not mistaken, the ratio of federal expenditure to domestic product has tended, like your weight, to fluctuate around 0.21 for the last fifty-odd years.

    I’m trying to think of what my weight would have been 21% fifty years ago… But yes.

    FWIW, I would argue that “spending restraint” is semi-relative. In some ways, although spending is the same percentage of GDP, it seems that we’re fairly cushy at the moment even compared to 15 years ago. More to the point, if we are to significantly reduce spending from current levels, I suspect it would require some amount of taxation to go with it in order to make people aware of the costs of spending.

  • Blackadder says:

    My theory is basically that we’ll never see spending restraint until we return to a point where the majority of the population actually pays income taxes.

    The irony, though, is that it is precisely the programs that are funded by everyone (i.e. Social Security and Medicare) where we have the biggest spending problem. And indeed, anecdotally it seems like the fact that everyone pays in is part of the reason it’s so hard to control spending, since people are less willing to give up a benefit that they have “paid for” than they are one that is explicitly funded by taxes on someone else.

    Personally I think making everyone pay income tax on net would be a bad idea. My guess is that if everyone was paying something there would be more pressure to raise the top rate, and it would be harder to cut taxes, since pretty much every tax cut over the last few decades has included tax rebates for the poor as a means of gaining political support. Further, I think that the idea of a negative income tax (like the EITC) makes a lot of sense. But such a program by definition would involve some people being net receivers of taxes, rather than everybody paying in more than they get out (assuming that is even theoretically possible).

  • Donald R. McClarey says:

    “But lots of countries have gone through spending induced crises, and I’m not aware of any that have responded in the way you suggest.”

    The preferred modes seem to be debt repudiation, Argentina for example, and currency devaluation combined with hyperinflation. That and of course increased taxation. I think we will, long term, be wiser than that.

    The policies I wish to see enacted were of course precisely what was done by the Pinochet regime in Chile with spectacular success after the Allende administration had done its level best to wreck the Chilean economy. It is melancholoy to observe that the most successful economic policy in the post war world was implemented by an oppressive dictatorship, but such is the case.

  • And indeed, anecdotally it seems like the fact that everyone pays in is part of the reason it’s so hard to control spending, since people are less willing to give up a benefit that they have “paid for” than they are one that is explicitly funded by taxes on someone else.

    I would tend to think it’s the fact that everyone benefits from social security and medicare that makes them so popular — not the fact that everyone pays for them. I suppose the test would be: would there be support for removing payroll taxes for those in the bottom 50% of the income distribution so long as everyone continued getting benefits. My guess would be, “Yes”, though it would be interesting if there’s some data pointing the other way.

    Personally I think making everyone pay income tax on net would be a bad idea. My guess is that if everyone was paying something there would be more pressure to raise the top rate, and it would be harder to cut taxes, since pretty much every tax cut over the last few decades has included tax rebates for the poor as a means of gaining political support. Further, I think that the idea of a negative income tax (like the EITC) makes a lot of sense. But such a program by definition would involve some people being net receivers of taxes, rather than everybody paying in more than they get out (assuming that is even theoretically possible).

    I’m of several minds on this, but let me try floating a couple ideas:

    - I don’t have any problem with some of the population getting more back than they put in — I just think it’s too many right now with less than 50% of the population paying any net income taxes. I’d rather see the number paying net income taxes of some amount be 60-70%, unless the budget is humming along so well we just don’t need the revenues.

    - This is waaaaaay too gimicky, but I suppose what I think would be the best incentive is if there was an “overage tax” which was calculated each year if some very simple set of fiscal rules was not followed (federal budget deficit existed, or grew too fast, or federal spending increased more rapidly than GDP or something) and bills for this tax were sent out on January 15 of every year, due April 15th. The tax could be 1% of your total taxable income (if you want to be progressive, make add 2-3 brackets up from there), and the trick would be that it had to be paid to the government, it couldn’t come out of witholding. If you defaulted, then it would be either held out of your next tax refund, or they’d put a tax lein or your wages or what have you. Basically, give people a very simple financial incentive for getting mad if we weren’t being fiscally responsible.

    Now, as outlined, that wouldn’t work and would be way too easily gamed. (Though the idea of a tax that kicks in under only certain circumstances would be interesting.) But to get back to the real life point: My concern would be that so long as we can fund whatever we want to do by only taxing “the rich” (as in: someone else) there’s little incentive to moderate. If it seems clear that most of us pay more if we spend too much, there will be more pressure on the parties to cut back.

    (Or we set up a VAT and the swine all gather to the trough…)

  • Art Deco says:

    If I am not mistaken, Canada was able to reduce the ratio of public expenditure to domestic product by about a quarter (from ~55% to ~40%) over a period of about 15 years, so this sort of thing is possible (absent debt repudiation & currency crises) in occidental countries with defective party systems and unsettling demographic metrics.

  • Blackadder says:

    The policies I wish to see enacted were of course precisely what was done by the Pinochet regime in Chile with spectacular success after the Allende administration had done its level best to wreck the Chilean economy.

    If you look here, you will find the current Chilean Cabinet. Notice that they still have a Departments of Agriculture, Health, Education, Energy, Labor, and Housing (I don’t think they ever had an equivalent of Homeland Security, and if they had I’m pretty sure Pinochet wouldn’t have been the one to get rid of it). From what I’ve read, Pinochet was able to reduce the budgets of housing, health, and education by about 20%. So even in what you claim is the best example of spending reform since WWII, Chile did not do what you are suggesting the U.S. should or will do.

  • Blackadder says:

    I would tend to think it’s the fact that everyone benefits from social security and medicare that makes them so popular — not the fact that everyone pays for them.

    Everyone benefits from spending on roads too, but I don’t see the same reluctance to cut road funding. In any event, if it’s true that what matters is that everybody benefits not that everybody pays, then making everybody pay won’t solve the problem.

    I suppose the test would be: would there be support for removing payroll taxes for those in the bottom 50% of the income distribution so long as everyone continued getting benefits.

    Supported by whom? If I’ve been paying for something and you offer to start supplying it for free, I’m hardly going to say no on the grounds that if I’m not paying for it I might not care as much if you stop giving it to me for free. Most people don’t think that way.

    There’s been a fair amount of research in recent years about how people respond to income transfers. One of the findings seems to be that it matters a lot to people whether they think the money has been earned or not. If people think they have earned a certain benefit they are less willing to give it up than if they think it’s just been given to them, and likewise are less willing to take from others if they believe that the other person has earned what they have vs having it handed to them. I think you see the same phenomenon with Social Security.

    My concern would be that so long as we can fund whatever we want to do by only taxing “the rich” (as in: someone else) there’s little incentive to moderate.

    I understand the concern, I just think the evidence doesn’t bear it out. In practice the desire to tax the rich goes up the more the non-rich pay in taxes.

  • Everyone benefits from spending on roads too, but I don’t see the same reluctance to cut road funding. In any event, if it’s true that what matters is that everybody benefits not that everybody pays, then making everybody pay won’t solve the problem.

    It’s true that everyone benefits from spending on roads, but people are willing to balance that benefit against the cost just like they are willing to do cost benefit analysis on their personal spending.

    FWIW, I think we probably agree that the thing which makes Social Security and Medicare so hard to cut is at root neither that “everyone benefits” nor that “everyone pays” but rather that people actually believe the fiction that these are retirement plans which they pay into and then get their own investment back. The idea of cutting them seems like cutting your house after paying it off. (Which is what makes the design of those programs so devious, given that they are not, in reality, accounts that people pay into, but rather have served effectively as a source for other government money which now needs to be paid back.)

    So reforming Social Security and Medicare is going to be very hard no matter what. However, in regards to all other government spending, some people benefit more than others. (For instance, most people won’t benefit much at all from the health care reform bill. And most people don’t directly benefit from bailing out GM. Etc.) In this regard, it seems to me that if there were a broader impact to new or increased spending in terms of taxes, people would be less supportive of spending increases.

    Maybe I’m wrong on this, but it at least seems intuitive enough that I’d want to read a couple articles on the topic to be convinced of the contrary.

    Supported by whom? If I’ve been paying for something and you offer to start supplying it for free, I’m hardly going to say no on the grounds that if I’m not paying for it I might not care as much if you stop giving it to me for free. Most people don’t think that way.

    Maybe I’m missing something, but it seemed to me like the obvious test of the claim “people support Social Security because everyone pays for it while they support other spending less because only the ‘rich’ pay income taxes” would be to see whether people would continue to support Social Security if it were paid for only by the rich.

    Given your point, which I agree with, about people feeling more strongly about things they feel they’ve “earned”, it seems like the answer would be: In the short term, people have no particular attachment to paying for things. If you could fund social security off the top 40%, people would support that. However, in the long term, people might come to see Social Security as an expendable hand out. (The question would be whether this effect would actually kick in since it’s effectively a guaranteed income. Most people are attached to their income whether they think they earned it or not.)

    There’s been a fair amount of research in recent years about how people respond to income transfers. One of the findings seems to be that it matters a lot to people whether they think the money has been earned or not.

    Fully agreed here.

    I understand the concern, I just think the evidence doesn’t bear it out. In practice the desire to tax the rich goes up the more the non-rich pay in taxes.

    I’m trying to understand how broadly you mean this. Certainly, when people are hurting from taxes, they may get urgent about, “Are other people not paying their share?” So if the middle class are paying taxes, they may demand that the rich pay more.

    On the other hand, it seems fairly obvious that if you tell someone, “Program A is going to be expensive, but we can fully fund it by taxing the pople in the top 20% of income,” versus “Program B is going to be expensive, and you’ll see your taxes go up $1200 per year to pay for it, but don’t worry, Bill Gates will be paying $50M per year,” the former will get more support than the latter.

    Maybe I’m wrong, but I’d at least want to read some of the evidence on why. Any good links on some public choice theory work on this?

  • Blackadder says:

    Maybe I’m missing something, but it seemed to me like the obvious test of the claim “people support Social Security because everyone pays for it while they support other spending less because only the ‘rich’ pay income taxes” would be to see whether people would continue to support Social Security if it were paid for only by the rich.

    I misunderstood what you were saying. Sorry.

    I’m trying to understand how broadly you mean this.

    I think there are a couple of different mechanisms at work here. The first is that historically if you want to pass a major tax cut then you usually need to make it be a tax cut for virtually everybody (obviously the amount of the tax cut can be more for some than for others). Effectively that means that if you want to reduce the top rate below a certain point you are going to have to reduce the rates for lots of people to zero or below.

    In terms of tax increases, at least in the U.S. you usually don’t see major tax increases absent a war or some other major crisis. For example, the original income tax was established during the Civil War, then abolished afterwards. When the income tax was established again in 1913 the top rate was 7% until the U.S. got into WWI, when it went up to 70+%. It came down after the war, then went back up with the Depression and WWII, came down a bit, went back up for the Korean war, came down again under Kennedy, edged up a bit during Vietnam, and then began its recent decline. The only counter-example is the 1993, which took us about back to where we were in 1987.

  • Art Deco says:

    Blackadder,

    That does not tell us precisely what those departments do. They might be engaged in regulatory functions, service provision, redistribution, or statistical surveys, or some combination of these. The first and the last of these functions eat up comparatively little cash, btw.

    All else being equal, they are likely to have somewhat different fuctions in Chile than in the United States because Chile has a population similar to that of Illinois and is not formally constituted as a federal republic.

    Now, I haven’t a clue as to what Chile’s Energy ministry does. The federal cabinet department of that name in this country is engaged in pork barrel for scientists and engineers. Ask John Simmins (who occasionally appears in these fora) what he thinks of the national laboratories where he used to work. The U.S. Dept. of Energy acquired a reputation for mismanagement within about two years of its formation and Mr. Clinton’s Secretary of Energy (Hazel O’Leary) said only someone ‘certifiable’ would ever want that job for more than about four years.

    (Also, Agriculture is abnormally prominent in Chile’s export mix and the country produces proportionately less for its domestic market than does the United States. In the U.S., agriculture and forestry amount to about 2% of domestic product.)

  • Blackadder says:

    ObamaCare won’t be repealed (indeed, I suspect you’ll soon see Republicans start to redefine what they mean by ObamaCare so as to minimize their opposition).

    I must be psychic or something.

  • Donald R. McClarey says:

    “ObamaCare won’t be repealed (indeed, I suspect you’ll soon see Republicans start to redefine what they mean by ObamaCare so as to minimize their opposition).”

    Mark Kirk? The pro-abort Mark Kirk, future senator from Illinois due to the inability of the Democrats not to nominate a mobbed up candidate for the Senate seat of Obama, is the closest thing to voting for a Democrat without actually voting for a Democrat. He voted for Cap and Trade last year and is against it this year. By the Fall I have no doubt this insult to weather-vanes everywhere will have changed his mind twice on the subject of ObamaCare.

    As to Senator Cornyn, I have no doubt that he will vote to repeal ObamaCare when the time comes.

    http://cornyn.senate.gov/public/index.cfm?p=NewsReleases&ContentRecord_id=bb9f3eb8-20b7-458d-a083-be2b826ca4d8&ContentType_id=b94acc28-404a-4fc6-b143-a9e15bf92da4&Group_id=24eb5606-e2db-4d7f-bf6c-efc5df80b676

    As to Senator Corker, considering his backtracking in the Weekly Standard, I have no doubt he will vote whichever way his political base is demanding, and I have no doubt that will be against ObamaCare.

    http://www.weeklystandard.com/blogs/sen-corker-clarifies-repeal-isnt-going-happen-after-election-cycle

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