As House Republicans gird themselves for battle over the debt limit, they are united by an adamantine conviction that something must be done about federal spending, and soon. The challenge Republicans face, however, is that they’ve become the party of all sticks and no carrots.
Back in 1976, Jude Wanniski, the idiosyncratic supply-side guru, published a short essay arguing that while the Democrats are the spending Santa Claus, bearing promises of more government benefits, Republicans should become the tax Santa Claus, bearing promises of tax cuts. That is famously what happened during the Reagan era.
But as the tax burden on middle-income households dwindled, middle-income swing voters started to care less about taxes and more about the cost of medical insurance, higher education, and a whole host of quality-of-life issues. President Bill Clinton exploited this dynamic by politically championing middle-income tax cuts and tax increases on high earners at the same time, a tactic that has paid dividends for Democrats ever since. Republicans have found themselves defending tax cuts for high earners while offering little if anything to middle-income voters but calls for entitlement reform. Whether or not this stance is defensible on policy grounds, it’s certainly not what Santa would do.
And after the fiscal cliff deal, during which the Republican leadership acknowledged that it was powerless to stop tax increases on high earners, the GOP finds itself in a bind. Federal taxes are expected to rise to 19.4 percent of GDP, a level that is well above the 17.8 percent of GDP that had been the average federal tax take from 1946 to 2008. There are good reasons why tax levels might be higher now than they have been in the past, including the aging of the baby boom cohort. But the growth of federal spending over the coming decades threatens to outstrip the ability of taxpayers to bear it, particularly if Congress aims to shield middle-income households from punishing tax increases.
Democrats can still play the role of Santa Claus by claiming, however implausibly, that tax hikes on the rich are all we need to pay for future federal spending increases, with an assist from technocratic fixes like the Independent Payment Advisory Board. Republicans, in contrast, are in desperate need of a new Santa Claus narrative, as across-the-board tax cuts are just not as appealing or affordable as they have been in decades past.