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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is an FT contributing editor and executive director of American Compass
The era of “the era of big government is over” may itself now be over. Realignment in American politics has already transformed debates over free trade and free markets, labour unions and family policy, but its impact on fiscal matters is only beginning to emerge.
Many of the professional-class Republicans who identify as “socially liberal, but fiscally conservative” have decamped for the Democratic party. Meanwhile, a racially diverse set of traditionally Democrat working-class voters, who often have more positive views of the government and have benefited from its programmes, now side with the GOP. The budget cutting championed by former Speaker of the House of Representatives Paul Ryan no longer has an obvious constituency.
That’s no great loss. When Ryan retired at the start of 2019, after two years of unified Republican control of Congress and the White House, at the peak of the longest economic expansion on record, he left behind a deficit for the fiscal year in progress that would approach $1tn.
But as in many areas where decades-long conservative orthodoxy has finally crumbled, the question of what comes next remains an open one. Some conservative leaders have now adopted the position that Medicare and social security must not be cut at all.
Former president Donald Trump at times echoes that stance. At other times he calls for aggressive reform. Budget proposals from both the Republican Study Committee and the Heritage Foundation call for steep welfare entitlement cuts alongside yet more tax cuts, while the Republican chair of the House budget committee recently said that “it’s only fair to have both revenue and expenditures on the table”. This is a position endorsed by prominent free-market think-tanks such as the American Enterprise Institute and the Manhattan Institute.
New polling conducted by American Compass in partnership with YouGov further underscores the confusion on the right. Yes, 61 per cent of Republican voters do say they would “prefer to pay lower taxes and have the government do less”. But that’s less than two-thirds support for a position previously assumed to be mandatory for participation in the conservative coalition.
More strikingly, when it comes to the major areas of federal government spending, the appetite for cuts vanishes — and not just in areas like retirement security or defence. Only one in five Republicans say they’d like to see the government do less to provide “medical care for those who need help affording insurance”, or to support “the poor, disabled, needy” or “families raising children”. In each case, they are roughly twice as likely to say they want to see the government do more, not less.
It would probably be a mistake, though, to conclude that bigger government is now back in demand. Many conservatives still place great stock in a conception of liberty that entails being left alone to do what they want. They tend to believe that when government does act, it can do so more effectively with market-based solutions than with direct programmes and services. And they have much greater faith in their local governments, and even state government, than in the federal government. What they do seem to want, however, is better government that is focused on doing more efficiently and effectively what only it can do.
Of course, budgeting is an exercise in trade-offs. When doing more also means paying more taxes, cuts come more sharply into focus. But analysts must revisit the long-held assumption that conservative voters prefer smaller government and lower spending as ends in themselves. And conservative politicians must also begin to consider, as their voters surely have, who would do the paying.
There is a reason that Barack Obama made permanent the Bush-era tax cuts for the upper-middle-class households earning as much as $250,000, while Joe Biden has now drawn his own line at no tax increases on earnings up to $400,000. Families with incomes in that range — quintessentially composed of highly-educated professionals — are precisely those who must bear the inevitable burden of funding a more generous welfare state. They are also the core of the Democratic party’s new electoral coalition.
The advent of Republicans eager to preserve social programmes and thus open to raising new tax revenue will be a fascinating turn in American politics. Trump himself may not have a clear plan, but his party’s future leaders are already laying the groundwork to build upon the coalition he has assembled. The real fun will come when the Democrats begin demanding a tax cut and suggest cutting those same programmes in order to fund it.
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