When Dead Men Rule

G.K. Chesterton worried that our predecessors would have too little influence on our politics. But Gene Steuerle says that they have too much. [Credit: christiancompletely blog]

G.K. Chesterton worried that our ancestors would have too little influence on our society. But a new book by the Urban Institute’s Gene Steuerle says that they exert too much control over our politics. [Credit: christiancompletely blog]

“Tradition means giving votes to the most obscure of all classes, our ancestors.  It is the democracy of the dead.”G.K. Chesterton

Chesterton fretted that modern democracies might show too little deference to past generations.  But according to the Urban Institute’s Gene Steuerle, the very opposite is true: in American democracy, dead men rule.

Steuerle lays out his provocative case in Dead Men Ruling, published this past spring.  For 200 years, Steuerle argues, a growing economy provided government with the resources to respond to the nation’s ever-shifting circumstances.  Congress could channel tax receipts toward meeting unexpected challenges and exploiting new opportunities.

All of that changed during the latter part of the twentieth century as Congress created more and bigger entitlement programs and tax breaks.  As a result of those decisions made by people who have long since left office, our current leaders find that most tax revenue is spoken for.

The problem is the extraordinary level of permanent and growing commitments we have made to existing spending programs and tax subsidies, and the parallel promise not to collect enough revenues to pay for it all.

This state of affairs, Steuerle argues, is the result of both parties having largely accomplished what they set out to do: Democrats in establishing spending programs that automatically grow and Republicans in setting relatively low tax rates.

Both parties have conspired to create and expand a series of public programs that automatically grow so fast that they claim every dollar of additional tax revenue that the government generates each year.  They also have conspired to lock in tax cuts that leave the government unable to pay its bills.  The resulting squeeze deprives current and future generations of the leeway to choose their own priorities, allocate their own resources, and reach for their own stars.  Those generations are left largely to maintain yesterday’s priorities.

The book is an equal opportunity offender.  Democrats will bristle at Steuerle’s proposals to scale back entitlement spending, Republicans at his call for higher taxes.

Steuerle argues that viewing the budget strictly in terms of taxes and spending has helped get us into this mess.  The public will almost always favor paying lower taxes and receiving higher benefits.  Instead we should analyze fiscal policy from the perspective of giveaways and takeaways.  For him, spending cuts and tax increases are takeaways, while spending increases and tax cuts are giveaways.

While there is merit in thinking about the budget in this way, there also is a basic flaw.  My Social Security check is indeed a giveaway.  But my deduction of mortgage interest, which allows me to keep more of my pension and investment income, is not.  The fact that the government doesn’t tax away all of my savings doesn’t mean that they have given me anything, so it is somewhat misleading to characterize tax deductions as giveaways.

But there is another sense in which his point about taxes carries some force.  The thicket of tax preferences that has grown up over the decades smacks of social engineering.  These provisions often seem at odds with the goal of taxation, which is to finance the necessary operations of government, not to reward conduct that the government prefers.  Taxpayers who engage in favored behavior like homeownership, charitable giving and enrollment in employer-sponsored health coverage get some pretty lucrative tax breaks.  How large are those breaks?   Those three alone resulted in the government collecting $259 billion less this year than it otherwise would, according to the Joint Committee on Taxation.  Throw in other tax preferences for individuals and corporations and the total of all the inaptly named “tax expenditures” would climb by hundreds of billions more.

That’s not to say that these tax provisions or the growing mass of entitlement programs like Social Security, Medicare, Medicaid and Obamacare don’t serve a useful purpose.  It is only to say that, whatever their benefits, their cumulative cost has left government bereft of the resources it needs to address changing needs.   They deny government the flexibility and leeway – the “fiscal freedom,” as Steuerle terms it – to adapt public policy to changing circumstances.

Steuerle sees four deadly economic consequences of this loss of fiscal freedom – rising and unsustainable debt, shrinking ability to meet recessions and other emergencies, a budget that invests less in the future, and broken government.

Addressing these economic dislocations is fraught with political risk, Steuerle writes.  Democrats and Republicans rightly fear that they will lose politically if they abandon long-standing party orthodoxy on taxes and entitlements.  Such changes, moreover, would require them to “renege on old promises, telling people that they are no longer entitled to the higher benefits or low taxes that they have come to expect.”  It would entail a seismic shift in intergenerational transfers — a move away from policies that primarily favor the elderly to those that benefit the young — a politically risky undertaking.

Loss of fiscal freedom helps explain the rancor and deadlock that increasingly afflict the political class, as elected officials find themselves hemmed in by policies set by their long-ago predecessors.  Dead men rule.

Despite its dreariness, Steuerle intends his book to offer hope.  He cites numerous examples from the first two centuries of American history to argue that a government less encumbered by past commitments would be more nimble and effective.  He discusses the benefits of shifting the emphasis of fiscal policy from encouraging consumption to stimulating social mobility and economic growth.   Living standards would rise amid a prospering economy, Steuerle writes, if we did a better job of “relating tax and spending programs to the needs of modern society rather than the wishes of dead and retired legislators.”

Steuerle’s sketch of how this might be accomplished is a bit wanting.  He rejects the arduous path of constitutional amendment and is not at all disposed to requiring the government to balance its budget on an annual basis, regarding the deficit more as symptom than disease.  The process changes he advocates, though potentially beneficial, are politically daunting and don’t seem equal to the task.

But a comprehensive and workable plan for recovering fiscal freedom is far too much to expect from a single book.  Steuerle is to be commended for calling us to shake off the yoke of dead men and to think differently about government, its fiscal condition and the benefits of shelving some of our most cherished political fetishes.