The fiscal hawk’s black feathers
As French strikers try to paralyze their country in an effort to save the welfare state, the parallel with the U.S. could not be starker. In one country the popular, grass-roots movement is trying to save and increase government expenditure. On this side of the Atlantic, however, the Tea Partiers have usurped and misunderstood the traditional revolutionary slogan “No taxation without representation.” “No taxation” is certainly snappier, but it’s also extremely misguided.
Missouri Proposition A was a good example of a Tea Party measure. The goal is to scrap the one percent earnings tax collected by St. Louis and Kansas City by forcing a vote on the tax next year. The lost windfall for the county could perhaps be recuperated by increasing land taxes or the like. However, the way the bill is written, the intention is to force the cities to stop spending.
Depending on your political judgement, that could be a good or a bad thing. My main quibble is that those who vote against taxes are usually those who will complain the most about what will happen once the taxes are reduced: the decreasing quality of public service. The earnings tax makes up a third of the St. Louis budget. You can’t cut off such a large slice of the income pie without expecting serious problems in government service. When the number of police officers drops and crime increases, you can be sure that the Tea Partiers will be the first to complain that the government is doing nothing to protect its citizens…
The Tea Partiers are supposedly fiscal hawks: Their main aim should be to reduce government and balance the budget. Yet they support the Bush tax cuts, which sank the balanced budget that Clinton left the country.
The rest of the world understands what a real fiscal hawk does. The English Tory party has cut the budget AND raised taxes for the well-off. Lowering tax rates for the rich does not help the economy, because they have a lower marginal propensity to consume. Redistribution is essential to ensure economic recovery.
In France, most of the current hate is directed against the people who have caused the financial crisis and whose income levels are back to the levels where they were before. The French don’t take kindly to being (for lack of a better word) shafted, and on top of that paying for their bankers’ new Rolls-Royces.
The current assumption in the United States is that the tax burden is overwhelming, despite the fact that the tax rates are much lower than in other developed countries. That feeling comes because of the steady disappearance of the middle class. However, the reason the middle class is disappearing is not because of high taxes but rather because of an increase in income inequalities. The Gini coefficient (a measure of income inequality) has been steadily rising and reached record levels in recent years.
In the U.S., however, the blame for these problems is not being put on Wall Street but on the Democrat majority, leading to their losses last night. It’s surprising that the so-called “fiscal hawks” are not calling for higher taxes on Wall Street revenue, i.e. on the people that have caused much of the current deficit. And so, the American middle class will continue its slow descent into oblivion…
Sure, a tax cut seems like a good thing. But when the roads stop being paved and the streets stop being cleaned while your banker lights a cigar with a $100 bill, letting out a Machiavellian laugh, perhaps the light will then dawn on you, slightly too late.