Belmont Club

The Fine Print

President Obama may have lost a tactical fight with the Tea Party, but he still doesn’t know what the war is about. Or at least, he hasn’t given up on winning it. Despite a debt ceiling agreement that ostensibly contained no tax increases, President Barack Obama hinted that new taxes were not off the table.

Republicans have insisted repeatedly over the last few days that the deal does not include tax rises. But Obama, in a short statement in the Rose Garden, said the country’s huge national debt could only be reduced through a combination of spending cuts and tax rises, particularly for the wealthy and big corporations such as those in the oil industry.

“Everyone is going to have to chip in,” he said. “That is only fair. That’s the principle I’ll be fighting for during the next phase of this process.”

The International Business Times has more details on what directions raising more revenue could take:

“It means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share,” he said. “And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses.”

These efforts may go a long way toward refuting charges that he has surrendered to the “anti-tax mania” of the Tea Party. They are to be conducted under the flag of tax reform.

The BBC says that this could mark a turn in Obama’s fortunes. “Deal done. Crisis averted, a feisty president has come out fighting. … But he used his short Rose Garden speech to insist that tax rises had to be part of the eventual solution.”

Noting that both houses of Congress had now approved a deal that raises the U.S. debt ceiling while committing Washington to specific deficit cutting targets, Obama said he was returning to the question of job creation — and insisted that the “the wealthiest Americans and biggest corporations” need to pay more.

Solution the BBC says, but what is the problem? Taxes, like most other things, are neither good nor bad in themselves. The key question must always be, what are the taxes to be collected for?

There is no doubt that corporate subsidies from public money must be cut, but reforms to the tax code should be part of a broader effort to rationalize the role of government in the economy. Tax reform should not simply be used as a fig leaf to cover revenue raising efforts. It should include regulatory reform and a general reduction in government’s footprint everywhere there is no clear policy reason for it.

It is senseless to speak of “job creation” as a process undertaken by government to be paid for by the “wealthiest Americans and biggest corporations,” as if job creation were a function properly undertaken by government paid for by the “wealthiest Americans and biggest corporations.” Taxes ought to go into funding the proper business of government, which is what they are for; not to subsidize activities the state should never enter in the first place. Otherwise President Obama — in insisting on “tax reform” — will merely have “come out fighting” for bigger government under another name.

Tax reform should not mean more money for bigger government. It should mean eliminating the tangle of transfers by which cash is moved from one pocket to the other. Otherwise the president will have misunderstood what the recent political wrestling match was about. It wasn’t about the debt ceiling, though he might have thought it was. It was about limits on the role of government.

The government should first get out of the business of robbing Peter to pay Paul except in cases where it must provide clear and necessary welfare functions. Otherwise “tax reform” is just another name for finding more money to pay for the same old addiction: using the power of the state to favor one private party over the other.

But the president is unlikely to concede that. His ideology may be that government activism, rather than limitation, is the solution to the problem. And so the political battle will continue until one view prevails over the other.

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