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Ideological Disagreement In Low Tax America

I think this chart from the Center on Budget and Policy Priorities about how the United States is a low-tax country does a lot to explain the constant ideological angst that exists inside the progressive camp in this country. The issue is that the United States is a low tax country. In a high-tax country like Austria there’s a relatively narrow range of plausible center-left views about the size and scope of the welfare state. It’s always possible to mount a fairly radical critique of the Austrian status quo. But anyone thinking of themselves as a moderate sensible progressive is going to see a pretty narrow range of options available. “Maybe we should be more like Denmark.” And maybe we should.

The United States is different. This is a country where saying that the state ought to be as large a role in the economy as it did in pre-crisis Ireland counts as a left-wing perspective rather than a right-wing one as it did in most countries. “We ought to be around the OECD average” is an even further left position. But a lot of people look at the Netherlands or even Sweden and see economically and socially dynamic societies with many admirable features. People holding all these views find themselves in the same political coalition. And since people holding all these views are arguing for the United States to imitate actually existing pleasant places (albeit small ones) it’s possible for people holding all these views to deem themselves to be sensible, practical-minded, reformers and not at all pie in the sky radicals. But “we should be like Ireland,” “we should be like the Netherlands,” and “we should be like Sweden” are actually dramatically different policy proposals. And certainly in the Netherlands “we should be like Ireland” and “we should be like Sweden” would be correctly understood as very different agendas, whose adherents would find themselves on opposite sides of the political debate. Here in the United States, a very right-leaning status quo combined with a two party political system means that people with sharply divergent ideas are all “on the same team.”

A related point, very relevant to the ongoing debt ceiling negotiations, is that there’s substantial ambiguity around what the status quo even means going forward. The United States has the option of persisting with some very much like Medicare and Medicaid in their current forms, but doing so would require substantial changes in the level of taxation. Conversely, we have the option of persisting with a level of taxation similar to what we’ve had historically but doing so would require fundamental changes in government health care and retirement programs. Consequently, people proposing fairly dramatic changes on both the tax and health can can plausibly see themselves as defending the status quo.

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