Governance and Institutions 101 and the Anti-Tax Pledge

Republican U.S. Senator George Voinovich of Ohio made some news last month when he criticized many of his colleagues for signing a pledge stating that they will oppose any and all new tax increases if they are re-elected to office. Voinovich suggested that in light of America’s precarious fiscal situation, a “no tax hike pledge” is foolish, and will tie the hands of lawmakers as they begin the Herculean task of tackling America’s monstrous national debt in the next Congress.

Voinovich’s analysis is correct because of the co-existence of two realities. Firstly , the American national debt is enormous, and is projected to grow dangerously for the foreseeable future. It is a serious problem that demands urgent action. Secondly, the United States will not be able to begin solving this debt problem in the near-medium term without introducing tax increases of one sort or another.

Proponents of the pledge dispute the second of these points, arguing that America’s finances can be set right by focusing entirely on reducing the country’s out-of-control spending. I’m not sure if this is true – the fiscal adjustment the United States must make is huge, and it seems likely that tax hikes and spending reductions will both be necessary. But let’s imagine that pledge proponents are right – that there is a reasonable set of policies waiting to be put together that could reduce the debt to sustainable levels entirely through spending cuts. Even if this package could be developed, the political reality facing lawmakers under the American system is that it could not be enacted– certainly not in the near-medium term – because of the nature of American institutions and the presence of a liberal Democrat in the White House.

The current President may be unwilling to entertain deep, meaningful spending cuts under any circumstances, but he will certainly be unwilling to entertain them unless they are coupled with significant tax increases. Same goes for the vast majority of Democrats in the Congress. Unless you can envision President Obama signing a series of major spending cuts without accompanying tax increases, you have to conclude that any debt-reduction plan that has a chance to actually become law in the next two years will include both. I can therefore restate my premise with some confidence- the United States will not be able to even begin solving this debt problem in the near-medium term without introducing tax increases of one sort or another.

A congressman pledging not to vote for any new taxes under any circumstances is therefore tantamount to stating that he will refuse to vote for any debt-reduction package that actually has a chance of being enacted. In other words, it is a vow, taken in advance, to refuse to work seriously on addressing the debt- one of the most important challenges facing the American economy.

The no-tax pledge illustrates why institutions matter. In Canada, a party could responsibly run on a platform of debt reduction based entirely on spending cuts, knowing that if they won the election they could actually enact that plan. The American legislative system, based on compromise and log-rolling, makes promises such as these irresponsible, and often extremely difficult to keep.

America’s debt problem is serious, and addressing it can’t wait until folks who share my strong preference for low taxes control both houses of Congress and the Whitehouse – whenever that may be. In the meantime, candidates for high offices who are serious about governing should accept the necessity of compromise and avoid promises that preclude any serious negotiations on debt-reduction in advance.

The unique, bizarre and wonderful American political system sometimes needs “all hands to be on deck” – it often requires cooperation and compromise between political rivals of markedly different ideological stripes to solve major problems. Theoretically, this sort of teamwork is possible for addressing the national debt issue because both parties agree that there is a major problem that must be solved. They just disagree on how best to solve it. Neither side is going to get its way entirely – there will not be significant tax hikes alone and there will not be significant spending cuts alone. In the short-medium term, there will be both or there will be neither.

The “no new tax increases” pledge takes the “both” option off the table in advance, leaving us almost certainly with “neither,” which will be a disaster for America and the rest of the world economy. Long-term prosperity requires Congressmen of both parties to, however glumly, accept the necessity of the unappealing “both” option. That’s why the next Congress requires serious, gutsy statesmen ready to make a deal – not stubborn politicians who have ruled out compromise in advance by taking an irresponsible pledge.

– Ben Eisen

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