Dueling Visions For Taxing Times: Grover Norquist v. Robert Reich

This is why I got into radio: A pairing of guests representing two competing visions for the nation’s economic future, each making their case in turn, no shouting.

Their policy recommendations are diametrically opposed. “No new taxes,” says one. “Tax the rich,” says the other. Their understanding of how our economy works, what drives innovation and growth, the proper role of government, the lessons of history, and what makes homo economicus tick couldn’t be more at odds. Their contrasting backgrounds—the precocious rebel who grew up to shame tax-raising  politicians vs. the bullied intellectual who reached the loftiest corridors of power—couldn’t be more revealing.

This week, I’m pleased to have Grover Norquist, founder and president of Americans for Tax Reform, and former Secretary of Labor Robert Reich, professor of Public Policy at the University of California, Berkeley, as back-to-back guests on RealClear Radio Hour, sharing their views on what each believes is wrong with America and how they propose to fix it.

Grover Norquist leads off, singing the praises of limited government, federalism, and supply-side economics. He directs his strongest criticisms at long-serving appropriators, old-school politicians—including many Republicans—dedicated to siphoning money from around the country to distribute in their districts. Things will only get better when they “retire or pass away,” making room for new legislators with the “voice of the electorate ringing in their ears demanding less government spending.” Just as Republicans have become increasingly hostile to raising taxes, he predicts that “someday people won’t believe you when you say there were once Republicans who supported increased government spending.”

Regarding partisan gridlock, “Nothing good will happen while Obama is president,” but “nothing bad will happen either, since the Republican majority in the House won’t allow it.” With the budget’s growth constrained by the sequester, the federal government running on autopilot until the next presidential election is not entirely a bad thing. And even as federal regulations continue to grow, “Regulations can always be undone under a future Republican president, while laws tend to become permanent.” Norquist sees America’s salvation in the high-growth, tax-averse Red states, even as many Blue states remain hell-bent on “turning themselves into California or Greece.”

By Reich’s reckoning, the Reagan and Bush tax cuts gave us slower growth, growing debt, and increased inequality. His main message: The economy grew faster, inequality declined, and median income went up when marginal tax rates were as high as 70%, after World War II and before Ronald Reagan became president. Further, he argues, Social Security, Medicare, Medicaid, and other transfer payments are not the largest parts of the federal budget (never mind data showing otherwise), and it is wrong to call them transfer payments because citizens have “paid into the system” (though he acknowledges that much of the money Baby Boomers sent to Washington to cover their retirement has been “spent by the government on other things”).

Professor Reich seemed a bit surprised—incredulous perhaps—when I noted that President George W. Bush collected $1 trillion more in personal income taxes from the rich than Bill Clinton during their respective years in office, despite cuts in marginal tax rates. (Here’s the table on the IRS Website, if you want to add up the numbers yourself.) But then it was my turn to be surprised—by the Secretary’s answer.

He insisted that, “The number of nominal dollars sent to Washington in taxes is a silly measure,” because what really matters is how much “the rich” pay, not in total, but as “percentage of their income.” Thus, tax policy should focus on “equalizing the pain” between rich and poor by subjecting the former to higher marginal tax rates. He said he considers the Bush tax cuts “a big failure,” not because the rich are sending more money to Washington today than ever before, but because, “They’ve never been so rich!”

The choice we face is really quite simple.

I found Grover Norquist’s efforts to shrink federal spending, cut taxes, and reduce the size of the federal government—with greater freedom as their goal—more appealing. Though I understand why others might favor Professor Reich’s advice (believe me, I live in Massachusetts).

So, if income inequality is your overriding concern, a return to 70% top marginal tax rates and increased government spending may be your cup of tea. But it sure feels like we’ve heard it all before, and got a good look at where it leads—back in the days of Jimmy Carter.