Nothing demonstrated the pathetic state of contemporary conservatism as yesterday’s teabag protests. Held in various cities, groups of conservatives gathered to protest their high taxes and the President’s budget priorities. They dumped teabags in public places to vent their outrage in a not-so-subtle echo of the Boston Tea Party in 1773.
Newt Gingrich, one of the organizers of the protests, has a degree in history so surely he will recall that the colonists in Boston were not arguing about money. They did not protest taxation per se, but taxation without representation. In short, they were arguing about the constitutional right of Englishmen not to be taxed without their consent, voted through their representatives in the House of Commons.
No one likes paying taxes. But, the problem in America today is not that our taxes are too high but that they are too unfairly applied. The tax code has become Byzantine because vested interested with skilled tax lawyers and lobbyists have made it Byzantine. Those multiple volumes you see in legal offices are the result of lobbyists getting Congress to insert special provisions that help the companies that pay them. A simplified tax code without all the special tax breaks would not only be more fair, it might make companies spend less time trying to rig the tax code and more time trying to improve their performance.
I heard a news item yesterday on the radio about Goldman Sachs trying to give back the bailout money it took under the Toxic Assets Relief Program (TARP). They do not wish to be bound by the compensation requirements of TARP. They want to be able to pay obscene bonuses because, despite all the evidence of the past eight months, they think such bonuses will improve performance. Good luck with that.
But, there is a better way than TARP to force Wall Street to change the culture of greed that led to the economic meltdown that is affecting everyone and nearly bankrupting the federal government. Re-introduce higher marginal rates. Despite what the teabag protesters claimed yesterday, Americans are paying historically low rates today. During Dwight Eisenhower’s presidency, marginal rates topped out at 92 percent and no one threw tea bags at him nor called him a socialist.
President Obama is mired in an economic crisis right now and the last thing he needs is a fight over raising taxes. But, once the economy starts to improve he will have a political wind, as well as an economic one, at his back. That will be the time to make a proposal that tips its hat to both conservatives and liberals: radical simplification of the tax code combined with more progressive rates.
Voters currently feel powerless before the economic meltdown and the President’s flurry of activity has been warmly greeted not because most people understand the economics of the proposals but because at least he is demonstrating that we humans are not powerless before impersonal economic laws, that we are not homo economicus. Voters also feel powerless before a Byzantine tax code and the K Street lobbyists who created it. Demonstrating the power of the people to re-order the priorities of the nation by fixing the tax code has more in common with the cause of the Bostonians in 1773 than yesterday’s conservative tantrum.