If you talk to smart conservatives these days, they are very excited about the future. A group of aspiring Republican policymakers—including Mike Lee, Paul Ryan, and Marco Rubio—are consulting with conservative scholars and proposing new ideas to redesign the federal government. This resurgence of reform conservatism is a real, growing movement, but at least one major blockade stands in its way: the reflexive Republican opposition to increased spending.
New York Times columnist Ross Douthat, a member of the reform conservatism brotherhood, demonstrated this in a back-and-forth over inequality with former White House economist Jared Bernstein. Helping the poor means putting more money into anti-poverty programs, Bernstein had written, and paying for those programs would require raising taxes on the rich. In response, Douthat agreed on the need to increase spending on these programs. But the money, he said, should come from elsewhere in government:
Given that our existing tax code, like the zoning policies mentioned above, has a heavy pro-rentier and pro-rich bias, why couldn’t we start by cutting or capping existing tax subsidies — for expensive homes, for expensive health insurance, for being a wealthy taxpayer in a high tax state — and put that money to work first? This would involve “new revenue,” in a sense, but you wouldn’t have to raise tax rates (as we already just did) in order to get it, and you would be redistributing unearned, effectively-subsidized riches rather than just hacking away more indiscriminately at the idle and entrepreneurial alike.
In principle, Douthat is right—and Bernstein says as much in a follow-up. But the actual politicians in the Republican Party—the ones who would have to take actual votes, to make these things happen—would never support curtailing the mortgage-interest deduction and using that money to expand the Earned Income Tax Credit. Grover Norquist’s infamous anti-tax pledge forbids policymakers not just from raising taxes, but also from supporting “any net reduction or elimination of credits and deductions, unless matched dollar for dollar by further reducing tax rates.” Norquist’s pledge may not command quite the fealty it once did, as Republicans reluctantly accepted higher taxes on the rich in the fiscal cliff deal and new “fees” in the Murray-Ryan budget. Even so, all but 16 of the 233 House Republicans and seven of the 45 GOP senators have signed it. And it’s not like Republicans are running around calling for the kind of reforms Douthat seems to have in mind.
Which is too bad. The elimination of tax expenditures is a cause that could win support from conservatives and liberals alike. Those expenditures totaled more than $1.2 trillion in 2013, just slightly less than the $1.3 trillion the federal government collected in individual income taxes. They also overwhelmingly benefit the rich: the top 20 percent of households collected more than half of the expenditures. Economists also widely agree that they are federal spending in another form. Congress could limit tax expenditures and use the money for antipoverty programs without expanding the size of government. The federal government would just be realigning its fiscal priorities to focus on the poor.
Of course, there’s a reason Republicans and, yes, some Democrats are reluctant to take on these tax breaks. They also benefit the middle class—limiting them means taking money out of middle-class pockets. And significantly curtailing the major tax deductions would be very disruptive. Capping the mortgage-interest deduction, for instance, might send housing prices down. That might not be such a bad thing, particularly in the long run, but it would infuriate homeowners. Employers may stop offering employer-provided insurance en masse if that deduction is reduced. Once again, that’s not a bad thing. But as we saw with the uproar over Obamacare’s relatively minor disruptions in the individual market, Americans have a deep status quo bias.
But the biggest problem for reform conservatives is not the political and policy implications of cutting tax expenditures. It’s the base’s refusal even to consider using those funds for different purposes. Republicans will not propose capping the mortgage-interest deduction to expand the EITC, because they oppose expanding the EITC without offsetting it with cuts to other, more traditional spending programs. That’s why Marco Rubio has twisted himself in a knot trying to expand the EITC (in the form of a wage subsidy) without cutting funding for any other low-income Americans or increasing the deficit. (It’s not mathematically possible.)
Reform conservatism is very much alive. On Thursday, the American Enterprise Institute is hosting a major kickoff for a new domestic reform agenda with Eric Cantor, Mitch McConnell and Mike Lee. Douthat will be on hand with Ramesh Ponnuru, Yuval Levin, Reihan Salam and Peter Wehner afterwards discussing reform conservatism. Cantor and McConnell’s presence at the event shows how far the bloc has come in just a few short years. But for the cause to progress, Republican leaders have to admit what Douthat and others already do: Sometimes increased federal spending on antipoverty programs is a good thing. Then it will make sense to argue about how to pay for it.