Government size matters and it’s on the table
The 2020 election was dominated by keeping or jettisoning Donald Trump. His Twitter account is no longer with us, but a Democratic President and Congress (barely) are.
Despite President Joe Biden’s moderate tone throughout the electoral cycle he’s commenced his presidency with a commitment to dramatically altering the scope of government and addressing the continuing problem of income inequality.
Strip away the cultural and social issues for a moment. Progressives, liberals, conservatives and libertarians all agree: Any society is some mix of public and private sectors. They absolutely disagree about the desirable size of each.
Public economies are first and foremost about the provision of goods and services like the military, bridges and roads and basic levels of social welfare.
The private sector may be the main driver in creating wealth but with it comes inequalities in income distribution. The public sector mitigates this through taxation, social service spending and to some degree through regulation of the workplace and minimum wages.
We struggle with wealth disparity
Things are changing.
President Biden’s recently passed COVID-19 relief bill brought a significant shift in the scope of government, an increase in the social safety net for children, and while much is labeled as temporary, it will likely become permanent.
A $2 trillion Infrastructure bill awaits. Government is getting bigger. And it is not likely to get smaller any time soon.
Then there’s income inequality. The most commonly used measure is the GINI index, which ranges from zero for perfectly equal distribution of resources to one for all income held by very few people.
In 2017, the last time there have been consistent measures, the World Bank rated the U.S., Canada, Germany and Denmark at .41 .34, .32. and..28. after taxes and transfers.
Our level of income inequality isn’t sustainable without significant unrest.
So it’s clear that while the US economy has been incredibly productive, we struggle with great wealth disparity. There’s no mistaking one thing. Biden is moving at governmental light speed to convert his electoral victory to an altered US economy. He and Democratic leaders know they can only count on control for two years.
America continues on path toward more debt
Sen. Joe Manchin, D-west Virginia, has put the brakes on reconciliation or an altered filibuster. But Republicans suffer from a major problem: no effective message. They have been playing from an obstruction script. And it has gotten really stale.
There is an argument to be framed around the benefits of a vibrant private sector with minimal government debt. However, that moral ground got a lot harder to defend after following Trump into the debt wilderness with the tax cut of 2017.
If there’s a conservative counterpoint, now’s the time to make it.
Reagan successfully framed the debate about politics around the productivity of the private sector with fewer restraints. But that was 40 years ago.
Democrats have staked their claim on greater economic equity: a broader safety net, less income inequality, more regulation and higher taxes for corporations and the wealthy. What’s the current Republican alternative vision?
Raising taxes on higher incomes matters
Cultural issues and immigration are important. But the fundamental nature of the American economy is on the table.
Some may look to Norway, Sweden or Denmark as models. But they do more to pay as they go to support their larger public sectors. Their value added consumption taxes puts everyone’s skin in the game. Yes, they tax the rich. Higher upper rates must be a significant part of any payment plan.
Public decisions have long-term consequences. Ignoring major factors in complex economic models for short term convenience eventually throws wrenches into the machinery. Then everyone loses. A responsible debate must include the amount of debt and inflation that’s tolerable. It must include America’s competing in a very competitive world.
It’s past time to have a public conversation, preferably framed by the parties, that addresses and ultimately defines the size and scope of the federal government. This includes paying with real dollars, not just printed ones.
William Lyons worked as a professor of political science at the University of Tennessee and served for more than 16 years in a number of policy-related roles for Knoxville Mayors Bill Haslam, Daniel Brown, Madeline Rogero and Indya Kincannon.