Not Insane.(The Talk of the Town)(government spending)(Essay)

On "Hardball" the other night, David Frum was complaining about the Republican Party--a popular activity at MSNBC, a cable news network whose prime-time hosts are non-Republicans, including "Hardball" 's Chris Matthews. Frum, however, is a non-non-Republican, and an overdetermined one: 1980 Reagan volunteer, Federalist Society activist, Wall Street Journal editorial-page editor, George W. Bush speechwriter ("axis of evil"), National Review contributing editor, American Enterprise Institute resident fellow. What conservatives are saying, he told Matthews,

is increasingly not only counterproductive economically but also politically. We look like we don't care. We look like we're indifferent. We don't offer solutions. We're talking about a spending freeze in the middle of a 1929-30-style meltdown!

On ABC's "This Week," David Brooks, the Times columnist, was even more aghast. Brooks--whose conservative credentials (William F. Buckley, Jr., protege, Wall Street Journal op-ed editor, Weekly Standard senior editor) aren't too shabby, either--said wonderingly, "There are a lot of Republicans up on Capitol Hill right now who are calling for a spending freeze in the middle of a recession slash depression. That is insane." Quite a lot of Republicans, actually, and they weren't just talking about it: On March 6th, John Boehner, the House Republican leader, made a motion on the floor for just such a freeze. His charges voted for it, a hundred and fifty-two to nothing.

The theory that preventing the United States government from spending more money will halt the cascading crisis of demand that threatens the world with recession slash depression is indeed crazy. And many Republicans, even as they rail against "government spending," at least understand that the government must cause more money to be spent, and that the fiscal deficit must rise in the process. They just want the government to do the job indirectly, by cutting taxes--especially taxes paid by the well-off, such as inheritance taxes, capital-gains taxes, corporate taxes, and high-bracket income taxes--in the hope that the money left untaxed will be spent. It is useless to point out to them that this approach was tried for eight years and found wanting, that in this economy the comfortable are less likely than the strapped to spend any extra cash that comes their way, that government spending often serves socially useful purposes, that "wasteful spending" is not a government monopoly (see corporate jets, golf-course "conferences," premium vodkas), and that the only way to insure that money is spent is, precisely, to spend it.

And yet, lurking underneath the anti-spending, pro-tax-cutting cant is one idea that might truly have merit. Frum mentioned it on that "Hardball" broadcast, touching off this rather cryptic exchange:

FRUM: I'm for a big payroll-tax holiday that would go into effect immediately., MATTHEWS: I know about the payroll, uh--in other words, it gets money back in the hands of people who are working people, right?, FRUM: Up to a hundred and twenty dollars per week per worker, starting last month., MATTHEWS: But it sounds like a liberal argument. The funny thing is, the liberals haven't pushed it. And I don't know why, because working people pay a very regressive tax when they go to work, right?

Right. The payroll tax--a.k.a. the Social Security tax, the Social Security and Medicare tax, or the Federal Insurance Contributions Act (FICA) tax-- skims around fifteen per cent from the payroll of every business and the paycheck of every worker, from minimum-wage burger-flippers on up, with no deductions. No exemptions, either--except that everything above a hundred grand or so a year is untouched, which means that as salaries climb into the stratosphere the tax, as a percentage, shrinks to a speck far below. This is one reason that Warren Buffett's secretary (as her boss has unproudly noted) pays Uncle Sam ...