The Empty Symbolism of American Politics

Seeking a middle ground, liberal and conservative politicians alike propose split-the-difference "solutions" to our problems which seem plausible and pragmatic but do not, of course, represent solutions at all. What's missing? The dimension of reality,

Democrat-Republican Fusion

IMAGINE a panel of eighteenth-century physicians with a royal patient who has a persistent fever and a hacking cough. Learned doctor Newt Gingrich wants to bleed three pints, learned doctor Richard Gephardt one. Doctors Bill Clinton and Bob Dole want to split the difference at a quart, but they can't decide which of them should make the incision. The next day the patient has acute pneumonia; the following day he dies and the kingdom goes into mourning.

That is what our political debate increasingly resembles. Led by the politics-is-a-game media, we have defined American politics along a single right-to-left dimension. We know that the new conservatives of the House of Representatives are on the right and the old liberals of the Kennedy-Johnson tradition on the left. And the votes are in the middle, so that's where President Clinton and ex-senator Dole have gone. The middle of the road may be mathematically equidistant from the right and the left, but the symbolic middle toward which both candidates have moved is meaningless for making real national policy.


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For liberals it is worse than meaningless. It is harmful, because most of the terms defining the political debate are inherently conservative: "less government," "middle-class tax cut," "tough on crime," "abolish welfare as we know it." And for most Americans, who just want solutions to the nation's problems, the symbolic middle is useless, because it provides only symbolic solutions. We need real solutions. The correction of our national problems requires neither right nor left, neither moderation nor extremism. The political debate needs a new dimension: reality.

The issue that best represents the grip of symbolism on the public debate is balancing the budget. There is no difference for Clinton and Dole to split on this issue, because the Administration and the Republican Congress have agreed to balance the budget by 2002. A balanced budget has become the Holy Grail of public policy, a symbol that no politician dares to question. Meanwhile, in the real world of tradeoffs, where rarely do all good things go together, the effort to make that symbol an achieved fact is likely to slow the country's economic growth, increase unemployment, and even trigger a recession.

Other examples of the politics of symbolism can be found in categories from taxes to social programs -- categories that are not far apart, since where the money comes from is inextricably linked to where it goes.

Taxes

THE Administration and the Republican Congress agree on the need for a middle-class tax cut. Why? Aside from the excellent politics of handing out money, the tax issue is based on four symbol-clotted myths plus one clear untruth that everyone knows as such and almost no politician mentions:

1. Tax cuts, balanced by cuts in government expenditures, stimulate economic growth and employment. Wrong. The supply-side theory is that if you let people keep more of their earnings, they will work harder. That is probably true, but most economists agree that it is a very limited truth -- certainly as it applies to small shifts in current low marginal tax rates. Tax cuts do stimulate growth, but primarily on the demand side. People with more after-tax money in their pockets will spend more, and their buying will increase employment. But if the tax cuts are balanced by cuts in government expenditures, the people who were receiving money from the government will have less of it to spend, and that will decrease demand, offsetting the impetus that tax cuts have given demand and thus doing little to increase growth.

2. The proposed tax cuts are for the middle class. The middle class approaches motherhood as an American icon, but at least motherhood is definable. President Clinton has proposed cuts for couples with incomes up to $120,000; the Republicans initially went much higher, although they have now come down. But the middle 50 percent of American families make $15,000 to $50,000 a year; only one family in six has an income above even $75,000.

3. Federal taxes are being used to equalize incomes. The debate rages over whether they should or should not be. In fact the redistributive effects of federal taxes are mild at best (or worst). Families with incomes of less than $30,000 pay up to 13 percent of their income in taxes; those above that level do pay significantly more, going above 20 percent, but there is little variation among the groups making more than $30,000.

The alleged leveling effect of taxes calls forth two further myths. The conservative one is that federal taxes are confiscatory, but at an average tax rate that is effectively less than 25 percent for families with incomes higher than $200,000, confiscation is truly mythical. The liberal myth is that a more egalitarian distribution of income can be achieved primarily by playing with income-tax rates. Ronald Reagan's 1986 tax reform reduced progressivity, although loophole-tightening compensated for that to some degree. In focusing on income taxes, however, liberals ignore the really regressive feature of the tax system -- Social Security payroll taxes, which are levied only on wages and salaries of less than $62,000, thus exempting not only all pay above that level but also interest, dividends, and capital gains. A truly progressive tax system -- that is, one that takes proportionally more from those with higher incomes -- would look first at payroll taxes.

4. Federal Entitlements and other direct subsidy payments are questionable pieces of pork, whereas federal subsidies provided as tax reductions are rewards for virtue. This is highly debatable. Entitlements are defined as payments available to all those who meet certain conditions -- for example, poverty or willingness not to plant corn. The total cost is determined by the number of applicants and the amount paid to each. That definition of entitlements, however, fits not only direct payments but also most tax deductions -- at least as defined by many economists and some tax lawyers. One example of the mythological difference between tax and expenditure subsidies lies in housing. The deductibility of mortgage interest is an entitlement that costs the federal government more than $50 billion a year, and it goes mostly to middle-income homeowners along with better-off owners of expensive or multiple properties. Politically, the mortgage-interest deduction is viewed as almost pure virtue, to be continued even under many proposed "flat tax" plans. It costs twice as much as federal expenditures for public and other low-income housing -- popularly considered a dubious subsidy, and one that is likely to be reduced significantly in the drive toward a balanced budget.

Presented by

Robert A. Levine, an economist with the RAND Corporation, was deputy director of the Congressional Budget Office from 1975 to 1979.

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