The Problem with a 'No New Taxes' Pledge

As the debt ceiling debate showed, you need flexibility to effectively compromise

600 Repubs pledge REUTERS Larry Downing.jpg

No matter what their party or affiliation, no one should celebrate the debt ceiling debacle that the U.S. just endured. It was dangerous to the economy, embarrassing from a global standpoint, and provided relatively weak medicine for the nation's long-term deficit illness. But now that it's over, we can begin to assess the debate and examine some of the problems that made the episode so awful. One sticks out: Republicans' no new taxes pledge.

The pledge was developed by Grover Norquist's organization Americans for Tax Reform. A significant number of Republicans had signed on. This resulted in many Republicans forbidding themselves from even considering increasing taxes, even if they wanted to do so in the name of compromise and fiscal responsibility.

Why didn't they just break their promise? This question would be best addressed to George Bush Sr. His 1992 loss is often blamed in large part on his famous "read my lips" speech, where he promised not to raise taxes only to do so anyway during his term. And that's okay: politicians should be held to their word. But their word needs to provide some flexibility to act when necessary.

These sorts of pledges make for great campaign talking points, but they also make the political process impractical. For example, imagine if Democrats had taken a similar pledge where they promised no new spending cuts. How would the debt ceiling talks have gone? The debt ceiling might have been raised without any deficit reduction plan whatsoever, which might seem like a nice outcome to anyone who is unconcerned about U.S. debt trajectories. But the more likely result would have been Republicans stubbornly refusing to allow the ceiling to rise. This may have led to U.S. default, which would have sent the market reeling.

The problem with sweeping, categorical pledges is that they eliminate the government's flexibility to act. Consider the current deficit reduction plan. Let's say we wanted to pay down the debt -- I mean really pay it down, not cut a measly $2 trillion off spending growth over the next 10 years. Doing so would be extremely difficult without any new taxes. Similarly, we'd have to raise taxes tremendously to achieve deep deficit cuts without also reining in spending.

The solution would be compromise, which is kind of the point. If both parties can agree that U.S. debt levels should be cut substantially, then they should also be able to form a reasonable compromise to get us there. But when they're constrained by extreme pledges, the compromise needed to achieve that end is impossible.

We'll see this problem in action later this year when the "Supercommittee" convenes to try to hammer out a compromise to avoid the debt deal's automatic mechanism. If a deal isn't reached, various cuts already agreed upon as a default will occur. This includes a very deep cut to defense spending. The committee will fail, because Republicans won't agree to a tax increase and Democrats would rather see the deep defense cut that would result than cut entitlements deeper, which is the only other real option for spending cuts alone. Much of the Republican base will see the deep defense spending cut as being worse than a small, targeted tax increase. So how is this a better outcome for the party?

Further deficit reduction will also be unlikely in the years that follow so long as such pledges are involved, assuming that neither party achieves a supermajority in both houses as well as control of the White House. The only way to cut the deficit without compromising is if your opposition has no voice. And even then, you had better hope moderates within your party don't object to one-dimensional action. Providing this much power to a single party is rare in American politics, so the U.S. economy would be better off without these sorts of absolute pledges.

Of course, candidates can still be against tax increases or spending cuts. But their stance needs to be reasonable. For example, a more practical Republican pledge could be, "I promise not allow taxes to rise unless spending is cut by an equal amount" or "I promise not to allow taxes to rise unless spending is left flat and 100% of those tax dollars are used to pay down the national debt." Any conservatives who are also fiscal hawks should find such pledges not only reasonable, but better than an extreme "no new taxes no matter what" alternative.

Image Credit: REUTERS/Larry Downing