For the better part of the 17 years that I spent working in American politics, I took every opportunity to tell my fellow conservative travelers that it was more important to reduce government spending than to cut taxes.
The politicians I talked to always smiled and gave me an encouraging pat on the shoulder—metaphorically if not literally—and I had not expected anything else. But what I found surprising, and as time went by frustrating, was that other policy experts and scholars at right-of-center think tanks and activist groups summarily dismissed the very notion of spending cuts. I even earned a reputation for being annoying for always bringing up an issue that most of them considered a non-starter (elected Republicans refused to listen) or too complicated (it required a lot of analytical work).
But as the saying goes, good things come to those who wait. Things changed after the outrageous Congressional spending binge in response to the COVID pandemic. The conservative movement turned its attention to the spending side of the government budget.
Since then, born-again fiscal conservatives have been trying their luck in what is for many of them a new policy field. This change in policy focus is welcome, and hopefully not too late to help steer America clear of a potentially catastrophic debt crisis.
The only problem is that conservatives for spending reform do not have much of a window to get their reforms done. Not only are we precipitously close to a fiscal crisis, making spending reforms urgent, but the reforms we need to do are complex in nature.
Put simply: the need for spending reform is daunting. To get an idea of its enormity, consider the fact that the welfare state we Americans fund with our taxes has its roots in the 1960s. The Left has had nearly six decades to build and solidify an intricate structure that spent $6 trillion last year.
You don’t turn that supertanker around on a dime.
In short: conservatives cannot offer simple solutions to a complex problem. If we do, our solutions will fail to solve the problem, and we will have wasted the only chance we will get in the foreseeable future to implement real, solid, and durable spending reforms.
So far, the offerings from the conservative movement vary quite a bit in terms of complexity and ideological approach. Furthermore, there aren’t that many of those offerings. This is not per se a criticism of conservative institutions—I know from years of experience that very few policy analysts, regardless of ideological affiliation, are capable of addressing the depth and systemic nature of fiscal policy and its macroeconomic context.
That said, it is important to put the few contributions we have under scrutiny. Given the seriousness of our fiscal problems at the federal level, and the mounting risk of a debt crisis in the near future, whatever solutions we bring forward must be as effective as possible already at the drawing table.
Most of the focus has thus far been on Congress and the federal budget. The non-federal levels of government are often forgotten in the debate, which is unfortunate. They do not spend quite as much as Congress does—approximately $3.6 trillion for both states and local governments in 2022. However, as explained here and in this Report last week, the states are major conduits for federal spending. Therefore, if conservatives want to put an end to the era of big government spending, they have to include the states in their policy reform efforts.
Fortunately, that is now happening. On Wednesday, June 21st, Patrick Gleason, Vice President of State Affairs at the Americans for Tax Reform, appeared on Vance Ginn’s excellent podcast Let People Prosper. Gleason announced that ATR will be launching a new program focused on state government spending. The goal, Gleason explained, is to make state lawmakers aware of the perils of excessive spending and to promote a model for spending restraint.
So far, ATR has not released any deeper details of its model, but from what Gleason revealed on the podcast, there is cause for praise and appreciation for this initiative. One of the goals of the model is to give legislators a simple metric that can be used by anyone, including those that are not very interested in state budget issues, to gauge whether or not a state government is spending too much money.
The model suggests that a state government’s spending can increase by the sum total of population growth and inflation. If a state experiences a 1% increase in its population and inflation is 2%, then the state government can spend 3% more money.
There is a pedagogical beauty to this simple model. From my own experience, working with lawmakers both state and federal, I know that most of them rarely read government budgets. Only a handful of them know the budgets well enough to ask important questions about spending, and fewer still have full command of the intricacies of their government’s expenditures and revenue systems. Therefore, the simple ATR model will encourage even the most disinterested ones to pay more attention to fiscal matters.
With any luck, ATR will also help steer the public’s eyes to government spending. This would help other initiatives gain attention and hopefully carry forward broader, fiscally sustainable spending reforms in coming years.
At the same time, while ATR’s initiative is much welcome, there are a few problems with it. Some of them are technical, as I discuss briefly in The Fiscal Podcast. In this evaluation sheet, I elaborate in detail on the merits of and challenges to the approach that ATR takes. I include a review of what data could derail the intentions behind the model, or make it work better.
These technical aspects of the ATR reform are not to be ignored. However, of perhaps even more importance is the ideological conservative question that their initiative inevitably gives rise to: do conservatives want to participate in the administration of America’s welfare state?
If the answer is negative, do they want to reform the welfare state in the image of conservatism?
Before we dig further into these questions, let me be clear about the ATR initiative and conservative ideology. As I understand their intentions with their spending restraint project, ATR does not want to start an ideological debate over government spending. Their goal is practical and focused on ‘what works’ here and now. The ideological aspect of their initiative is inspired by, not derived from, their initiative.
Returning to the question of whether or not conservatives want to be good welfare-state administrators, the answer has to be negative. In order to practice conservatism, we have to want more than that. We can consider the ATR initiative a good start in terms of spending reform, but for two reasons it is essential that conservatives go far beyond it as we put our ideological preferences to work.
The first reason has to do with problem complexity. As mentioned, it is never a good idea to use simple solutions to fix complex problems. Government spending is a complex institutional structure. It has thousands of moving parts, with bureaucracies and constituents benefiting from the spending in a multitude of ways. Countless laws and regulations define what money government can spend, when, and for how long. A simple spending cap cannot inspire any in-depth reform to this complex fiscal machinery.
Again, it is not ATR’s intention to do anything of that kind, but for those who would like to go further, it is essential to keep in mind that complex problems require complex solutions.
This brings us to the second reason why conservatives need to do more work in order to bring about more substantial reforms.
The American government is an institutional manifestation of an ideology. It has an ideological architecture that spans the entire spectrum from the federal government down to cities, counties, and school districts.
This ideology is socialist in nature. I know from experience that whenever I state this, many conservatives stop reading: how can we possibly have a socialist government in America? We are not a socialist country; government does not own the means of production. However, socialism is not defined by the proprietary status of our industries or corporations. The public ownership of ‘everything’ is just one extreme of socialism, namely the one we refer to as communism.
In order to understand the ideological nature of our government, we need to relax our reaction to the concept of socialism. The best way to understand why our government is socialist in nature is to think of it in terms of the Nordic tradition of social democracy. Essentially a soft-spoken rewrite of democratic socialism, this term labels a welfare state of the kind that evolved in Sweden, Denmark, Norway, and Finland in the middle of the last century.
The Nordic welfare states became known worldwide, but they were not materially different from the models that evolved in many other countries in Europe after World War II.
At the heart of social democracy lies the premise that all differences in economic outcomes between citizens are immoral and must be eliminated. This premise, which is derived directly from Marxist economic theory, prescribes that government give money and provide in-kind services free of charge (or for a nominal fee) to constituencies that government defines as eligible. These programs should be funded by highly progressive taxes on, primarily, personal income.
We know this fiscal practice as economic redistribution. The American welfare state is designed to do exactly that: redistribute income according to the ideological edicts of social democracy. This is no coincidence: it was given its social-democratic architecture under President Lyndon Johnson. His “war on poverty” explicitly intended to bring the Swedish welfare state to America.
In short, social democracy has entrenched itself in the very institutions of government spending, both federal and state. This welfare state has failed in every way imaginable, and by the very nature of its entitlement programs, it forces annual increases in government spending, regardless of what taxpayers can afford.
For this very reason, the socialist welfare state is now driving America to the brink of a catastrophic debt crisis.
The recognition that our welfare state is socialist in nature has two implications for conservatives. The first implication is that we should ask ourselves whether or not we want to be administrators of a socialist welfare state. So long as we do not develop spending reforms that explicitly intend to change the ideological architecture of our welfare state, the best we can do is become fiscally more efficient at administering socialism than the socialists themselves are.
The second implication is that if we reject the role of fiscal administrators, we must design reforms to our welfare state that will eventually replace the socialist architecture with one that is distinctly conservative in nature.
We do not lack the bricks to start building those reforms. We should start by rejecting the concept of ‘income inequality’ as the guiding star of government policy. We have good reasons to do so, even without referring back to ideology. We can find inspiration in the concept of a social market economy, which has recently gained popularity among European conservatives. There are multiple policy tools for conservative practice, among them the spending reforms that the Heritage Foundation published last year.
Regardless of exactly how we choose to practice conservatism, the starting point for all reforms must be the principle that social welfare programs should provide a last-resort safety net for subsistence living, not a permanent improvement of the income of those who are gainfully employed. If this can be the guiding principle for conservative reform, then we will automatically reject the practice of economic redistribution—and the ideology of socialism.