Is Bad Government Good Politics?

At the end of my last post, about whether Bush's domestic initiatives can be compared to Nixon's, I made the point that the sloppiness, complexity, and general fraudulence of both the Medicare drug bill and No Child Left Behind would lead to backlashes, but that the backlash was likely to help the Republicans, because it would further stir up anti-government feelings, and reinforce the sense that government can't do anything right. The blogger Angry Bear commented here that this was "just screwy enough to be scary." I didn't really deal with the question of whether I think it's a deliberate strategy, or just the accidental outcome when people who don't particularly like government programs and listen only to K Street lobbyists try to craft liberal social programs.

Given a choice between a conspiracy theory and a screw-up as an explanation, I usually vote for screw-up. But in this case, I'm willing to speculate that there's something deliberate about it. At the very least, someone in the White House is thinking about it in just these cynical terms. To understand why, you have to go back to those one-hit wonders, the "lucky duckies."

The lucky duckies had their fifteen minutes in a Wall Street journal editorial on November 20, 2002, with the title, "The Non-Taxpaying Class." The Journal argued that "thanks to a growing number of absolutely legal escape hatches," too many people paid little or no federal income tax. "Who are these lucky duckies?" the Journal asked. Not, as you might imagine, Conrad Black or the corporate clients of tax-shelter promoter KPMG, but the working poor and middle class, about 16 million who file income tax returns without tax liability.

The editorial was a window into a way of thinking that usually does not dare speak its name.

After all, the provisions that raised the personal exemption and the standard deduction, created and expanded the Earned Income Tax Credit, and then added the child tax credit were great bipartisan achievements of the 1980s and 1990s, and priceless innovations in social policy. Conservatives who could never stomach an increase in the minimum wage could live with the EITC, which is no substitute but at least helps the minimum wage dollar go further for people supporting a family. The change in tax policy, along with expansion of Medicaid, also deserves credit for the partial success of welfare reform, because moving from welfare to work was no longer quite such a leap off a financial cliff. And even George W. Bush had endorsed the idea when he promised in the 2000 campaign to cut taxes for "the waitress with two kids who makes $20,000," although he did not acknowledge that the $20,000 single parent already pays no taxes, thanks to these innovations, and that his plan did nothing for her.

The lucky ducky editorial seemed odd at first because the Journal is supposedly against taxes, period. Their idea of equality would seem to be that the rich as well as the poor should pay no taxes. But the Journal's objection to the elimination of income taxes for the working poor was not fiscal, it was psychological. Even those in the 10% bracket, the editorial said, paid an amount that was, unfortunately, "not enough to get his or her blood boiling with tax rage."

Ah, rage. That's really what this is all about. Conservatives used to be threatened by the rage of poor people; now apparently they'd like to see more of it, as long as it can be directed exclusively toward government. Without the rage, poor and middle-income voters might continue to see government as providing economic security, a modicum of justice, and essential services that the private sector can't. They will support entitlements, without feeling any of the burden that those entitlements pose to those able to pay.

It wasn't in the cards, though, to actually reverse these tax-code innovations. To get the 2001 tax cut passed, Bush actually had to swallow a further expansion of "the non-taxpaying class," when Republican Senator Olympia Snowe of Maine made her support contingent on making the child tax credit partially refundable to low-income working families. (That is, such families can get cash back even if the credit exceeds what they owe in income taxes.) In 2003, the tax cut expanded the child credit for everyone except these poorer families, an "oversight" that was "discovered" only after the bill passed. A backlash resulted in legislation to expand the credit again, but that bill was loaded up with so many more tax breaks for wealthier people that it became expensive and died.

Without repealing these tax breaks for the working poor, there are other ways to make low- and middle-income people feel the rage that the Right wants to stoke. One very long-term gambit that John Podesta, the former White House Chief of Staff now running the Center for American Progress, pointed out recently is the creation of more and more vehicles in which investment gains can be sheltered tax-free. The Health Savings Accounts created under the Medicare bill are a minor version; the Retirement Savings Accounts and Lifetime Savings Accounts to be proposed in the State of the Union Address would be the real deal. By shifting most investment income into these tax-free vehicles, the tax burden will fall increasingly on relatively poorer people who get their income from work. More significantly, when a future president is forced to raise revenues, there will be no way to bring this income back into the taxable base. Congress could disallow any future contributions to these tax-exempt accounts, but the money already in them would continue to accumulate tax free. That means that the inevitable tax increases in the future -- what the Dean campaign has cleverly taken to calling "The Bush Tax" -- will have to take the form of rate increases on a narrower base. When middle-income people see their tax rate go from 15% to 20%, simply because so much other income is off the table, that might get their "blood boiling with tax rage."

But the other way to stoke rage is through complexity and confusion. It's probably more effective in the short-term. There's no more reliable way to get people to hate government than by creating situations where every interaction with government is fraught with hassle and uncertainty and where it's never clear just who is accountable. But that's a good description of what life will be like under the Medicare drug bill. Senior citizens will have to first decide whether the deal is worth it to them, at a premium of $420 a year (but maybe more). And then, in theory at least, there will be several private insurers offering them coverage, and they will have to decide which offers the better deal for them, now and in the future. And then, of course, they will have to fight the insurer over every claim, with the insurer given the right under the law to give preference to certain drugs and to shift those preferences around.

(Just as I was wrapping this up, and looking for an article that explained this complexity, Clinton HHS Secretary Donna Shalala appeared with a Monday op-ed that does a good job of it. Her angle is that the Department will now have to "transform a complicated, ideologically driven piece of legislation into a practical drug benefit" in order for it to be successful, but all the examples she cites are written into the law and cannot really be changed by the regulatory process.

Standard Medicare is complicated, and particularly frustrating for what it doesn't pay for: nursing home care and prescription drugs. But compared to the prescription drug scam, it's simplicity itself: You turn 65, you become eligible. You go to the doctor, or the hospital, Medicare pays. End of story.

Ultimately, that's what the right dislikes about entitlement programs like Medicare. It's not that their spending is hard to control. It's that they make government look good. At their best, they're seamless, painless, hassle-free. The rules are clear, and everyone eligible is treated equally under the law. They run so smoothly and efficiently that people don't even think of them as government programs, leading to the anecdote, which is told in perhaps a half-dozen versions, of the senior citizen who approaches a Senator in an airport in the midst of the 1993 struggle over the Clinton health plan and pleads, "Just don't let the government get a hold of my Medicare." (Here is the version of the story that carries the official imprimatur of David Broder, but of course the original source is a Cajun fabulist.) That will no longer be the case with Medicare, at least, which is guaranteed to become a very frustrating and elusive benefit, even if no less costly.

Another good example of the perhaps deliberate complexity of Bush programs is in the tax code. It's true that the benefits for low-income workers, the lucky duckies, were not cut and were slightly expanded. But the next time you do your taxes, try filling out the form for the Additional Child Tax Credit. Or, worse, the refundable child tax credit. And then consider that low-income people filing for these credits and the Earned Income Tax Credit are also twice as likely to be audited as people who make more than $100,000. It's hard to come out of that process feeling the government is responsive and respectful of people struggling to support their families on a minimum wage job.

When the backlash comes, against Medicare, No Child Left Behind, or even these tax policies, most people assume that the backlash will have to hurt Republicans, since they were in charge when all these provisions were passed. But as long as Democrats/liberals don't figure out how to talk about these things, as long as they don't have an alternative other than more funding for these flawed programs, they will not be able to capture the backlash. If it becomes a general backlash against government, which seems likely, then there is no reason that Republicans can't use it to bolster their claim as the anti-government party.

I don't know if this is, top to bottom, the understood strategy of the White House and congressional leaders. Actually, I'm sure it's not. Conservatives who think their party has "lost its moorings" are obviously not in on the plan, and maybe no one is. But in the case of Medicare in particular, I can't believe that no one in the White House fails to understand that there will be a fiercely negative reaction. I'm pretty certain that the people who do understand this have also thought about how to turn that reaction in their favor.

The right-wing provocateur Grover Norquist last year sent liberals into a tizzy with his adolescent boast that he wanted to "shrink government to the size where you could drown it in the bathtub." Of course, that never made much sense. A smaller, smoother, less capricious government would be a more popular one. The real plan, I think, is to create a government so big, impenetrable, unpredictable and aggravating that we will want to drown it in a bathtub.

Mark Schmitt

12/29/2003

Is Bad Government Good Politics?

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