WASHINGTON — If the political right wants to remain the governing majority, then it should adopt an incremental approach to politics. This means that if conservatives want to extend the reach of liberty, if conservatives want more policies that expand the free market, then they must be willing to do so in an increasingly piecemeal fashion.
Too often in recent years, the political right has preferred what might be called the “Big Bang” approach. That is, conservatives prefer policies that achieve most, if not all, of their objectives in one fell swoop. This was understandable when in 1994 the GOP found itself the majority in the House of Representatives for the first time in 40 years. The dominant mindset seemed to be “Who knows how long we will be in the majority, so why not get as much done as quickly as possible?”
That also seemed to be the approach that had worked so well for the left. From the New Deal, to the Great Society, to the Clinton Budget Deal of 1993, the left always appeared to advance its agenda through big, sweeping legislative proposals.
Yet as HillaryCare demonstrated, the Big Bang approach is seldom the most effective strategy. It only works when the majority of America is either solidly behind the policy, or is at least sufficiently indifferent. It does not work if the policy arouses the ire of a large number of interests.
The Big Bang approach is also a bit of a mirage in that it was not the primary, nor most effective, tactic by which the left advanced its agenda the last six decades. Rather, the left advanced much of its agenda little by little. Health care is a prime example. Democrat Henry Waxman, when the Democrats were in the majority in the House, often tacked on small bits of health-care regulation each year in big omnibus bills. On the state level, Democrats often passed coverage mandates a few at a time. And even when the left did succeed by using the Big Bang approach, it often did so in such a way that enabled it to use the incremental approach in the future. The enactment of Medicaid was surely a major achievement, but since then the Democrats have expanded Medicaid via the incremental approach, from increasing the income level at which people are eligible for Medicaid to adding preferred-drug lists. It was surely no accident that many of these small initiatives were designed to be popular with voters.
Finally, the Big Bang approach can cause enormous damage especially come election time. The danger is that those pushing the major legislation become so excited by and wrapped up in what they are doing that they lose sight of what voters are willing to tolerate. As the elections of 1994 showed, Hillary Clinton’s massive takeover attempt of a huge portion of the economy wasn’t all that popular with the electorate. Some conservatives are now showing signs of making the same mistakes. Consider President Bush’s proposal to overhaul the tax code. This has led a few pro-tax reform scholars to propose doing away even with the home-mortgage deduction. Although the economic argument for doing so is sound — the credit distorts the flow of capital toward home building and increases the price of houses —VOTER SURVEY SAYS: XXX!!!!! Indeed, if the conservative movement is serious about closing loopholes in the tax code and instituting a flat income tax, it would be more likely to succeed using the incremental approach.
SO WHAT DEFINES the incremental approach?
1. It advances a larger plan by passing one or a few parts of that plan at a time. So instead of comprehensive tax reform that closes most loopholes and institutes a flat tax all at once, the incremental approach would close a few loopholes and lower income tax rates slowly. Over time, the bottom income tax rates would be reduced so much that they could be eliminated. Eventually, enough of the rates are eliminated that there will be almost nothing standing in the way of compressing the remaining rates into one flat rate. This ultimate goal can be done with either annual legislation that accomplishes a few things, or by inserting some provisions into the omnibus bills that pass Congress at the end of each year.
2. It does not raise the ire of a large number of voters and/or organized political interests. As noted above, it is possible to do tax reform in such a way that huge numbers of voters — specifically homeowners — rise up and charge the Republicans in Congress with pitchforks in hand. If a tax reform proposal does away with too many loopholes all at once, all of K Street will unite in opposing it. It would be better to eliminate a few loopholes this time and come back for more next year. Instead of the home-mortgage deduction, start with the exclusions for reimbursed employee parking expenses, casualty losses, alternative fuel production, and capital gains for coal and timber. It shouldn’t be too difficult to win the rhetorical debate on these, especially since they cater primarily to a few special interests.
3. Closely related to the previous principle is the idea of making proposals that do not give the opposition a “large target” to shoot at. The more popular the tax loophole, the easier it will be for liberals to sink reform. Removing the home-mortgage deduction is an idea that every Democratic politician worth his salt, and even some who aren’t, will be on the evening news denouncing. But Democrats won’t be so eager to go after a proposal to eliminate the “exception from passive loss limitation for working interest in oil and gas.”
4. The incremental approach means that we may have to accept that a “perfect” policy is not achievable. The best economic benefit might come from a tax code that treated all income equally, but there is no more surefire way to send the Democrats back to majority status than for Republicans to seriously consider eliminating a loopholes like the home-mortgage deduction. Ditto for tax credits for children, health care, and 401(k)s. But conservatives can still get a tax code that is still relatively simple and fair. It would not be perfect, but then conservatives should not be in the business of making the perfect the enemy of the good.
5. But acknowledging that we may not get a perfect policy does have one important benefit. It keeps free-market oriented conservatives in office and helps them build a majority by enabling them to go back to the voters with more. If the GOP can keep promising voters lower taxes, it will have an issue that will work to their electoral advantage for years to come. Indeed, Republicans can play one set of imperfections off against another set. Give a boost to the exemption for 401(k)s in exchange for getting rid of the exemption for research and experimentation expenditures, or boost the child credit in exchange for eliminating the credit for the interest on hospital construction bonds. Or Republicans could exchange a bevy of these loopholes for an across-the-board lowering of income tax rates. In short, voters aren’t likely to give much support to eliminating tax loopholes just because it seems like a good idea. The voters will get behind eliminating such loopholes if it means their own tax burden goes down.
SURELY, SOME POLICIES CANNOT be achieved any other way save the Big Bang approach, Social Security reform being the most prevalent example. Yet the incremental approach can even offer some guidelines for Social Security reform. First, take the question of small vs. large personal accounts. Ed Crane of Cato argues the “‘start small’ approach is a mistake.” The “small account proposals will not allow low- and middle-income workers to accumulate meaningful wealth….Individual accounts should be as large as feasible, ideally at least half of payroll taxes.”
The incrementalist would argue in favor of smaller accounts. Smaller accounts mean less money that the federal government would have to borrow in the short run. Larger accounts mean more borrowing, and more borrowing means a larger target that reform opponents have to shoot at. The more that reform requires the government to take on huge amounts of debt, the more opponents will howl and the more likely the public is to balk.
Moreover, it is possible in the long run to achieve the large accounts that Crane favors while at the same time creating favorable electoral terrain for free-market oriented politicians. If personal accounts begin at 3% of payroll, then candidates for Congress and President can go back to the voters each election cycle promising to boost accounts to 3.5%, then 4%, then 4.5%, and so on. An added benefit is that we get politicians who are not only good on Social Security but other issues as well. Candidates that favor expanding personal accounts are much more likely to be free-market oriented on tax policy, regulatory policy, health-care policy, etc. Starting with small personal accounts now will give such candidates an issue that will make it easier for them to get elected for many elections to come.
Finally, the incrementalist would be extremely careful how he changes the formula for paying benefits. If reformers wish to switch to a system based on the Consumer Price Index and away from wage indexing, they should limit the switch to only those workers who choose the personal account option. Above all, there must be no such change for retirees or near-retirees. That would only give reform opponents a big target and would outrage the senior population, an organized and active interest group.
It is possible for politicians to expand the breadth of liberty and restrain the scope of government. The best way to do that is incrementally. It gives politicians that favor markets over government a better way to run for office. And, most importantly, it keeps the public from getting nervous. For the body politic is much more likely to get indigestion when it is forced to consume huge quantities versus taking small bites.