Painful truth of debt crisis: We must raise taxes, even on the middle class
For 75 years, the federal government has used tax benefits and other indirect assistance to underwrite a giant middle-class welfare state. Now it’s time for Americans to admit the truth. If we want all the 'stuff' the federal government provides for us, we’re going to have to pay for it.
The United States has a debt crisis, but almost no one is willing to point out that the best way to solve the nation’s financial problems may be to raise taxes. Not just on the rich, but on the middle class as well.Skip to next paragraph
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The political risks in this approach are significant. Americans hate taxes. And we have come to expect low individual tax burdens almost as a matter of right. But, as President Obama pointed out recently, although we may not like taxes, we do like the “stuff” our tax dollars buy.
In fact, we like almost everything the modern state provides. We like that the federal government helps us to buy homes through the mortgage interest tax deduction; we like that Social Security provides us, and our parents, with economic security in our old age; we like that the federal government helps local communities pay for public education and helps us to send our children to college. Indeed, according to a recent Harris Poll, large numbers of us oppose any cuts in federal spending for retirement security, education, or health care. Significant minorities even favor increasing spending in these areas.
Federal government's hidden role
But few of us think we should have to pay for any of this. Indeed, many of us don’t even know that the federal government has played – and continues to play – a major role in ensuring the economic and social security of the vast majority of Americans – poor, rich, and middle class alike.
For this, we can thank New Deal and post-World War II liberals.
The reason that many Americans don’t think they have to pay for what government does is that the politicians and policymakers who wrote the American social compact decided to hide its costs. Even Franklin Roosevelt – a liberal president with huge Democratic majorities in Congress – rejected any effort to expand the federal income tax base to pay for his New Deal. The architects of the Social Security system – rightly referred to as the cornerstone of the American welfare state – often disingenuously claimed that the program would use “premiums” and not taxes to pay for Americans’ retirement security.
Myth of tax-and-spend liberal
On closer examination, the tax-and-spend liberal turns out to be a myth.
Throughout the postwar period, liberal politicians and policymakers avoided higher taxes like the plague. President John Kennedy promised to take the nation to the New Frontier at the same time as he slashed corporate taxes. Lyndon Johnson even launched the Great Society and the War on Poverty after pushing a massive, across-the-board tax cut through Congress.