Corey Robin: The War on Tax

... Had politics not intruded and had Obama heeded the advice of centre-left economists, these are the steps he might have taken. First, do nothing about the debt, at least not now. The debt can be significantly reduced only if the economy improves. The best way to encourage that is for the government to spend, which will add to the debt in the short term but reduce it in the long term through revenues generated by growth. Second, once the economy is healthy, increase taxes, particularly on the wealthy. As a share of GDP, revenues are at their lowest levels since 1950. With the exception of a brief interregnum in the late 1980s and early 1990s, top marginal rates are the lowest they’ve been since 1931. Corporate taxes in the US are the lowest of any OECD country. The notion that taxes shouldn’t be raised, not only to fund necessary and desirable expenditure but also to cut the debt, runs counter to common sense. Last, cut military spending. As the economic journalist Doug Henwood has observed, if the US simply returned to the spending levels of 2000 – when ‘the Pentagon didn’t have to hold bake sales’ and spending was 3.7 per cent of GDP as opposed to the current 5.4 per cent – it could save $3.6 trillion in the next decade, 72 per cent more than the debt-ceiling deal negotiated by Obama and Congress will save.

Instead, Obama and Congress took the opposite path, which was paved 40 years ago by the anti-tax philosophy of the American right. In February 2010, Obama convened a bipartisan commission to balance the budget by 2015, effectively making debt reduction a top priority. After the November midterm election, when the Republicans took back the House with the help of the Tea Party, Obama froze the pay of federal workers and endorsed a more aggressive austerity programme. Cuts were proposed and tax increases dismissed: not just once (with the extension of the Bush tax cuts in December) but twice (with the first phase of the debt deal, which eliminates $900 billion solely through spending cuts) and now potentially a third time (with the second phase of the deal, which eliminates an additional $1.2 trillion solely through spending cuts if a congressional committee can’t produce an alternative package of tax increases and spending cuts by November). While the deal does include defence cuts – though it’s unclear if these are cuts or simply slower rates of growth, and whether and how most of them will happen – Obama’s latest comments, and those of his defence secretary, suggest they could be traded for benefit cuts....

Historically, debt crises resulting from wars have catalysed politically progressive advances and even precipitated revolutions. Both Charles I and Louis XVI found themselves entangled in military conflicts their tax systems couldn’t fund. Debts eventually forced both into fatal confrontations: Charles with Parliament in 1640 and Louis with the Estates General in 1789. Beyond financial exigency, the revolutions that overthrew these sovereigns drew on arguments the kings themselves had to make in order to raise taxes and fund their wars. As Richard Tuck has suggested, it may have been Charles himself who opened the door to democracy in England. Levying an ancient tax on coastal towns (ship money) to fund a naval expedition against the Dutch, the Crown made the claim that the people’s safety was the highest ground for political action – an axiom of republicans through the ages – superseding any law or constitution. Though used to justify absolutism, Charles’s rhetoric about the ‘interests of the people’ carried a subversive democratic implication: these are not my wars, they’re yours, and you ought to do everything you can to see that they are won. Parliamentary forces could counter that if the interests and safety of the people were the gold standard of politics, it should be the people’s elected representatives who decided what that interest or safety consisted in and how it ought to be secured.

In the wake of 9/11 many liberals hoped that the war on terror would open a new chapter in American social democracy, with calls for patriotic sacrifice generating an ethic of social solidarity. Instead, Bush slashed taxes, borrowed through the nose and turned the war on terror into a spectator sport rather than a people’s war. Late modern sovereigns, it seems, push their polities away from democracy by mustering mercenary armies and tapping into flush credit markets. As a result, no one in the United States need claim ownership over anything common or collective: not its wars or debts, not its government, and certainly not its ever more impoverished and precarious citizenry.

That’s why the current crisis has served as an opportunity for retrenchment and reaction rather than sparking a democratic revolt on the left. To that extent, it calls to mind similar crises in the Third World over the last three decades, which were used by elites to justify drastic cuts in government spending and the restructuring of social democratic economies. Or, for that matter, the New York City fiscal crisis of 1975, when Wall Street rallied to impose discipline and austerity on the one outpost of social democracy in America, in a move many have seen as a precursor of later experiments in Latin America and elsewhere. Obama’s persistent calls for austerity have been in keeping with the stance of Wall Street Democrats during the 1975 crisis and, in the wake of that crisis, a national party remade in the image of Wall Street....