Don’t worry about the debt

A lot of professional Democrats find themselves looking at the deficit implications of the tax bills House and Senate Republicans have endorsed and are wondering to themselves why it is that they bother to pay for any of the programs they create.

As someone who has long been a proponent of caring less about debt, I’m glad to see this. But to help get to a relaxed posture about debt, it’s also worth running down all the many perfectly good reasons legislators have from time to time to pay for programs.

One theory FDR had about the design of Social Security, for example, was that by giving it an insurance-type structure where everybody pays into the fund and then later everybody withdraws from the fund would increase the level of political buy-in. That strategy seems to have worked pretty well. And though it’s not true that today’s Medicare beneficiaries’ costs are fully covered by the Medicare taxes they paid earlier in life, the program does maintain an element of the universal contribution structure and then does seem to bolster support for it.

A converse reason you might want to pay for a program is that maybe the point of your program is to redistribute economic resources — if you’re not paying for your redistribution by taking something away from someone, you’re not really redistributing at all.

Then of course you have your classic cases where the point of the tax is to discourage some kind of bad behavior. Alcohol taxes cut down on excess drinking and save lives. Cigarette taxes, likewise, reduce smoking and save lives. Under conditions of full legalization with industrial-style agricultural methods applied out in the open, marijuana would be extremely cheap, and it would make a lot of sense to use taxes to constrain consumption. Burning gasoline creates a lot of pollution, which is a good reason to tax it. More generally, carbon dioxide emissions should be taxed, and it’s possible there are categories of fine particulate pollution that should be subject to additional fees. Congestion charges reduce traffic jams. A land value tax would discourage people from sitting on undeveloped parcels.

Related to both redistribution and externalities is something that people don’t think about much these days but that has historically been significant: the fact that sometimes the government is really trying to give the economy a good hard shove in a particular direction.

If you think about World War II, for example, obviously the federal government was faced with a huge logistical problem. They needed to take an entire continental-scale economic system that was geared toward producing personal consumption goods and have it make military equipment instead, even as a huge share of the workforce decamped to become soldiers. Some of that was achieved through rationing, some of it was achieved through exhortations to buy war bonds, but some of it was achieved through progressive taxation. If you take money out of people’s pockets, they won’t buy as many consumer goods. And if you take more money out of richer people’s pockets, you’ll make sure the consumption squeeze doesn’t push people below the subsistence level. Psychologically and politically, there’s also a solidaristic element of “shared sacrifice.”

WWII was an extreme case, of course, but at the height of the Cold War the total US fiscal commitment to the military and closely related matters like the space race was genuinely enormous. And there are various proposals to say we should treat climate change mitigation as a kind of equivalent to war.

Less dramatically, suppose we want to encourage people to have more kids by offering a generous child allowance and free preschool. Well, those measures might be more effective if they were explicitly financed with consumption taxes (like a value-added tax, say) that deliberately lowered the material living standards of non-parents.

Last — and not exactly least — there’s inflation. If you doubled everyone’s Social Security checks, that would boost consumption quite a lot, since retirees probably don’t save very much. If the economy were severely depressed, that could be effective stimulus. But if it weren’t, it could lead to price increases and inflation — inflation that the Fed might try to offset with higher interest rates that reduce investment. A better idea might be to pay for the Social Security boost with higher taxes.

This adds up to a lot of good reasons to mostly pay for most stuff — reasons that hold even if you’re inclined to agree with Dick Cheney that Reagan proved deficits don’t matter.

But I do think it mostly supports what Republicans do with regard to the deficit (not what they say, which is mostly nonsense) — namely that it’s often good to pay for things but lack of pay-fors is very rarely a reason to refuse to do something worthwhile. A big green New Deal designed to massively boost the ecological sustainability of the American economy, for example, would be more effective if it were paid for — through pollution taxes in the first instance, but secondarily through general taxes — unless it were enacted in the middle of a recession. But if political considerations or whatnot mean that the only way to get it done is to deficit-finance a good chunk of it, that’s not a reason to ignore a pressing environmental problem.

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