The Appeal And Limits Of Libertarian Populism

 One way to understand libertarian populism is as an attempt to put limited government politics on the side of the average American. You can look at the speeches of Obama and see how the president constantly tries to frame his higher taxing, higher spending, higher regulating policies as putting policy on the side of the little guy against the amassed forces of wealth and privilege. Meanwhile we had a Republican nominee who couldn’t stop congratulating the high-earner job creators who “built that” and who was caught slandering those Americans who had no net income tax liability. The result was that the majority of the electorate saw the Republicans as the party whose economic policies would benefit the rich. Libertarian populism seeks to reverse that impression by arguing that higher taxes, greater regulation, and big government generally work on behalf of the politically connected and against the average person. Carney makes the Obama inspiration explicit when Carney writes that if Obama can make a big deal out of tax breaks for corporate jets, libertarian Republicans can make a big deal out of the Export-Import bank.

There is something to all this. Most people would prefer not to pay for future bailouts to Too Big To Fail banks and the average voter is likely open to the idea that many business subsidies are more about insider influence than the common good. The problem is that it doesn’t end there. What happens to the money when you cut government spending and special interest carve-outs in the tax code?

If the revenue is just plowed into tax cuts for high-earners, it won’t seem very populist. It would seem (at best) like a class war among the rich where Republican are trying to take money from the bad crony capitalists in order to cut taxes on the noble high-earning job creators. And that will be when Republicans are telling the story. Democrats will be telling it as a story of Republicans rewarding their rich friends. This is where libertarian populism is often too close to Romneyism. One of the unstated themes of Romney’s campaign was that the job creators who “built that” were the only people whose economic activities matter. The lives of everybody else are incidental. Increase taxes on job creators and you get bad things for everybody. Cutting taxes on high-earners will be the engine of rising living standards for everybody. But it gets worse than that

The politician most identified with libertarian populism wants to go to a flat tax that sharply cuts taxes on high-earners and raises the tax liability of many working parents. Some fraction of conservative activists probably favor this outcome, but mass support for flat taxes is likely a result of people initially misunderstanding the distributional impact. The assumption being that a cleaner, simpler, fairer tax code would lead to lower taxes on the average fellow and higher taxes on somebody else. If a Rand Paul-style tax plan ever faced sustained and widely publicized criticism, it wouldn’t seem so populist anymore. No amount of misdirection about ending “the existing Wall Street paradigm of Blankfein, Dimon, and Schumer” will be able to cover up for the combination of a middle-class tax hike and a tax cut on high-earners.

Tim Carney has a less suicidal version of libertarian populist politics. It needs some work, but it acknowledges the burden of the payroll taxes on working families and public anxieties about health insurance coverage. Ramesh Ponnuru noted that even Carney’s more prudent libertarian populism tends to focus on less salient issues. Not a lot of people are going to vote on the Export-Import Bank. There is nothing wrong with that. Secondary issues have their place. Carney’s agenda can form a point of contact between libertarian populists and conservative reformers who favor family friendly tax reform that would increase the take home pay of working parents and market-oriented alternatives to Obamacare that would alleviate public anxieties about access to health care.