Economics

Whatever Happened to Tax Cuts?

In the GOP, free markets are losing to Huckanomics.

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Mike Huckabee was supposed to be dead right now, politically speaking, and the Club for Growth was supposed to be standing over the corpse holding the knife. The Club—an eight-year-old coalition of supply-siders that helped elect such anti-tax politicians as Rep. Jeff Flake (R-Ariz.) and Sen. Tom Coburn (R-Okla.)—supports the GOP's anti-tax dogma. Huckabee, who repeatedly raised taxes while governor of Arkansas, does not.

Yet by the dawn of 2008, Huckabee was the driving force in the race for the Republican presidential nomination: on the cover of Newsweek, on top of the Iowa caucus results, campaigning cheek by jowl with Chuck Norris and the martial arts master's curiously taut skin. Huckabee's ability to beat establishment Republicans raises questions about how the party's current coalition thinks and who gets to be part of it. It also challenges a bit of conventional wisdom already undermined by the 2007 elections: the idea that economic conservatism drives the Grand Old Party.

The Club for Growth has a basic theory of politics: Republicans lock up elections when they credibly promise to cut taxes or never to raise them. This trend, the Club's leaders say, began with Howard Jarvis' California tax revolt in 1978 and continued as Ronald Reagan slashed the top income tax rates and won two landslide victories in the 1980s. Then the first President Bush broke his no new taxes pledge and got retired by Bill Clinton, and then Clinton raised taxes and got clotheslined by Newt Gingrich.

In 2004 the Club for Growth bought an ad in Iowa in which a middle-aged couple (of actors) declared they would never vote for the "government-expanding, latte-drinking, sushi-eating" candidate Howard Dean. (Most of the club's successful campaigns have relied on cultural conservatism as much as economic conservatism, a gaping hole in its taxes-matter-most theory.) The spot wasn't the only reason Dean finished a poor third in the Democratic caucuses, but it locked in his image as an unelectable liberal.

But the Club lost most of the elections it tried to influence in 2007, a letdown after a reasonably successful 2006. Its endorsed candidates lost, respectively, a primary and a party convention vote for open House seats in Ohio and Virginia. The group endorsed six candidates for the state Senate in Virginia. Just three won their primaries, and only one was elected. And now Huckabee has jumped from asterisk status in Iowa to winning the state decisively, humiliating the much better-financed Mitt Romney. In 2007 the Club for Growth spent $100,000 to run an ad on Iowa TV comparing Huckabee unfavorably to his predecessor in the Arkansas governor's mansion, Bill Clinton. It appeared before that state's Republican straw poll, the traditional kickoff of the caucus campaign. It had no effect: Huckabee finished a strong second in the poll, and his stock never stopped rising. The Club ran more ads before the Iowa caucuses; none of them stopped Huckabee's triumph.

Nor does Huckabee's Iowa boom seem to be a fluke. Paul Jost, head of the Virginia chapter of the Club for Growth, was the group's unsuccessful candidate for the GOP nomination for Virginia's 1st District House seat. In that state the party has lost ground in four consecutive state elections (2001, 2003, 2005, and 2007), finally losing control of the state Senate in 2007, even though conservatives defeated a tax hike referendum in 2002.

"Our brand is badly damaged," Jost admits. Like many economic conservatives, he attributes the damage to tax hikes earlier in the decade. Moderate Republicans broke with their party and supported the increases, giving Democrats the votes to pass them. That collaboration, Jost argues, gives Democrats room to blur the differences between the parties and run on competence. It also allows Democrats like Mark Warner and Tim Kaine—the former and current governors, respectively—to tell voters they won't raise taxes, to raise them anyway, and to feel no electoral backlash.

"The problem in this state is that people don't trust us on the tax message," Jost says. "Taxes went up under the Republicans. When the Democratic governors wanted to hike taxes, both houses—which were run by the Republicans, remember —caved in. So why should people believe us right now?" Many Republicans in Virginia tried to change the subject from taxes to immigration, hoping this was a "good government" argument they could win on. It wasn't.

It sounds a lot like the chorus of gripes coming out of the GOP's presidential race. Mitt Romney claims that "before we change Washington, we need to change the Republican Party"; John McCain grumbles that "Washington changed" his party; Ron Paul talks as though 12 years in the majority corrupted everyone but him. All of the candidates save Huckabee preach the gospel of lower domestic spending and deep tax cuts.

All of this is what the Club for Growth represents. It enthusiastically attacks incumbent Republicans when they take another course, whether inserting an earmark for a Heroes of Hog-Rendering Museum into the budget or voting to cancel part of a tax cut package. Yet in 2007 the Club couldn't win.

Joe Carter has an explanation for this. Carter, a Huckabee spokesman who left the Family Research Council to work for the campaign (and has since returned to the council), thinks the Club for Growth is being passed by because the Reaganites were successful. Because conservatives have been able to cut tax rates to acceptable levels, he says, the message no longer attracts voters. "I agree with their basic philosophy," he says. "I think all Republicans do. But if you're a CEO making $20 million, your biggest concern is marginal tax rates. If you're a real entrepreneur or a consumer you don't care as much about that. You want good schools, you want laws that make it easy to start a business, and you want economic growth."

It's a more radical explanation for the tax cutters' woes than the one the rest of the candidates are giving. The Club for Growth argues that a few terms of lean, clean Republican governance can convince voters to trust them on taxes again. But if Carter is right, the Club's argument simply won't work unless tax rates explode. Voters don't like taxes, he implies, but they can tolerate current rates as long as they're getting good services.

Huckabee complicates this argument by supporting the glib Fair Tax, a proposal to replace the income and payroll taxes with a national sales tax. It allows the tax-hiking governor to offer tax-cutting rhetoric too. He can say he wants to demolish the Internal Revenue Service even while demanding the tax system be rejiggered to punish the rich. (A national consumption tax wouldn't actually punish the rich, but the candidate's crowds gobble it up.)

"If Gov. Huckabee is the nominee, you'll see a shift from where the GOP is now," Carter says. "I see politics as more of a split between libertarians and conservatives than liberals and conservatives." In his opinion, full-bore libertarian philosophy sounds good on the surface, but it won't equalize opportunity the way Huckabee's tax and business reforms would. Libertarians would dismiss some of those reforms as statist, but Carter is willing to see those libertarians go. "If you let the libertarians go over to the Democratic Party while the Republicans win the votes of entrepreneurs," he says, "you're talking about a new majority party."

David Keating, the Club for Growth's executive director, laughs when Carter's theory is laid out for him. "The whole concept is ridiculous," he says. "The bad Republicans are retiring and being replaced by supply-siders. We're still winning the long game." This is the conversation the old Republican coalition is having as it enters 2008: The room is split into two crowds, each yelling at the other, and none of their arguments are sinking in.

David Weigel is an associate editor of Reason.

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  1. David, this is a great article. So precisely “on the nose.” This is such an obvious slide in the GOP, but it hasn’t really been addressed by party leaders. Even talk radio has been hesitant to point out this paradigm drift, although with the emergence of McCain and Huckster as the last men standing, rancor seems to be growing.

    This is a forward-worthy piece for sure. A few of my GOP friends will be getting this in their inbox this morning.

    -Damon

  2. With any hope and the big losses to come, I’d like to see the GOP break apart Nov. 5. Libertarians have been pushed out of the tent a long time ago…

  3. Anyone think Ron Paul will actually be allowed to speak at the convention?

  4. The GOP has been on this road for the last eight years. McCain and Huckabee are the logical results of big-government conservatism.

  5. What a pile of nonsense.

    The GOP’s big issue has not to do with free markets as it does to do with War and the GOP’s illogical support of the War. War is the health of the state and the GOP cannot continue to back a war that saps the life out of the country and its free markets. A prolonged War has no place in free markets since a Free Market an endeavor which is an economic loser should have been purged by market forces. Instead this economic loser is being nourished by the state.

    If Huckabee is given a shot to win then you might as well give a shot to Ron Paul. It is mathematically impossible for Huckabee to gain enough delegate; however, Huckabee as well as Paul can still push a brokered convention.

    I saw that someone commented that Libertarians have been push out of the GOP. Even that has good reasons for Libertarians can’t even support a candidate with Libertarian views without coming up with lame excuses. Oh and by the way Paul has the record to claim that he stands out from the GOP, Democrats and even the independents. It just amazes me how so called Libertarian rags discount Paul as much as the MSM although Huckabee seems to be emerging as their whipping boy now.

    The War is the real issue and free markets and wars don’t really go together unless you are supplying the warlords. When you are the chief warlord then you must feed the War. When you supply the warlords that is a different story.

    Huckanomics what a pile of nonsense. War is the problem. War is left out of your article. The bill is coming in at somewhere around 2 trillion dollars and growing. This thing is the beast that the country now faces. It is a beast built on fear and fear mongering which is perpetuated by fools and as the fools support it more and more the beast grow larger and larger and the fears of the fools are being reinforced and nourished by the beast.

  6. With any hope and the big losses to come, I’d like to see the GOP break apart Nov. 5.

    The only hope for a “third party” is to replace one of the existing major parties. I think experience has shown that in our system they are too entrenched to be surpassed while they hold together.

    If Hillary “steals” the Dem nomination, there might also be a lot of disaffected Dems looking for a new home as well. Although, oddly, a Hillary candidacy is probably the best thing that could happen to keep the Repubs together this cycle.

  7. If Gov. Huckabee is the nominee, you’ll see a shift from where the GOP is now,” Carter says. “I see politics as more of a split between libertarians and conservatives than liberals and conservatives.” In his opinion, full-bore libertarian philosophy sounds good on the surface, but it won’t equalize opportunity the way Huckabee’s tax and business reforms would. Libertarians would dismiss some of those reforms as statist, but Carter is willing to see those libertarians go. “If you let the libertarians go over to the Democratic Party while the Republicans win the votes of entrepreneurs,” he says, “you’re talking about a new majority party.”

    This is what happens when the religious right get into politics. They don’t feel the need to do their homework.The war hawks, the social conservatives are not conservatives! Robert Nesbit, one of the pillars of the conservative movement- would be known as a libertarian today. Social Conservative is an oxymoron. Less Government; Not More. Tear down the New Deal. Tear Down the War on Poverty. Tear down government. Huckabee is just a tax and spend Democrat…err.. Republican.

  8. That’s right Josh. You’ll never hear the war mentioned around here. Nope. Not a word. What war?

  9. Ron Paul talks as though 12 years in the majority corrupted everyone but him.

    And this is wrong because?

    Huckanomics what a pile of nonsense. War is the problem. War is left out of your article.

    The war in Iraq is a problem, in that people are getting hurt and it’s expensive. But even if the situation in Iraq magically went away tomorrow that wouldn’t solve the tax-and-spend nanny state. We still have the wars on poverty, drugs, education, environment, consumerism, obesity, pornography, etc. to win. Until they go away any hope of small government is remote.

    Huckabee and McCain want to win these “moral” battles just as much as Hillary and Barack do. When one of them is elected we will look fondly on the time when all we were spending was a trillion in Iraq.

  10. Anyone think Ron Paul will actually be allowed to speak at the convention?

    Maybe a 2:00am time slot, to an empty hall. If the GOP nominates that ignorant, hillbilly, whack-job preacher, stay out of my way a I dash out of the “big tent”.

  11. That’s right Josh. You’ll never hear the war mentioned around here. Nope. Not a word. What war?

    FYI Josh:

    Non-shills don’t mention their shillery in every single article…

  12. Among Republican voters, economic conservatism has merely been gravy to the meat and potatoes of populist social conservatism for quite a while now. God, teh gay, war, are among the overriding themes driving the base. If it makes economic conservatives sad, it should, as they heavily and often cynically courted these yahoos, and they’re now carrying the party where they want it to go. Which may be straight into the shithole. The sooner, the better. The only hope for fiscal responsibility is to rise from the ashes. With a Dem in the WH, maybe it’ll happen sooner rather than later.

  13. But the Club lost most of the elections it tried to influence in 2007, a letdown after a reasonably successful 2006.

    (emphasis added)

    Uh, really?

    Even if this is right, isn’t it like being the 2007 MVP of the Miami Dolphins?

  14. In 2004 the Club for Growth bought an ad in Iowa in which a middle-aged couple (of actors) declared they would never vote for the “government-expanding, latte-drinking, sushi-eating” candidate Howard Dean.

    So, apart from the Club for Growth’s quaint allegiance to supply side mumbo jumbo, the Club also hates lattes and sushi. Well, fuck the Club for Growth.

  15. Huckanomics? Yeah, because the governor of Arkansas is doing so well this primary season, he must be capable of starting a new movement within the Republican Party.

  16. “Anyone think Ron Paul will actually be allowed to speak at the convention?’

    I sure as fuck hope not. The Republican Party is too often tarred as a party of racists because it doesn’t have a quota system to make its delegates “look like America”. Having an actual racist address the crowd would not help that image any.

  17. Mike Huckabee’s demise was assured after his loss in Michigan where he was leading after winning Iowa. An anomaly in the primary season, Iowa combined the votes of those who believe the local garden center sells the knowledge tree of good and evil plus those who thought Huckabee might champion their Fair Tax idea. The Club for Growth stopped Huckabee cold with big Michigan ad buys outing him as a tax and spender. The Club knew that Iowa was the battle but Michigan was the war. Huckabee never recovered.

    Weigle’s analysis, which relies on Huckabee mouthpiece Joe Carter, seems more appropriate for USA Today’s editorial page than Reason.

    Primarily, the Club for Growth takes big risks by financing US House and Senate candidates who hold the GOP’s party machinery accountable.

    Oh by the way, just this week the Club bagged another RINO, defeating Rep. Gilchrest in MD-1. By financing the winner Andy Harris, and with big TV ad buys labeling Gilchrest as a tax and spender, the Club succeeded again and further weakens Weigle’s analysis.

  18. If the surge keeps going as well as it has been(and there is no reason to think otherwise), by the time the conventions come Ron Paul will have little to add to the GOP or Libertarian convention besides some commentary on “fleet footed black kids” …so I wouldn’t expect him to show up to either event.

    Serious conservative libertarians realize that none of our freedom will remain unless we help spread freedom around the world and show everyone how effective we are at helping them, that is why stop loss is such a great libertarian program. McCain and Max Boot(foreign policy advisor and senior fellow at the Council on Foreign Relations) went to Iraq recently and they talked to hundreds of Iraqis who realize this and WANT us to stay!

    Ron Paul’s racist border enforcement policies are just too much. The Paultards are also incredibly naive if they don’t realize that there are thousands of innovative, al quada extremists cells out there looking for any american weakness to come over here and commit terrorism.

    The only thing saving us is this strategy of tying them down in a conflict in Iraq so that they simply don’t have a chance to get to America.
    Muslims aren’t too great at strategy games and have no ability to see around this strategy, instead they just keep blowing up car bombs in Bagdad instead of in America. We will be pretty safe as long as we allow homeland security to gradually implement some more reasonable security measures and keep engaging with the world diplomatically and militarily.

    But if code pink and the cynical public resist Chertoff’s real ID too much, then hell America probably needs to have a dirty nuke go off somewhere. That was the one great thing about 9/11 at least it finally brought this country together to get some much needed legislation passed.

  19. “Having an actual racist address the crowd would not help that image any.”

    Yeah, to dispel that racist image, it’s far better to have lots of stuff about bombing the brown people.

  20. I think you’re underestimating the extent to which Huckabee voters mistakenly think Huckabee IS a fiscal conservative. They’re judging him by his rhetoric, and not his record.

    If you don’t understand the FairTax, it sounds pretty good. If you don’t read his campaign website carefully, you don’t notice that he’s promising a lot of new federal programs, but no spending cuts anywhere at all.

  21. This sounds like it would have been a good article had it been written around the time of the NH primary. But as of now, the only shot the Huckster has of getting the nomination is if both McCain and Romney dropped dead.

    But don’t discount the Fair Tax. It would be the single largest transfer of power from the government to the people in our lifetime.

  22. The article makes a very good point: cutting taxes when the rates are very high makes good politics as well as good policy. When the bottom 50% of earners are responsible for only 3% of tax revenue (IIRC), cutting taxes rings hollow with 50% of the electorate. Most people find the current tax rates acceptable, especially if they see cutting taxes as necessarily cutting the services they like. When the tax rates were as high as they were when Reagan was elected, a case could be made that we were on the wrong side of the Laffer Curve. Now that is a much harder case to make. The best economic case for cutting taxes now comes on the side of cutting corporate tax rates. Unfortunately, that makes extremely poor politics, especially this year.

  23. The only thing saving us is this strategy of tying them down in a conflict in Iraq so that they simply don’t have a chance to get to America.

    As Ron would say, let me get this straight. We are tying them up over there? We are spending trillions of dollars on a no win war that means a committment of men and materials for decades and they are the ones tied up?

    Or, as John Stossel would say, -Give me a break!

  24. Typical. A whole article about GOP and Taxes and specficially Huckabee’s tax ideas, but not once do you mention the Fair Tax that he supports? How dishonest is the media that won’t even let the words “Fair Tax” be mentioned. Huckabee campaigns for the Fair Tax and you media types can’t even say the words. I’m not a conspiracy guy, but I’m really getting sick of the media and pols who can’t even debate the issue because they are too afraid to mention the plan’s name despite the fact that Huckabee mentions it every time he debates or talks economics. Too afraid to transfer the power of taxation back into the hands of voters maybe? Don’t tell me there isn’t a media bias in place…..

  25. “The best economic case for cutting taxes now comes on the side of cutting corporate tax rates. Unfortunately, that makes extremely poor politics, especially this year.”

    Especially when the Democrats frame the agenda by turning hard left – Anti-Capitalist mentality. Meanwhile, the media feeds the hungry masses, with shit.

  26. Whatever happened to tax cuts? Isn’t this Reason Magazine? How can you propose tax cuts with a straight face when:

    – We are fighting two wars at the same time.
    – Entitlement spending is growing 3x as fast as our GDP.
    – Discretionary and defense spending are both growing at double the rate of inflation.
    – The deficit is forecast to more than double this year.
    – The political benefit of tax cuts is negligible (since most voters are smart enough to realize they pay hardly any federal income taxes in our progressive system now).

  27. Fred, it’s totally appropriate to call for tax cuts when you are 1) against the War in Iraq; 2) believe the marginal tax rates are too high for everyone in America who pays the income tax; and 3) would cut spending deeply and permanently. Those are basic platform ideas of the staff of Reason and the majority of folks who post in H&R, including myself.

  28. IMO, talk show host Neal Boortz has a little egg on his face with Huckabee supporting his Fair Tax. Instead of calling him out for the big government religious conservative that Huckabee is, Boortz has to say that all this talk of Huckabee’s evangelical support is just big media smear tactics that overlook the votes coming from Fair Tax supporters.

    Boortz will allow theocrat Huckabee to carry his Fair Tax banner while he continues to bash Ron Paul for not supporting his favorite government program: central planning and nation building in Iraq.

  29. Michael,

    What spending would you propose to cut “permanently and deeply”? The most expensive federal programs are also the most popular: Medicare, Medicaid, and Social Security. Together, these programs cost more than 5 times what we are spending on the wars in Iraq and Afghanistan. Cutting any of them would be politically impossible.

    A smarter approach would be to raise tax revenues enough to create an initial surplus, and then invest the surplus in real trust funds/sovereign wealth funds (i.e., funds not invested in U.S. Treasury bonds) for each of these programs. Well-invested trust funds could conceivably grow as fast or faster than the expenses of these programs, obviating the need for future tax increases to support them.

  30. From a libertarian point of view McCain is by far the best choice for president. Who else has had the stones to oppose ethanol subsidies in Iowa and federal flood insurance in Florida? On top of that McCain has announced in the middle of a campaign for the presidency that he supports Free Trade. For that alone he deserves a Profile in Courage award.

    Yeah, McCain is wrong about campaign finance. But all we need is one more pro-Constitution Supreme Court member and that garbage will most likely be ruled unconstitutional.

    On top of that he believes that surrendering to Al Qaeda in Iraq is a bad idea. I don’t know about you people, but I don’t want my granddaughter to to wear a burka and have her genitals gouged out.

    Ron Paul seems to believe that our country has been in the wrong in all its wars. He’s an anti-American crank. Let’s support instead the great libertarian/conservative tradition of Barry Goldwater and Ronald Reagan.

  31. Bulbie,
    How do you get your assertion that Ron Paul is an “anti-American crank”? In supporting the most distinctive and important feature of our heritage, individual freedom, he is the most PRO-American of all the candidates. Unless, of course, you believe the “National Greatness Conservative” idea that a country’s best characteristics are its government and the wars it fights. Also, how do you know McCain wouldn’t appoint a pro-McCain Feingold member to the Supreme Court. Certainly the current Bush appointees, despite the “strict constructionist” label, have little trouble with massive executive power.

  32. Also, how does withdrawing from Iraq cause your daughter to be subjected to a clitorectomy? Just wondering.

  33. “Unless, of course, you believe the “National Greatness Conservative” idea that a country’s best characteristics are its government and the wars it fights.”

    One of our nation’s best characteristics is not its government, but its unique system of limited government embodied in the Constitution. The wars we fight are part of our greatness, in that they are fought for the protection of our freedom and that of our allies, and not, as leftists claim, for empire. There have been exceptions of course. I certainly would not defend the war in the Philippines in the early 20th century.

    Rather than calling Ron Paul an “anti-American crank” I should have said “blinkered isolationist”. For the third time in less than a century we face a militant totalitarian ideology bent on world domination. Nazism and Communism were defeated a great cost, and now we have the challenge of Islamofascism (radical Islam, whatever you want to call it). Given the demographics of Western Europe and the unwillingness of the majority in that region to defend their western heritage there is a very real possibility that western Europe will come under Muslim rule. The same is true of Russia, given the population implosion of the ethnic Russian population. Some eastern European countries seem likely to resist the trend.

    The point I am trying to make is that there is no freedom for those who are unwilling to fight for that freedom.

    Ron Paul’s idea that we can put a wall around the US and survive as the only free country (or one of the few such) is a world ruled by Islamic fanatics is a fantasy. Totalitarians hate freedom more than anything. We see this in the behavior of our homegrown socialists who increasing seek to rule every aspect of our lives by the arcane tenets of political correctness.

    The shared hatred of freedom leads to strange alliances, such as that between the leaders of the “peace” movement and Islamist terrorist groups.

    Al Qaeda in Iraq is close to being defeated. The Sunni tribes, disgusted by the Al Qaeda’s atrocities, have mostly switched sides and are fighting alongside the Marines. If we pull out precipitously the power of Al Qaeda would likely be revived. Internal strife could lead to the slaughter of millions. To bug out now would be an act of cowardice and depravity beyond description.

    Snatching defeat from the jaws of victory in Iraq could set a chain of events in motion that would lead to my granddaughter living under Sha’ria law.

    Just because the US is a great power today doesn’t mean that always will be. A nation is which Hillary Clinton and Barack Obama are serious candidates for president is a nation is deep trouble. Half people in the country have the mindset of children. They really don’t understand that there ain’t no such thing as a free lunch.

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