Can’t Get Enough of the Libertarian Populism Debate?

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The debate over “libertarian populism” may seem, at first blush, like nothing more than a meaningless, dull blogger circle-jerk. But it’s significant because it reflects at the intellectual level something that is happening at the political level: the Republican Party’s inability to grapple with the yawning chasm between its ideology and the economic needs of most Americans. Libertarian populism has caught on as a catchphrase on the right precisely because it elides the problem while purporting to hold out a solution.

The traditional conservative anti-government economic agenda is getting less and less popular in large part because it appeals to the economic interests of a small minority of capital owners and high-income earners. “Libertarian populism” proposes different ways of avoiding this problem. One of them, advocated by orthodox right-wingers like Ben Domenech, is simply to assume that all market income is just, that those who benefit from government are “the powerful,” and those who benefit from the free market are “the people.” It’s “libertarian populism” in the sense that it presupposes that libertarianism is inherently populist.

A second, subtler method of the libertarian populists is to propose an agenda that boosts the middle class and comports with the libertarian goal of shrinking government. There certainly are ways to do this: cutting farm subsidies, other unnecessary corporate welfare, reforming criminal justice, and so on. The trouble is that these items fail to grapple with the central political-economic questions. On the whole, the free market creates and perpetuates enormous extremes of wealth without government, so an agenda that limits itself to government-shrinking measures is going to inevitably leave them defending the interests of the rich at the expense of the non-rich.

The same dynamic — ignoring the main problem that confounds their ideology in order to focus on the smaller bits that dovetail with it — can be seen in the halting libertarian populist efforts to answer the major fiscal questions. For instance, Timothy Carney proposes that libertarian populists endorse a cut in payroll taxes. Sounds great, right? Payroll taxes are regressive. So there you have a policy that fulfills both the requirement of helping the middle class and shrinking government.

Except … payroll taxes are just part of the Social Security system. And the taxes may disproportionately harm the poor and middle class, but the benefits of Social Security disproportionately help the poor and middle class. Overall, the program transfers income downward. And since it already faces a long-term gap between its revenue and its outlays, you can’t just cut the payroll tax without worsening its fiscal standing. You could cut benefits in a progressive way — which is part of the standard liberal Social Security plan — but nobody has proposed a way to shrink the revenue stream and make the numbers add up without cutting benefits for people with pretty modest incomes. Cutting payroll taxes is just a way of hand-waving away an entrenched fiscal policy dilemma.

Ross Douthat, likewise, argues that Obamacare robs unfortunate young, healthy people who would rather go uninsured:

The money that pays for the uninsured isn’t just being taken from wealthy taxpayers and bar-hopping “bros” – it’s also coming from a potentially-much-larger population of middle-class Americans who may end up paying higher premiums for a product they’re now required to buy.

I’d dispute this whole argument, for many reasons, one of which is that young people who will have to pay more now will eventually become older people who benefit from a functioning individual insurance market. But leave all that aside. Bringing young, healthy people into the insurance market is part of a larger scheme of providing coverage to those who are too poor or sick to get it. On the whole, Obamacare is extremely progressive. But don’t take my word for it. Listen to Reihan Salam, Douthat’s co-author:

The taxes embedded in the ACA [Affordable Care Act], e.g., the unearned income Medicare contribution tax, are fairly narrowly-targeted to high-earners, and so redistribution away from the highest-earners is substantial. And the average value of subsidies for households at the 40th household income percentile and below is quite large. If the goal of the ACA were simply to reorient resources from the rich to the poor (and not to spend the money wisely, etc.), it is likely to be a success.

That’s the aggregate effect of the law. Libertarian populists can point to some tiny segment of people who are (arguably) worse off and non-rich. They can likewise point to some beneficiaries of the law who are rich. But Obamacare is a very progressive law on the whole. Repealing it would be a massive upward transfer of income, and even if repeal comes with a replacement, conservative replacement plans will leave many non-rich people worse off than they were under Obamacare.

Again, the Democrats’ policy agenda does not have all the answers for middle-class economic security for multiple reasons, political reality being one of them. There are ways to shrink the government while also fulfilling progressive goals (especially at the local level, where opportunities for government-cutting progressive initiatives are ripe). But libertarian populism at the federal level seems to be a process of starting with a slogan and then trying to work up ideological premises while hoping the details fill themselves in eventually. The actual agenda can't be filled in. Bad and/or nonexistent budget math is the whole secret to making it work.