Tuesday, December 05, 2006

Brink on the Brink

Milton Friedman, if my recollection is correct, once described himself as a small-L libertarian and a capital-R Republican. He meant that his personal philosophy was one that emphasized personal freedom and limited government, and his judgment was that the Republican Party was the best political vehicle for those views. My guess is that Friedman was less comfortable with some of the social positions taken by the party. But all things considered, he saw the Republicans as more congenial than the Democrats. Many Republican economists I know feel the same way.

Brink Lindsey, the very smart vice president for research at the Cato Institute, wonders whether liberals and libertarians can find common ground in a newly revived Democratic Party. Personally, I am skeptical. For the Lindsey plan to work, the economic centrists among the Dems, including luminaries Bob Rubin, Larry Summers, and Jason Furman, would have to lead the way. My sense, however, is that they are now losing to the economic populists who prefer to bash Wal-Mart and obstruct free trade. But if the tide turns and the DLC crowd starts gaining ground, the libertarians could well jump ship from the Republicans. [How's that for a mixed metaphor?]

In any event, in the process of weighing these issues, Brink submits his application for the Pigou Club:
Tax reform also offers the possibility of win-win bargains. The basic idea is simple: Shift taxes away from things we want more of and onto things we want less of. Specifically, cut taxes on savings and investment, cut payroll taxes on labor, and make up the shortfall with increased taxation of consumption. Go ahead, tax the rich, but don't do it when they're being productive. Tax them instead when they're splurging--by capping the deductibility of home-mortgage interest and tax incentives for purchasing health insurance. And tax everybody's energy consumption. All taxes impose costs on the economy, but at least energy taxes carry the silver lining of encouraging conservation--plus, because such taxes exert downward pressure on world oil prices, foreign oil monopolies would wind up getting stuck with part of the bill.
Welcome to the club, Brink.