The Impending Death Spiral?

Via TIA Daily, is an article claiming that the era of large tax cuts may be over.

Republicans may now be concluding that there is no longer any political benefit to pushing for deep tax cuts. This may come as a shock to those long convinced that tax cuts are not only good politics but also good economic policy because they spur growth. But the national tax-reform movement--kicked off by California's Proposition 13 in 1978, which froze property taxes, and propelled forward by Ronald Reagan winning the White House in 1980 with promises to roll back big government by rolling back taxes--now appears to be running out of steam. The reason is that the Laffer Curve applies to politics too. There's a point at which further tax cuts won't spur any more economic growth, and there's also a point after which they won't win any more elections.

Of course, the problem (as I think Robert Tracinski puts it differently) is that the purpose of cutting taxes isn't to make the economy grow to support a larger welfare state! It's because taxation is wrong. Until this idea acquires greater currency, fiscal conservatives are going nowhere.

And don't hope for the Democrats to pick up that banner, if E.J. Dionne is any indication. Consider the following two quotes from today's column:

(1) Today's spendthrift Republicans make it easy to poke fun at Gingrich's critique of Democratic "spendaholics." Nonetheless, the Republican assault between 1987 and 1994 regularly linked the Democratic majority's abuse of power to big deficits and to what Gingrich called the "spending runaround." Whether they liked Gingrich or not, the voters felt they knew what he and his majority stood for.

(2) Democrats will never win as the party of small government. Their case will ultimately rest on a persuasive argument that they would wield power on behalf of a different set of causes and interests. That is why the party was wise to unite in defense of Social Security -- and why it would be foolish for Democrats to cave in to the evisceration of the estate tax, a move that would boost the deficit in the interest of a tiny number of very wealthy Americans. It is also why Democrats who would give in to big-money politics and abandon efforts to strengthen the reformed campaign finance system don't understand the implications of their own critique of today's Congress. And rhetoric about defending middle-class living standards must be rooted in a plausible set of policies.

Never mind that the very "causes and interests" advocated by Dionne would eviscerate "middle-class living standards". The Democrats will check their premises approximately when Hell freezes over.

With the loss of momentum for smaller government among Republicans noted in the Wall Street Journal article and the refusal of the Democrats to even consider becoming a party of small government, what difference will there be at all between the two parties down the line? I fear that the only difference will become this: Who gives more to the religious right?

This is not where we need to be. And this is exactly why it is crucial to make a principled case for laissez-faire capitalism. It is only when the basis for capitalism in individual rights is appreciated that a compelling case for an end to the welfare state can be made and smaller government can become a reality.

-- CAV