During the Cold War, the choice facing ruling elites in Western countries was between perpetuating the interwar laissez faire system that had created working class misery, and which in turn threatened to create an opening for Communists, and building welfare states. Even for conservatives, that was an easy choice. Building North Atlantic welfare states in the postwar period was an explicitly counter-Communist political project shared by Christian and Social Democrats alike. Its explicit political goal was to marginalize the influences of the far Left.
In postwar Europe, Communist parties in France, Italy, and elsewhere routinely polled as high as 30 percent of the vote, and parties of the Left were everywhere polling at all-time historic highs. While the U.S. Central Intelligence Agency worked assiduously to undermine such political organizations, there was also wide recognition even on the Right that the material grievances that underpinned the appeal of socialism had to be addressed though public housing, mass education, universal health care, and welfare programs. There was also a grudging acceptance that these programs would have to be funded via progressive income taxes. These postwar years saw top marginal tax rates ranging from 65 percent in countries like France to over 90 percent in Great Britain and the United States. Far from being a sign of creeping socialism, the high marginal tax rates were designed precisely to fend off political demands for more profound redistributions of control over the means of production.1
While the results varied from country to country, the overall impact was an unprecedented postwar economic boom and broad-based increases in prosperity. Between the late 1940s and the early 1970s, pent-up demand plus technological innovation and adoption ensured high growth rates and productivity increases across the West, even as burgeoning welfare states ensured that the benefits of the growth and productivity were broadly distributed to the population as a whole. Never before in the history of any of these countries had so many been raised up from poverty so quickly.
It is no apology on behalf of Communism—which in practice immiserated and murdered millions—to observe that the presence of a live alternative form of political economy held Western economic elites’ feet to the fire, making them willing to accommodate demands (and sometimes actively push) for greater economic and social egalitarianism. In the United States, as Thomas Borstellman and Mary Dudziak have argued, perhaps the biggest effect that the Cold War had on domestic life was in pushing the United States to finally grant de jure civil rights to African-Americans. Undoubtedly, it also affected President Lyndon Johnson’s push to deliver on so-called Great Society programs, which aimed to provide a cradle-to-grave welfare system of the sort that socialists and communists were promising. If systems as inefficient and repressive as those could guarantee such benefits for their citizens, Johnson reasoned, then surely a country as rich and dynamic as the United States ought to be able to do so as well.
Although some U.S. conservatives never fully accepted the principle of redistribution, the Cold War context—that is, the threat posed by the alternative of Communism—meant that from the 1930s through the 1970s, even Republican Presidents like Dwight D. Eisenhower and Richard M. Nixon basically accepted the Keynesian, mixed-economy framework and the support of welfare programs. President Nixon even went so far as to promote a Guaranteed Minimum Income—a program very similar to a Universal Basic Income (UBI), the darling idea of today’s Left. Legislation to introduce such a form of income guarantee was passed in the House of Representatives in 1971 only to die in the Senate, before being eventually abandoned by Nixon himself as the economy soured.
As the Communist alternative retreated, however, the choice in favor of building domestic welfare states in the West became less clear for many on the Right. This retreat did not take place all at once, but rather unfolded progressively in the face of the grim realities of the Communist system. Although the global Left’s political disenchantment with the Soviet Union had begun earlier, widespread disillusionment with the economic appeals of socialism began in earnest only in the 1970s, as the Soviet system’s economic stagnation and the immiseration of Mao’s China became increasingly stark. Even if conservatives and liberals never bought into the false economic promises of Communism, the brute fact of the existence of a socialist alternative meant than some effort had to be made to match the siren song of egalitarianism. As the bloom came off the rose of the centralized planning models, it became safer for conservatives to push further to the Right.
In addition to the decay of the ideological appeal of socialism, further slowing the redistributional drive in the United States was the decline in real economic growth during the 1970s. By the end of that decade, the country was mired in what had come to be called “stagflation”—the combination of low growth and high inflation that appeared impossible under orthodox Keynesian theory. Rather than redistribution, figuring out a way to reignite economic growth was the political order of the day.
This was the context for Ronald Reagan’s dramatic arrival in Washington in 1981. Reagan had campaigned explicitly on a plank of rolling back the welfare state, using the racially coded trope of the “welfare queen” to reprise the hoaried distinction between the deserving and undeserving poor, and ridiculing the idea that the government could be an effective agent of positive change. “The nine most terrifying words in the English language,” Reagan famously liked to joke, “are ‘I’m from the government and I’m here to help.’” Such attitudes toward government provided ideological cover for cutting top marginal tax rates in the United States from 70 percent in 1981 to under 30 percent by the end of that decade. At the same time, however, Reagan was notably less successful in actually dismantling welfare institutions.
By the time growth returned in the late 1980s and 1990s, the slow retreat of the socialist alternative had turned into a rout, as Communist regimes collapsed across Eastern Europe and the Soviet Union itself dissolved. Despite the return of domestic economic growth and rapidly increasing levels of inequality in the United States, the lack of a credible alternative form of political economy meant that the right-wing pushback against redistribution only intensified in the 1990s. Whereas Reagan in the 1980s had admitted that Social Security reform was the “third rail of American politics,” by the 1990s the GOP was making the roll back of Social Security an only semi-secret part of its long term plans. Likewise, with the collapse of the socialist alternative, the idea of flat income tax went from being a fringe idea to the central pillar of Republican Steve Forbes’s presidential campaign in 1996.
In the end, however, U.S. conservatives over the past generation have turned out to be much better at cutting taxes for the rich than at dismantling the U.S. welfare state for the poor. From the early 1980s down to the present day, taxes have been successfully cut on several occasions—usually just as soon as a new GOP administration takes office—but welfare programs have not been cut back much. The one major exception was Democratic President Bill Clinton’s dismantling of Aid for Families with Dependent Children—“the End of Welfare as We Know It,” in his notorious phrase—which reduced the number of people receiving cash assistance from the government from more than 13 million in 1995 to just 3 million today. But otherwise most welfare programs have been preserved and, in the case of health care, significantly extended, for example through the Medicare Modernization Act of 2003, which provided subsidies for the costs of prescription drugs and prescription drug insurance premiums for Medicare beneficiaries, and through the Affordable Care Act (Obamacare) of 2010.
The Tax Bill
This historical preamble brings us to the present tax bill, which as of this writing has just been passed by the Senate, and is now in the process of reconciliation with the House version of the bill.
On its face, the tax bill is not really an ideological document. In fact, it is almost entirely made up of special interest giveaways, as even its proponents have admitted. As Chris Collins (R-New York) memorably put it, “My donors are basically saying, ‘Get it done or don’t ever call me again’.” The donor class has given to the GOP for a generation, and if the GOP couldn’t deliver the goodies now, when in control of both branches of Congress as well as the Oval Office, the prospects were dire. After the failure to enact any other significant legislation this year despite controlling both branches of Congress and the presidency, passing this tax bill became a political imperative of the highest order. The GOP Congress simply had to bring home the bacon.
And yet, what a breathtaking piece of pork-barrel tax expenditure this is. This is the most regressively redistributional tax bill in the modern history of the country. It transfers over a trillion dollars in revenues from regular people who work at regular jobs to a combination of around 5,500 people with estates, as well as to the largest and most profitable global corporations in human history. As Paul Krugman explained, in his usual blunt style, “The core of the bill is a huge redistribution of income from lower- and middle-income families to corporations and business owners. Corporate tax rates go down sharply, while ordinary families are nickel-and-dimed by a series of tax changes, no one of which is that big a deal in itself, but which add up to significant tax increases on almost two-thirds of middle-class taxpayers.” This law passed on a straight party-line vote, despite a public approval of well short of 40 percent. The people who voted for this law clearly had little fear of a left-wing class revolt.
The little details are particularly telling. This is a bill that only a plutocratic insurgent could love. Consider the tax deductions for private jet maintenance bills, for example, or Amendment 1715, which John Cornyn (R-Texas) inserted especially for his friends at Blackstone, Carlyle, KKR and Apollo, which states that income at Publicly Traded Partnerships (but not other sorts of financial services firms) gets a 23 percent pass-through deduction.
Likewise, there are the culture war-informed decisions about which tax loopholes to target for closure. The one that has gotten the most press includes ending the deduction for state and local taxes, effectively penalizing taxpayers in deep-blue states like New York, New Jersey, and California. Perhaps more wanton, however, was the decision to tax graduate student tuition waivers as income, in effect raising taxes on grad students (who typically earn $30,000 or less) by 400-600 percent. Since there can surely be no economic rationale for wishing to make it harder for our country to produce scientific experts, the only possible rationale for this is as an attack on an institution that is seen by the Right (not incorrectly) as largely hostile to their politics.
In the face of such substantive nightmares, it is perhaps pettifogging to point out that the procedure that led to the passage of the bill was also a farce. Even while boasting that this would be the most monumental piece of tax legislation in a generation, the GOP forced a vote on these plans without a score from the nonpartisan Congressional Budget Office—though to be fair, what was the point in waiting for such a score, given that whatever the so-called experts at CBO might have said was never going to be persuasive to a party now dedicated to a rejection of expertise as such? The same political party that had howled with fury when the Affordable Care Act was “rushed through” the second-longest consecutive session in Senate history passed a bill without any floor debate, giving Senators literally minutes to read a bill that still had handwritten amendments scribbled on it. At least no one will accuse the hobgoblins in the minds of the GOP leadership of imposing any foolish consistencies.
The Bill Always Comes
Some commentators point out that this shows that the usual Republican “deficit hawkishness” when faced with Democratic spending proposals was nothing other than self-serving nonsense (as if hypocrisy were a charge with any sting in today’s Washington). But this is a mistake. Rather, the ideological consistency will reappear in what comes next: in the claim that, now that we’ve given away all these revenues, we have to cut entitlements and other programs for poor people.
Literally before the scribbles in the margins of the tax bill were dry, the GOP was already declaring that the huge deficit to come would require gashing cuts to the welfare state. “You also have to bring spending under control. And not discretionary spending. That isn’t the driver of our debt. The driver of our debt is the structure of Social Security and Medicare for future beneficiaries,” said Senator Marco Rubio (R-Florida) even before the vote on the tax bill was final.
“We’re spending ourselves into bankruptcy,” declared Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) the same day. “Let’s just be honest about it: We’re in trouble. This country is in deep debt. You don’t help the poor by not solving the problems of debt, and you don’t help the poor by continually pushing more and more liberal programs through.”
For example, Congress has been stalling on extending the Children’s Health Insurance Program (CHIP) since October. On November 30, even as the Senate was debating the tax bill which would strip $1.5 trillion in revenues from the Federal government, Hatch announced that “the reason CHIP’s having trouble is because we don’t have money anymore.” It’s worth noting that Hatch was one of the original sponsors of the CHIP legislation, but he now raises the specter of the underserving poor in demanding that funding be cut for the program: “I have a rough time wanting to spend billions and billions and trillions of dollars to help people who won’t help themselves—won’t lift a finger—and expect the Federal government to do everything.”
Indeed, the tax bill seems expressly designed to add to the debt in a manner that will then trigger automatic cuts to Medicare and other entitlement programs. From this perspective, the fact that the tax bill is going to create a huge new set of deficits, far from being a bug, may actually be a feature for the Republicans, as it will provide them with the lever they need to cut the entitlement programs they’ve had in their gun sights for a generation. Indeed, it could well be that this tax bill will finally provide the break of the fiscal camel’s back that will enable the rollback of the welfare state that the GOP has dreamed about since the 1980s.
Then again, it could also spell the return of a more radical politics of redistribution from the Left. What is almost certain is that unless a radical threat from the Left reappears, the push for the final dismantling of Cold War-era welfare systems will continue to be the primary agenda of a revanchist Right that is feeling its political oats.
1Such Cold War redistributionist projects were not limited to the Global North. Throughout the early postwar period, the United States encouraged or in some cases directly presided over numerous land reforms. In Asia such reforms took place in Japan, Taiwan, the Philippines, South Korea, Malaysia and Thailand. Though less thorough-going, Latin America also saw Cold War-motivated land reforms in countries such as Peru, Bolivia, and Chile. These reforms were stirred by a desire to disempower old elites and improve agricultural productivity, but above all, as with the building of postwar European welfare states, the goal was political deradicalization.