Do classical liberals overestimate the ability of private philanthropy to deal with the complex social problems of the industrial and postindustrial age? If so, the best way to promote economic security and individual flourishing may involve a combination of market growth and state-provided welfare programs.
The independent Congressional Budget Office recently released a report offering 121 options for reducing spending or increasing revenues. It’s a cornucopia of fiscal responsibility. Whether your goal is reducing unsustainable deficits, strengthening existing social programs, or saving the planet, there’s something for everyone. Here’s my top 10 list (in no particular order):
1). ELIMINATE ITEMIZED DEDUCTIONS
Estimated revenue change: $1.312 trillion over 10 years
Itemized deductions are one of the main reasons the federal tax code looks like Swiss cheese. Eliminating deductions such the state and local tax deduction and mortgage interest deduction, which are regressive and distortionary, would be the more efficient way to reduce the deficit without raising marginal tax rates.
2). INCREASE INDIVIDUAL TAX RATES ACROSS THE BOARD
Estimated revenue change: $905.4 billion over 10 years
Nobody likes to see their taxes go up but a broad-based increase of 1 percentage point across the board would be one of the more sustainable deficit reduction strategies. It would have minimal impact on most taxpayers and leave the overall tax-burden distribution unchanged. …
The Government Accountability Office recently released a report looking at Medicaid’s effects on access to medical care in expansion and non-expansion states. They found that low-income adults in expansion states were less likely to report having unmet medical needs than those in non-expansion states. Like the Oregon experiment study finding Medicaid expansion reduced financial strain on beneficiaries, expansion advocates interpreted this study as clear evidence of the benefits of expanding Medicaid as widely as possible. Because of this, these same advocates are often at a loss to explain why 17 states have chosen not expand to Medicaid or why 21 states have applied for section 1115 Medicaid waivers to enact work requirements, eligibility restrictions, or benefit restrictions.
One common explanation is what could be called the “mean Republican” theory of Medicaid. The only conceivable reason why states might not expand Medicaid or might restrict access in light of its obvious benefits is because callous Republican policymakers in these states hate Obama, poor people, or both. Does this theory fit the evidence? After all, many of the most restrictive states are deep red southern states with histories of limiting social programs for the poor.
Yet looking non-expansion states through the lens of partisan control misses a crucial confounding factor: Non-expansion states are also deeply poor. Mississippi’s per capita GDP, for example, is less than half that of Massachusetts, while its poverty rate is double. …
Striking teachers in West Virginia recently made headlines in their efforts to increase their pay and benefits, which are among the lowest in the country. Teachers in Oklahoma, Arizona, and Kentucky have followed suit with similar protests. The dominant narrative, pushed by Democrats and their allies in the labor movement, presents these protests as part of a larger struggle between underpaid educators and miserly state Republicans more concerned with cutting taxes than with investing in children. While politically convenient, this story is largely a red herring distracting us from the real reason teachers in West Virginia and elsewhere are currently underpaid and unlikely to see substantial pay increases any time soon.
The problem is fiscal capacity. This is the ability of governments to raise enough revenues for the provision of basic public goods. Some states have greater total taxable resources (income, wealth, natural resources, etc.) than others. Typically, social scientists discuss fiscal capacity in regard to the inequality that results from the ability of rich suburbs to spend more on education than poor urban areas. While reformers have made great strides in reducing the disparities between urban and suburban school spending, they have paid almost no attention to disparities among states. It is impossible to address the teachers’ grievances without addressing limited fiscal capacity among poor states.
Comparing West Virginia and New Jersey helps us understand the underlying problem. Each state dedicates the same proportion of its resources to spending on education salaries and benefits — about 3.5 percent of its GDP. In other words, they are putting in the same effort. …