Thursday, February 04, 2021

Progressives vs. Neoliberals Again: The 'Targeting' Debate

by Neil H. Buchanan

On January 5 of this year, no one could have known precisely what would happen the next day, but at least some of us were on high alert.  In my Dorf on Law column that day, I wrote that many people were "terrified about the treasonous actions of Donald Trump and his parasites."  For weeks, we had noted with alarm that Trump had promised his followers that his January 6 event was going to "be wild," and indeed it was.

Even so, my column that day was not focused on Trump's soon-to-bear-bitter-fruit attempts to carry out a coup to keep himself in power.  Instead, I preferred to imagine that he would fail (as he has so often failed) and that something like the familiar policy debates might again come to the fore:
"This column, then, is an expression of optimism.  We might soon, I dearly hope, be back to arguing about legitimate differences over policy matters.  More interestingly, we might soon be back to waging an important intramural fight among non-Trumpers over the future of neoliberalism -- the incremental, technocratic, intellectually defensive approach to economic policy that is somehow both appealing and disastrous -- and its uncomfortable tension with progressivism."
And here we are.  True, Republicans (when they are not kissing their failed leader's ring or pretending not to know anything about their most extreme colleagues) are back to lying about policy and insisting that everything that Democrats want to do is bad for the economy.  But as anyone could have predicted, Democrats are back inside the not-so-warm cocoon of their intramural debate between progressives and neoliberals.

Indeed, the very issue that motivated my January 5th column, whether to allow relief payments to go in part to upper-middle-class Americans as well as to middle-class and poorer Americans -- that is, to allow the checks to be "poorly targeted" -- has become a flash point among Democrats.  With Republicans having successfully sliced the $2000 relief payments down to $600 in the stopgap relief bill in December, President Biden now wants to give the other $1400 as part of his larger relief bill.

Here, I want to talk about the "targeting" question as an entry point to the larger debate about neoliberalism.  Short version: Progressives should not categorically reject targeting of benefits, but they should not allow themselves to be trapped by neoliberals' pious pretensions to being the true guardians of the needy.

I am happy to emphasize here that I truly am delighted to be writing about this debate.  Democrats control all of Congress and the White House, which means that good things are being proposed and debated, and something not at all terrible seems sure to emerge.  Compared to what has been happening for the last six years (the last two years of President Obama's second term being iced by then-Majority Leader Mitch McConnell's uber-obstruction in the Senate), that is a relief (pun intended).

And the disagreements over the $2000 COVID-related relief payments are actually not particularly heated among Democrats.  Honestly, if the Republicans were acting in good faith (which they clearly are not) and could be brought on board by adopting Biden's counteroffer to reduce the income limits on the phaseouts, I would fully encourage progressive Democrats to go along -- just as I encourage neoliberal Democrats to go along with the less-targeted version currently on offer.  That particular formula is not a big deal either way.

Does that betray a lack of conviction on my part?  Not at all.  I certainly agree with the oddball Democrat-turned-Republican governor of West Virginia, Jim Justice, on this issue:
"Too often we try to skinny everything down and not fund it properly.  If we ended up wasting a few dollars and it jump-started the economy, and it helped all those that were out there, as many as we can that are really hurting, would we not be one heck of a lot better off than trying to just match the shoe size to the foot and undersizing the shoe size to where you couldn’t even walk?"
Spoken like a realistic Keynesian, understanding that sometimes you just might need to go out and bury tubes of money so that "entrepreneurs" can go dig them up.  But honestly, if it could speed up the political process to agree to limit who is allowed to go dig up the tubes of cash, why not?  As Justice points out in his colorful way, the problem comes when there is too much of an effort to fine-tune the policies to make absolutely sure that not a single penny goes to anyone who could be depicted as undeserving.  Obsessing about that is both wasteful and harms truly needy people.

My January 5th column, in fact, arguably failed to deliver what I promised.  There, I criticized neoliberals and explained why it is acceptable to pass non-targeted relief payments, but I then revealed that the Democrats' proposal was already means-tested:
"The $2000 payments in the bill that McConnell killed were, in fact, going to be subject to an income-based phaseout, with no checks going to people with incomes above $310,000.  (There is always a balancing act when it comes to phaseouts, of course.)  One could argue that the phaseout should have been steeper, but the marginal effects of this are rather small, with a family of four earning $300,000 per year receiving a total of $500 rather than the $8000 total for a four-person poorer household."
If the difference between progressives and neoliberals were something as simple as this, where people are groping around to figure out exactly how much more to limit the relief payments on the high end, then this would barely even count as a debate.  The most progressive person I can imagine would have a difficult time defending $500 payments to families with incomes of $300,000 -- and she would not want to make that argument in any case.  Honing down phaseout formulas, which includes taking into account implicit tax rates and so on, is policy-wonk heaven.  But it truly is not a fault line in Democratic politics.
 
Where is the fault line?  It actually does revolve around targeting benefits, but it is much broader than what we see in the debate over relief payments.  Washington Post columnist Catherine Rampell might well deserve the title Queen of the Neoliberals, which means that I find her writing often persuasive in some details but also generally frustrating, precisely because she takes it as her mission in life to scold Democrats for not being neoliberal enough -- all the while hiding behind the saintly glow of being the true champion of the downtrodden.
 
Last week, for example, Rampell whined about how progressives have responded to requests for more carefully targeted relief payments:
"The Democratic-controlled House passed legislation in December to expand stimulus payments to $2,000. This was marketed as aid to the poor and middle class, but the bill would have given some money to 94 percent of households — including those making over $300,000. President Biden, who supports more direct payments, said this week that he is open to negotiating eligibility details to ensure the funds are targeted to the needy.

"To this anodyne (and reasonable) remark, some on the left reacted with rage: Just give the money to everyone, they argue, and stop this nonsense about targeting. It only slows things down."

Setting aside what it means to claim that "some on the left reacted with rage," consider first that Rampell repeats the deeply misleading suggestion that the $2000 payments would go to "those making over $300,000," even though she knows -- or at least should know -- that this is a straw man: "Hey progressives, why are you favoring $8000 payments to families of four with incomes over $300,000, you wasteful neglecters of the needy!?"  "We're not."

Again, I consider myself to be very progressive, and I am certainly capable of becoming enraged, but if Biden could grease the skids with a different targeting formula, that would be fine.
 
It is reasonable to worry that Biden will validate conservatives' bad-faith arguments and waste time by going down Rampell's technocratic rabbit-hole, just as Bill Clinton and Barack Obama ended up negotiating against themselves, which led to long delays and weaker finished products.  Happily, it currently appears that Biden is not falling into that trap, but it is reasonable for people of good faith to be reminding him not to be a sucker.

But Rampell's ultimate argument in that column nicely captures the sneering dishonesty of her position:
"If you believe that government fiscal capacity is infinite and deficits never matter, perhaps it’s easy to dismiss concerns about wasting money on the rich so long as money also happens to reach those who are suffering. But at some point, there will be choices to make, and tradeoffs. Either Republicans will enforce a ceiling on the size of the next relief bill, or the reconciliation process will.

"And then every dollar spent on those who don’t need it will be a dollar not spent on those who do."

The perniciousness of neoliberal arguments is that they seem to be premised on morally sound arguments while always acting as if Milton Friedman is in the room, reminding us that there is no free lunch.  But in fact, one need not believe that the government can borrow infinite sums of money or that deficits never matter to observe that there is currently more than enough fiscal capacity to do what Biden has proposed and more, notwithstanding the resulting deficit.

But even if one were to give the Rampellian argument some slack, perhaps dismissing her bad-faith mischaracterizations as mere rhetorical excess, the neoliberal obsession with targeting goes beyond the particulars of this relief package.  In a column at the end of December, Rampell wagged her finger at the left with this column: "A New Year’s goal for progressives: Stop advocating bailouts for rich people."
 
The hell, you say!  Progressives are advocating bailouts for rich people?  Of course not.  Rampell identifies three policies that she says are examples of people on the left acting like Republicans, "offer[ing] plutocratic giveaways while claiming to help the working class."  Her third example is the $2000 relief payments, discussed above.  What are the other two?
 
The first example is Democrats' efforts to repeal the Republicans' limit on the state-and-local tax deduction (SALT).  Rampell points out that doing so would, almost by definition, help upper-income people, because only relatively well-off people pay more than the limit of $10,000 in state-and-local taxes in a given year.  Why, she wonders, would Democrats waste money on those undeserving souls?
 
As I pointed out in a column this past September, however, focusing only on the immediate distributive impact completely misses the stakes in the argument.  Republicans openly and explicitly included that limitation in their awful 2017 mess of a tax bill (which they passed through reconciliation, by the way, bypassing any possible filibuster) in order to punish blue states.  Again, they could not have been clearer about this.  That is, the Republicans knew that the new limit would not hit all upper-income people; it would only hit upper-income people in blue states, which have higher sub-federal taxes to support their more progressive state governments.

Not only is Rampell's complaint incomplete -- ignoring the negative impact of Republicans' action on progressive state-level policies, which became much harder to sustain politically -- but it elevates targeting above any other goal.  In this case, that goal is to undo a political hit job.  I do not know of any progressives who think that people who pay, say, $25,000 per year in state-and-local taxes "deserve" a tax break overall, and we would prefer instead to raise more money from all upper-middle -- and especially upper- -- income people.  That would mean repealing the SALT limitation and changing other parts of the tax code.  But railing against Democrats for "advocating bailouts for rich people," when they are trying to respond to a different kind of inequity, is simply nutty.

Second, Rampell is shocked to see "Democratic lawmakers and left-leaning groups demand a massive student debt jubilee — to the tune of $50,000 per person, which they want Joe Biden to wipe out on day one of his presidency.  Such a policy would, perhaps counterintuitively, give the biggest benefits to those with high incomes."  Again, this is not the entirety of what progressives are proposing, so it is deceptive in the extreme to act as if there are a bunch of wild-eyed lefties walking around saying, "The be-all and end-all of our education policy should be to wipe out existing student debt, even for people who can afford to repay it."

This is a much clearer example of the deeper problem with neoliberals' reasoning.  After all, Rampell's argument against student loan debt relief applies with equal or greater force to having any kind of government support of educational institutions.  Why?  Because rich people can attend those subsidized institutions, too, sopping up money that could have been used on the needy.  So in-state tuition, and indeed any kind of support to make college less expensive, is badly targeted.

What to do instead, per the neoliberals?  If one is going to subsidize education (while sagely remembering the admonition that our fiscal capacity is finite), we must do so by targeting each individual precisely.  In short, our current system is a neoliberal dream, with unbelievable amounts of human toil expended by applicants and their parents, as well as financial aid administrators and loan companies, making sure that no money is ever sent to an undeserving student.  How has that worked out for us?  Does the status quo seem well targeted?

Ah, but the neoliberal response is that this could be done right.  And it could, if we are willing to accept the economic waste involved in calibrating everything perfectly.  Are we not supposed to be worried about waste, though?

What is the alternative?  Universal programs coupled with progressive taxation.  The non-needy people who benefit from, say, student loan debt forgiveness can be taxed at higher rates on their incomes and wealth, because they are non-needy.  That is administratively simpler and cheaper, in part because it also has the virtue -- important in its own right -- of being far less intrusive into people's lives.

Again, however, no progressive is going to argue against a straightforward way to target within an otherwise universal system, if it exists.  Social Security benefits are targeted progressively, and higher-income retirees can even be taxed on some of their benefits in some circumstances.  That fact has not undermined political support for Social Security, because people still think (reasonably) that they have earned their benefits by participating in a universal system.
 
Social Security is also useful as an example of a system that has regressive elements but that is overall progressive.  The single-rate, capped FICA tax is anti-needy, but the system's benefits more than make up for that.  Could it be more progressive?  Sure, but looking at it piece by piece should not obscure the big picture.
 
Rampell claims that the existence of means-tested programs like Medicaid and the earned-income tax credit (EITC) prove that non-universal programs can be politically successful, but she simply ignores how much both of those programs have been limited and savaged by budget cutters.  Just as one example, the IRS's enforcement budget is, by law, targeted disproportionately toward rooting out relatively minor errors in the EITC, with punishing penalties for even innocent mistakes.

In the end, the debate between progressives and neoliberals is not as stark as Rampell makes it out to be.  As I have emphasized, I -- along with every progressive I know -- would be willing to target benefits in many situations.  But acting as if the government's sole job is to come as close to perfection as possible in targeting taxes and benefits, while ignoring all other considerations that people in the center and left ought to care about, is nonsensical.