For most of George W. Bush’s presidency, tax cuts and military interventionism have together defined the Republican agenda. The GOP minority in the new Democratic-controlled Congress will spend much of the next two years trying to fight off reversals on both fronts. But the party and its conservative governing coalition could soon face a more fundamental challenge. What happens if the neoconservatives’ foreign policy runs up a larger bill than the supply-siders’ tax rates can pay?
The days of promoting democracy on the cheap may be coming to a close. Light footprints and streamlined forces appear to have gone the way of Donald Rumsfeld, replaced by proposals for a bigger Army and Marine Corps. President Bush has endorsed the idea, telling reporters “I am inclined to believe we do need to increase our troops” so they can perform “the many tasks we ask of them.” Eager to burnish their national-security credentials, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid also support a larger military, as did John Kerry during his 2004 presidential campaign.
Yet expanding the Armed Forces will inevitably cost money. Congressional Democrats are predictably uninterested in trimming domestic spending to meet these new obligations; the Bush administration will likely resist any significant retrenchment of existing U.S. military commitments. If forced to pick between the president’s tax cuts and funding a bigger fighting machine, which would Washington’s most vocal hawks choose?
The dilemma already has Democratic pundits chortling that the neoconservatives were sold a bill of goods when they backed the Bush tax cuts originally. Liberal hawk Jonathan Chait, writing in the Los Angeles Times, chided The Weekly Standard for its innumeracy in supporting both the tax reductions and the Iraq War: “But if they had only withdrawn their support earlier, before the big tax cut and before Bush invaded with too small of an army to win, the United States would be in much better shape today—and so would the neocons.”
Washington Post columnist E.J. Dionne is more dovish but just as caustic in his assessment of the neoconservative fiscal and foreign-policy mix. “Believe it or not,” he wrote, “winning the war in Iraq was never the Bush administration’s highest priority. Saving its tax cuts was more important.” Dionne concluded that neoconservatives “claimed to be against big government so they could justify big tax cuts. But they were also for a big, activist foreign policy, especially after Sept. 11, 2001, which required a big military and—sorry to break it to you, guys—a big military is a big part of big government.”
For the most part, it is true that—in keeping with their traditional roles in the conservative movement—the hawks went along with the tax cuts while the supply-siders accepted an activist foreign policy. Frank Gaffney of the Center for Security Policy, for example, argued in a 2001 open letter to President Bush that lower taxes would actually help strengthen national defense.
“Those of us who look forward to helping you succeed in your efforts to rebuild our defense posture appreciate that your success in reducing taxes is a first and highly synergistic step toward that goal,” he wrote. “Consequently, you can count on us in the national-security community to support you in both these important endeavors.” Gaffney explained that accelerated economic growth would “facilitate” a “very substantial recapitalization of the armed forces.”
But there have been signs that some hawks are uncomfortable with the political trade-offs the GOP has made. Ben Stein is no stranger to supply-side economics. His father was credited by longtime Wall Street Journal editor Robert Bartley with coining a variant of the phrase. The younger Stein is an economist himself; he even discussed the intricacies of the Laffer curve in his role in the classic film “Ferris Bueller’s Day Off.” Yet he has become a critic of the GOP policy of cutting taxes during wartime.
“If we really mean to win [the war], let’s get serious and have a much, much bigger Army and tax ourselves enough to pay for it,” Stein wrote in his American Spectator diary. “Wars are not won by tax cuts.” The celebrity pundit has even criticized Bush’s tax cuts for benefiting wealthier taxpayers: “Can’t we at least have a small tax increase for the very rich? There are so many very rich and they have money to burn. (I know. I live among them.)”
While few conservatives would go that far, Stein isn’t quite alone. Writing in The Weekly Standard back in 2003, economist Irwin Stelzer worried that the Bush administration didn’t seem interested in finding a way to pay for its ambitious Middle Eastern foreign policy—or very much else, for that matter. “In the Micawberesque world of Bushonomics, [the president’s expansions of government] are all free lunches: Taxpayers will simultaneously get these and other benefits, and tax refunds, and tax reductions to boot.”
At the time, Stelzer was careful to mention the Medicare prescription-drug benefit and other big-ticket items from the domestic compassionate-conservative catalog in his critique. He also avoided calling for any specific tax increases. Three years later, while acknowledging salutary economic effects of the Bush tax cuts, Stelzer was more direct about his desire for additional revenues.
Last October in The Weekly Standard, Stelzer argued that deficit spending was constraining U.S. foreign policy. He wrote that “when those deficits result in stacks of IOUs held by China, America’s diplomats are forced to walk softly, lest they antagonize so large a creditor.” To come up with extra revenue and curtail terrorist funding, Stelzer called for “a substantial tax on imported oil, or on gasoline.” Yet he conceded such a policy was unlikely because “that would require the president to demand sacrifice of the American people, something he is unprepared to do.”
David Frum, one of the more libertarian-leaning neoconservatives, is against repealing any of the Bush tax cuts. He argues that it would be unwise to increase taxes on saving and investment while the baby boomers are getting ready to retire. But in a Wall Street Journal op-ed last November, Frum came out in favor of imposing a carbon tax on gasoline, natural gas, jet fuel, propane, and coal.
Frum said the levy would be justifiable in part to help shrink Medicare and Social Security’s unfunded liabilities, but he also seeks a revenue source for his foreign-policy preferences. “At the same time, the United States must pay for the long war against Islamic extremism,” he later explained on public radio. “Yet the United States spends one-third less now than we did 20 years ago on national defense—only about four and a half percent of national income.”
“We conservatives hate to see new taxes,” Frum continued. “But sometimes a new tax is the necessary price for eliminating an old tax. Almost 100 years ago, the United States replaced many of its high tariffs with an income tax—a good move, even the most taxophobic of us would agree.”
At this point, you may be saying: perhaps some conservative pundits and policy wonks are tax-cut contrarians, but surely no Republican elected official would dare call for new taxes. Such a move would seem especially foolhardy since taxpayer groups are already watching closely to make sure the GOP doesn’t raise taxes as part of a Social Security reform deal.
Except that there is one major Republican politician who could hypothetically be persuaded to raise taxes as part of a call for shared wartime sacrifice—and he happens to be a front-runner for the 2008 GOP presidential nomination. Sen. John McCain has favored a larger military for years; he is also one of Congress’s strongest supporters of a troop surge in Iraq. He is not a hardliner on taxes, however.
McCain called for higher taxes as part of a tobacco settlement in the late 1990s and rebuffed supply-siders during his 2000 presidential campaign. The Arizonan was one of only two Senate Republicans to vote against the original Bush tax cuts in 2001. (The other was Lincoln Chafee.) He also opposed the next major round of tax cuts in 2003, forcing a tie-breaking vote by Vice President Dick Cheney.
It is doubtful that McCain would make higher taxes a part of his presidential platform. He would likely preserve the Bush tax cuts if he could—but not at the risk of his foreign-policy objectives.
Perhaps such a choice will never have to be made. Pay-as-you-go budget rules, divided government, and a dangerous world all could force both parties to become more realistic about their spending priorities. Washington’s consensus about the size of the military may shift yet again. Economic growth, stimulated in part by the tax cuts, may continue to swell federal coffers—America’s economy expanded through concomitant tax cuts and defense increases during the Reagan years. Or the U.S. could make changes in its foreign policy.
Otherwise, budgetary trends could move in a direction that threatens Republican unity. Neoconservatives would tire of pursuing what Jonathan Chait describes as “Dick Cheney’s foreign policy with Bill Clinton’s army.” Small-government conservatives would become irritated with GOP politicians acting as tax collectors for the warfare state. And the Bush era could end up being remembered as the final act of fiscal conservatism.
W. James Antle III is associate editor of The American Spectator.