Opinion

Obama's 529 walkback signals the end of the progressive dream

You can't expand entitlements without raising taxes. And Americans will revolt over big middle-class tax hikes.

In his State of the Union address, President Obama presented a new tax plan, which included, among many other things, higher taxes on popular college savings accounts called 529s. Mere days later, that part of the tax plan was dropped. 

Given that Obama's tax-raising plan was never going anywhere to begin with, given his lame-duck status and Republican control of Congress, this quick about-face is all the more striking. 

As I have argued previously, the fact that this tax plan was never proposed with the idea that it would actually become law makes it all the more significant, because it essentially represents a political statement of how the progressive movement sees the future. And one feature of the future, for the progressive movement, is (much) higher middle-class taxes. 

Progressives have made no secret of their belief that the government should spend a lot more money. Entitlements should not be touched, despite Americans' increased life expectancy. If anything, the left says, these enormously costly benefits should probably get expanded. Everybody should get comprehensive health insurance. Community college should be free. And so on. 

What progressives are a little more shy about admitting, at least when it comes to politicians, is that financing such a welfare state would require not just tax increases on the rich, but also the middle class. Today's tax code cannot sustainably support today's welfare state, let alone the much more expansive one that progressives imagine when they entertain their wildest dreams. 

Progressives usually ascribe the American political system's resistance to tax increases to dastardly Republicans bankrolled by Big Money. And it is true that the GOP's intransigence plays a role. But there is also a much simpler political reality at play: Americans don't like tax increases. And if you are talking about tax increases that affect middle-class families directly, they will revolt. 

Historically and culturally, Americans have proved much, much more resistant to tax increases than denizens of the rest of the world. I mean, they even declared independence and fought a war about it.  And it's become a truism of the American political economy that Americans love government spending but hate to pay for it. What happens when an unstoppable force encounters an immovable object? 

While Republicans also have a big problem on the other side of this questions — reforming entitlements is unpopular — the GOP, spurred on by the Tea Party, has gotten much more serious about entitlement reform, both in terms of policy substance, thanks to Paul Ryan, and in terms of the spine required to actually do it. No, there is not enough spine yet; but there is more today than yesterday, and there was more yesterday than the day before. 

Progressives, meanwhile, face a much harsher political calculus. At some point, the chickens will come home to roost. This little political skirmish is an omen; if it was in a movie, it would be followed by dramatic music. At some point, unsustainable entitlement programs, whether current or future, will require raiding middle-class pocketbooks. And when that happens, the progressive dream will die. 

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