Will Libertarian Populism Help America?

Senators Mike Lee and Ted Cruz

“The Tea Party is.   .   . a libertarian, small government protest against the centralization of federal power, and a populist resentment of snooty Ivy League professors who think the common people aren’t very smart.”

--Walter Russell Mead, American Interest  

“All the people a few weeks ago [were] saying there is no way you can win this fight. They also said there is no way any D’s are going to flip. We are starting to see Democrats flip as this thing—it’s a train wreck—it’s not working. In any political fight, when the truth is on your side, you are in a good situation.”

--Sen. Ted Cruz (R-TX)

Remember how “a few weeks ago” Senators Ted Cruz and Mike Lee (R-UT), the two who helped shut down government in an effort to defund Obamacare, were “tea party” extremists sending the Republican Party into oblivion? Well in spectacular fashion government today isn’t working, and perhaps the philosophy that drives Cruz and Lee--libertarian populism--deserves a closer look.

Stephanie Slade in US News presents an outline of what libertarian populism stands for--doing away with “the reality that our current system unfairly privileges big institutions at everyone else's expense.” Writes Slade:

crony capitalism is a problem in America. When the biggest, richest, most powerful institutions can collude with government to rig the game in their favor, the competition that makes free markets the greatest force for freedom in the world begins to break down. Aspiring entrepreneurs are dissuaded from trying to start new businesses, because they doubt they'll be able to compete with existing ones – not on the merits, but in the big firms' ability to buy influence with policymakers.

our needlessly convoluted "swiss cheese" federal tax code [means l]arge entities have the resources to hire an army of lawyers and accountants to ensure they're taking advantage of every possible loophole. Most individual taxpayers, well, don't have that option. As a result, middle-income households end up paying nearly as much, and sometimes more, in taxes than the wealthiest Americans.

The libertarian populist answer . . . is to flatten and simplify the tax code . . . because it makes it harder for [the rich] to avoid what they owe. Fewer loopholes means less [spent on] seeking out . . . loopholes. This does in a day what decades of carve-outs meant to benefit the middle class have failed to accomplish: It levels the playing field. And that is the crux of the libertarian populist formula: get government out so entrenched institutions can't . . . game the system.

The Washington Examiner’s Timothy P. Carney tells us Sen. Lee has detailed a variation of libertarian populism that “smashes some GOP idols”:

First, Lee’s plan isn’t a flat tax. He calls for a 15% rate and 35% rate. He puts much more emphasis on making the tax code clean and simple – eliminating deductions, streamlining returns – than on flatness. This tacitly accepts the notion of a progressive income tax code. He’s agreeing that the rich ought to pay a higher portion.

Along the same lines, Lee’s tax plan would cap the mortgage interest deduction at $300,000. Most homeowners would see no difference, but lobbyists living in Northwest Washington and Chevy Chase would see their deductions shrink.

Most importantly, Lee rejects the notion, persistent among some conservatives, that there’s something bad about knocking low-income families off the tax rolls.

The centerpiece of Lee’s bill is an expanded child tax credit that would not only reduce income taxes to zero, but also offset payroll taxes. In doing so, he explicitly rejects Romney 47%-ism: “Working families are not free riders.”

In short, Carney says, Lee is trying to help the working class and the middle class--the folks--by getting government out of their way.

But to get voters on your side, Lee maintains, you need to define “the other side” and fight it. You have to take on crony capitalism, just as US News’ Slade told us. Quoting Lee,

At the top of society, we find a political and economic elite that – having reached the highest rungs – has pulled up the ladder behind itself, denying others the chance even to climb. From Wall Street to K Street to Pennsylvania Avenue, we find special interests increasingly exempted and insulated – by law - from the rigors of competition and from the consequences of their own mistakes.

Lee says the U.S. economy is “rigged for big government, big business, and big special interests. And rigged against the ordinary citizens and forgotten families who work hard, play by the rules, and live within their means.”

Seems correct to me. As Lee’s colleague Cruz said, “when the truth is on your side, you are in a good situation.”