Invisible Handouts and Anti-Government Conservatives

Ezra Klein wrote a column for Bloomberg discussing research by political scientist Suzanne Mettler and some of her collaborators. Mettler studies what she calls the “submerged state”—the growing tendency of government programs to provide benefits in ways that mask the fact that they come from the government—and its implications for perceptions of government and ultimately for democracy.

There are several important lessons to draw from Mettler’s work. The most obvious, which was highlighted by Bruce Bartlett a year ago (and that I wrote about here), is that Americans are hypocrites: many people benefit from government programs, ranging from the mortgage interest deduction to Medicare, yet deny receiving help from any “government social programs.”*

Klein focuses on a different point. For him, the main problem with invisible benefit programs is that they are politically difficult to eliminate. He writes, “If Americans who either rent or own their homes outright were asked to accept a tax increase of $150 billion in order to subsidize the mortgage payments of their indebted friends, it seems unlikely they would find that appealing.” Now, I hate tax expenditures as much as the next policy wonk, but I’m not entirely convinced by this. First of all, every tax expenditure was passed at some point by some elected legislature. More importantly, the mortgage interest deduction, for example, is actually quite popular. This particular deduction isn’t hidden in the sense that no one knows about it; it’s hidden in the sense that people think of it as a natural feature of the income tax that they are entitled to, not as a government spending program.

In fact, simply telling people about the mortgage interest deduction doesn’t make it any less popular. In an experiment by Mettler and Matt Guardino (which is described in chapter 4 in Mettler’s book, The Submerged State, and which I also discussed here), subjects were first asked whether they supported the mortgage interest deduction; later they were given some information about the deduction and again asked if they supported it. Among people who were simply told what the deduction is, opinions shifted from 65-7 in favor to 81-6 in favor; that is, more information made it more popular, not less. Among people who were told what the deduction is and that most of its benefits go to high-income households, opinions shifted from 55-7 in favor to 40-41 against. In other words, it’s learning about the distributional effects of the policy that makes it unpopular, not simply learning that it exists or what it is.

But the most important implication of this research, I think, has to do with how these invisible handouts undermine attitudes toward government. As Mettler says (quoted by Klein), “I think one of the drivers of the kind of polarization we have today is policy design and delivery, because we have these policies where people can benefit a lot from the government but become more anti- government because they’re paying higher taxes and don’t think they’re getting benefits.”

One of the key themes we discuss in White House Burning is the rise to power of the conservative anti-tax, anti-government movement over the past half century. Government tax and spending policy is largely about distributional issues. When the poor are (indirectly) in power, they take their winnings in the form of benefit programs, since they don’t have a lot of taxes to cut. When the rich are in power, they take their winnings in the form of tax breaks. (For the most part: there are also sweetheart no-bid contracts, subsidies for non-commercial airports, and so on.)

What’s great about this for the rich is that those tax breaks only strengthen their political position. Tax breaks—say, preferred rates on dividends—mean either higher taxes on everyone else or larger deficits, both of which are unpopular. Since no one can see what the government is doing, it becomes less popular. Higher taxes make people think they’re not getting their money’s worth; larger deficits make them think the government is incompetent. Either way, they get mad at the parts of government they can see, not the tax breaks that the rich benefit from. Increasing anti-government sentiment leads to what you saw in 2010 and today: the Tea Party, demonization of the federal government, and a mad race among Republicans to see who can cut rich people’s taxes by the most.

Whether this is a conscious goal of the anti-tax movement or simply a nice side benefit , it really works. In chapter 2 of The Submerged State, Mettler describes a study showing that people who benefit from visible government programs (those that are transparently delivered by government agencies, such as food stamps) are more likely to have positive views of government and its impact on their lives than people who benefit from invisible programs, even after controlling for the usual things. So you can have a program like the mortgage interest deduction that mainly helps the well-off but also helps the middle class a little—and it helps turn its middle-class beneficiaries against the federal government. If you’re Grover Norquist, what could be better than that?

* As I said at the time, I think this is a bit of a trick question, since the researchers first asked people if they benefited from “government social programs” and then asked them if they benefited from a list of government programs like the mortgage interest deduction. I think you can know that the mortgage interest deduction is a government program (how could it not be a government program) yet legitimately not think of it as a “social program.”

This post originally appeared at The Baseline Scenario and is posted with permission.