Finding common ground between liberals and libertarians

Despite similar sounding names, liberals and libertarians are often at odds with each other. While the former favors a large welfare state and government intervention in the economy, the latter are loath to acknowledge any legitimate role for government. But as Bruce Bartlett points out, there may be more common ground than most think:

"On the surface, there would appear to be potential for an alliance. Libertarians tend to be liberal on social issues, favoring such things as gay marriage and drug legalization; and also liberal on defense and foreign policy, opposing the wars in Iraq and Afghanistan, and opposing torture and restrictions on civil liberties in the name of national security.

But libertarians are conservative on economic policy--favoring a free market with virtually no government intervention except the enforcement of contracts, and no government spending or taxes except those to pay for a very minimal police force and military.

Libertarians' views on social policy and national defense make them sympathetic to the Democrats, while their views on economic policy tend to align them with the Republicans. If one views social, defense and economic policy as having roughly equal weight, it would seem, therefore, that most libertarians should be Democrats. In fact, almost none are. Those that don't belong to the dysfunctional Libertarian Party are, by and large, Republicans."

Of course, Bartlett shows that these three areas do not have equal weight, as libertarians tend to emphasize economic freedom over all else.

For Bartlett, the dialogue between liberals and libertarians should involve each side conceding a little ground to the other:

"...many of the liberals persuasively argued that the pool of freedom isn't fixed such that if government takes more, then there is necessarily less for the people. Many government interventions expand freedom. A good example would be the Civil Rights Act of 1964. It was opposed by libertarians like Barry Goldwater as an unconstitutional infringement on states' rights. Yet it was obvious that African Americans were suffering tremendously at the hands of state and local governments. If the federal government didn't step in to redress these crimes, who else would?

...In return, liberals can learn something important about economics from libertarians. Liberals often turn to government to solve social problems simply because that is their default position. But often, there are private-sector alternatives that may in fact be superior. The rich diversity of America's states and localities shows there are many different ways of dealing with social problems that don't necessarily require more government."

"Liberalism", very broadly defined, is about promoting individual liberty and equality. But there are large differences within the philosophy. For modern American liberals, "equality" means a narrower distribution of incomes; for libertarians, "equality" means that everyone is free to pursue their economic interest, accepting a wide variation in individual outcomes.

Personally, I often find myself torn between these political views. I do favor a limited scope for government intervention, focused on expanding freedom rather than promoting traditional cultural institutions or engaging in social engineering.

Government should play a robust role in helping to alleviate freedom-reducing inequities in society; but we should also willingly acknowledge when government interventions in the economy privilege the few over the many, including regressive tax policies such as the mortgage interest deduction or the tax exemption on employer-provided health insurance. This is akin to Ed Glaeser's "libertarian progressivism", which is skeptical of certain government interventions because they favor the privileged over the poor.

Perhaps the key is avoiding falling in love with one's ideology. A dialogue between liberals and libertarians would involve the former admitting their great protagonist (government) is not always the best tool to enhance freedom, while the latter would admit that their great antagonist (government) sometimes is the best tool for enhancing freedom.

(HT: Mark Thoma)

Ed Glaeser, sacred cow-slayer

In the wake of $6 trillion of lost American housing wealth, now is certainly a good time for smart ideas on housing policy. One idea, courtesy of Harvard's Ed Glaeser, is getting rid of the mortgage interest deduction. It won't be easy, though. As Glaeser notes, this policy is a political "sacred cow".

With respect to the current crisis, the mortgage interest deduction encouraged Americans to leverage their houses as much as possible:

"Subsidizing interest payments encourages people to leverage themselves to the hilt to bet on housing markets. The size of the tax benefit is proportional to your debt. The deduction essentially encourages us to make leveraged bets on the swings of the housing market. That leverage means that housing price swings can easily wipe people out. We are currently experiencing the consequences of subsidizing gambles on housing."

But outside of the current situation, there are plenty of reasons to get rid of this deduction. The most important in my mind is that it is "wildly regressive", yielding proportionally greater savings for higher income earners than for lower income earners.

Glaeser advocates phasing out the mortgage deduction as part of his larger "libertarian progrssive" view: the view that large government is often used to privilege the privileged. The mortgage interest deduction is only available to people who itemize their taxes, virtually all of whom are well off. Indeed if you did want to support home ownership among the poor, a tax credit would be much more useful. This is probably a better use of taxpayer money than subsidizing million dollar houses for upper-middle class professionals.