TCS Daily

Compassionate Concerns

By Kevin Hassett - September 1, 2004 12:00 AM

NEW YORK -- One of today's thematic focuses here at the GOP convention is a celebration of America's "compassion." The theme is hardly new. President Bush introduced the idea of the compassionate conservative more than four years ago. But its nuances are important. If you are a Hayekian free-marketeer, committed to a small government, then you must wrestle with the fact that government has the power to do significant social good. When is it appropriate to use that power, and when is it not?

Hayek recognized that the problem of compassion is that it can be aroused in voters and then abused by socialist opportunists to increase the size of government without restraint. Since life will always deliver pain and injustice, one can always find problems that the government can in principle cure. This dynamic path will lead, he argues, to a government that is anything but compassionate in effect. Citizens will be so bound to the whims of bureaucrats and so heavily taxed that effort will wane, as will welfare. One need not look much farther than France or Germany today to see how desperate the economic circumstances can become when a society becomes too "compassionate."

There are, of course, jobs for government that are not directly related to compassion. The world being a dangerous place, it is a good idea for society to provide for a strong military. But once one builds a government strong enough to defend one's borders, it is large enough that it could be used for other purposes. Which ones are acceptable if private charity fails?

The Democrats appear to have a fairly broad standard of acceptable government intervention. Senator Kerry, for example, has adopted the middle class squeeze as a main campaign theme, and has offered up countless proposals that seek to improve the lot of the man in the middle. Putting aside questions raised here recently over whether he can pay for all of that, his claim is that higher taxes on the wealthy can finance generous improvements in government programs for the middle class. The philosophy of this view is quite radical, as it empowers government to seize without limit the property of individuals higher up in the income distribution if the resources are used to benefit those lower down. At a recent event at the American Enterprise Institute, I pushed one Democratic economist on this point. If marginal tax rates of 39.6 percent are acceptable because of social justice, why not go higher? The individual responded that Wesley Clark had recently remarked favorably on the seventy percent tax rates of a few decades ago. Senator Kerry's philosophy appears to admit the same slippery slope.

This confiscatory power is exactly what those wary of the road to serfdom are afraid of. They argue against such policies for two reasons. The high marginal tax rates will encourage capitalists to take their business abroad, reducing the welfare of those who government was attempting to assist. Second, the coercive seizure of too much of an individual's property conflicts with his very freedom.

Extreme positions are easy to argue against, but President Bush has attempted to define compassionate conservatism that identifies those moments when government can step in. His themes will undoubtedly be revisited and refined this week.

The policies that he enacted in his first four years are perhaps the best guide to compassionate conservatism. First, he has clearly identified children as being a key focus of government interventions. In doing so, he has attached himself to a burgeoning philosophical literature led by the brilliant economist John Roemer that emphasizes the importance of equalizing opportunity rather than outcomes. Second, his spending plans and tax proposals are especially beneficial both directly and indirectly to those at the bottom of the income distribution. Directly, these individuals received the largest proportionate tax reductions, and also benefit from numerous other programs such as extended unemployment insurance. Indirectly, those at the bottom are clearly the ones that suffer the most if economic times become difficult. Most analysts now agree that the marginal tax rate reductions at the top shortened the recession significantly. The shorter recession likely lowered unemployment, helping those at the bottom. On the other hand, Senator Kerry's repeal of the tax reductions should increase unemployment at the bottom end of the income distribution and harm the wealthy as well. Those in the middle will be little affected.

Thus, one might argue that compassionate conservatism focuses government interventions on children and on those most in need. By attempting to draw a line on the definition of "needy" the compassionate conservative responds to Hayek's fears with a built in limit on the scale of government interventions. Government can help, but government must not always help.

The one part of President Bush's agenda that is difficult to square with this outline of compassionate conservatism is health care. Senior citizens have also received a significantly higher government benefit because of President Bush's actions. Some of those seniors were needy, some were not. It is in this area that the lines of compassionate conservatism become more blurry and the philosophy more treacherous. Is it really right for society to tax a young two-earner couple with three children in order to provide generous prescription drug benefits to Bill Gates senior?

Certainly not, but such are the outcomes when compassion turns too quickly to policy.


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