Opinion: Your coming tax increase

View in [Browser]( | Add nytdirect@nytimes.com to your address book. [The New York Times]( [The New York Times]( Thursday, September 7, 2017 [NYTimes.com/Opinion »]( [David Leonhardt] David Leonhardt Op-Ed Columnist First: President Trump’s [surrender]( to Democrats on a debt-ceiling deal yesterday isn’t only a sign of his weakness. It’s also a sign of the dysfunction of the Republican caucus in Congress. A well-functioning majority party in Congress would stick together on raising the debt ceiling, a basic function of government. Instead, Republicans handed leverage to the Democrats, and Trump compounded his party’s problem by giving in. This is not how a serious conservative political party behaves. Now, the bulk of today’s newsletter: A 19th-century economist named Adolph Wagner made a prediction that came to be known as Wagner’s Law: As societies became wealthier, their taxes would rise. They would rise because people would want more of the services that government tended to provide better than the private market, like national security, education, medical care and a guaranteed retirement. [Wagner’s Law]( has proven truer than not, but there are still many people who would like to pretend otherwise. Specifically, they wish we could summon a country with a strong military, good schools, health care and comfortable retirements — but falling taxes. It’s a nice fantasy. Yesterday, [Larry Summers]( the economist and former Treasury secretary, gave a lunchtime presentation in Washington laying out the statistics that debunk the falling-taxes fantasy. He effectively updated Wagner’s Law for the United States in 2017. “With the same values and preferences, and the same basic attitude about government activity versus private activity,” Summers said, “you should expect government to be larger in the future than it has been in the past.” There are four main reasons, he argued: · One, society is aging, which calls for greater spending on retirees. The ratio of elderly Americans — those expected to be in the last 15 years of their lives — to all other Americans will rise about 50 percent from 2010 to 2030. · Two, inequality has [soared]( with living standards [stagnating]( for the middle class and poor. Taxes push back against inequality. · Three, labor-intensive services, like education and medical care, have become more expensive, and they also tend to be the areas where the government spends money. · Four, American military spending has not kept up recently with the spending by our main rivals, including China, Iran and Russia. This trend shouldn’t continue forever, Summers said. I find his case compelling. Even if you disagree in one particular area — say, you favor more private-sector education, or a weaker military — the combined costs are so large that the argument holds up. That’s part of the reason that taxes on the wealthy [should rise]( and big tax breaks — like those for home ownership and employer health insurance — should be reduced. I don’t mean to suggest that taxes should always be rising and that government will eventually take over the economy. Capitalism clearly has worked much better than any alternative. And there are times — for example, after a war or when a population is becoming younger — that taxes should fall. It’s also important to cut government where it’s wasteful. But believing in capitalism is different from believing that government cannot grow. Modern capitalism depends on a well-functioning government. Capitalism has already grown a lot over the last century, across this country and much of the world, and the world is a vastly richer place than a century ago. “If we want to maintain traditional American values,” as Summers said, “government will need to be significantly larger.” For more details on the numbers, I recommend [a new paper]( by Paul van de Water of the Center on Budget and Policy Priorities, which hosted Summers’s presentation. I first learned of Wagner’s Law from [the writer Matt Miller](. In North Dakota yesterday, President Trump tried his best to summon a magical world in which life keeps getting better and taxes keep falling. His pitch “is divorced from reality,” Katrina vanden Heuvel [says]( in The Washington Post. Richard Rubin of The Wall Street Journal [called]( the speech a big step away from tax reform and toward a simple tax cut. Remember: If Trump succeeds in cutting taxes for the wealthy, taxes for everyone else [will eventually need to rise even more](. Also in the news: The continuing storm devastation exposes America’s failure to treat climate change as the national security issue it is, [argues]( Sherri Goodman, a former deputy undersecretary of defense. “We prepare for the next phase of Russian and Chinese aggression. We prepare for deliberate terrorist attacks on the homeland. But we are not yet clear-eyed about the threat of extreme weather in the era of climate change,” she writes on CNBC.com. Welcoming a new colleague: I’m excited that Michelle Goldberg is joining The Times as an Op-Ed columnist. She will start in a couple of weeks. In the meantime, you can read about her (and her three books) [here]( or read her previous writings in [Slate]( and [The Times](. She’s also [on Twitter](. The full Opinion report from The Times follows, including [Masha Gessen]( on DACA, the repealed federal policy that had been protecting the Dreamers. Op-Ed Columnist [Inner Racism Revealed]( By CHARLES M. 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