Tax and Spend is a history of the efforts by US liberals to create a US welfare state on the foundations of the New Deal. The book's thesis is that US liberals failed in this endeavour because they tried to use stealth and opportunism rather than confront the basic trade-offs for the politically vital middle class. It argues that the welfare state being offered to the middle class gave them social security and Medicare (i.e., pensions and healthcare in old age) and in addition numerous tax breaks, such as mortgage relief, business tax loopholes and other allowances; in return they were asked to pay national insurance taxes via employers and federal income tax. But the offer was never put to them in these terms. Rather, social security was bracketed with national insurance as a free-standing exchange; while federal income tax was represented as something needed to pay not just for general spending but also for ‘welfare’ for the poor, especially Aid for Families with Dependent Children (AFDC) and the Poverty Programme, a miscellaneous set of poor reliefs. So the Republican Right was able to point to the abuses in AFDC and the Poverty Programme as a justification for cutting taxes. Later under Reagan supply-siders bolstered this case for tax cuts with supply-side arguments.

The case for federal tax to pay for the array of middle-class ‘transfers’ via tax privileges was never made. Instead liberals used the Keynesian era of the 1950s and 1960s to promote the idea of federal tax as a method of stabilising the economy. The appetite of the Republican administrations of Eisenhower and later Nixon to cut the income tax was thereby blunted, as both of them found it a convenient lever of policy. Under Kennedy and Johnson liberals were keen to have tax cuts for Keynesian reasons, and argued that the resulting growth would ‘lift all boats’. Later in the 1960s when the combination of the Great Society Programme with the Vietnam War created serious inflation Johnson sought to have taxes increased but Congress (led by Ways and Means Committee Chairman Wilbur Mills) opposed this increase without cuts in welfare spending. The reason for this opposition was, in Dr Michelmore's view, that there was no middle-class political constituency for welfare spending because the extent to which the middle classes were benefited was never explained to them.

When the Civil Rights movement gathered momentum and made demands for economic assistance for the integration of African-Americans into the economic mainstream, it had no support from the white middle classes, who failed to understand how far they had been helped by the tax and spend system. Instead it was wide open to attack on existing support via AFDC, which was seen as encouraging idleness, immorality and illegitimacy.

Thus, in Dr Michelmore's view, the liberal case for the welfare state was surrendered, inadequate provision was made for the economic emergence of African-Americans, and the middle classes too allowed tax cuts which ultimately damaged their interests as potential welfare recipients.

There is no denying Dr Michelmore's grasp of the historical narrative. The story is told with a wealth of fascinating detail. However, it seems to me that there are two main faults in her overall interpretation of these events.

The first is the thesis that a welfare state of a substantial sort has failed to occur in the US where the share of all public spending, state and federal, has now reached 40% of GDP. If one looks at US transfer institutions it is hard to distinguish them in overall shape from their equivalents in Europe. In some ways, they are more generous; think for example of Fannie and Freddie in their role as government-guaranteed underwriters of mortgages for the middle class, and during the 1990s and 2000s also for the ‘sub-prime’. Then if one adds Medicare and Medicaid the US government spends as big a share of GDP on medical assistance as a typical European state; add in the new Obama extension and it will clearly become rather bigger. Social Security is earnings-related and therefore typically more generous than the UK state pension, to take another example. The US has its Earned Income Tax Relief which is comparable to the UK’s. It is true that the US is tougher on eligibility for unemployment and welfare benefits than most European states have been in the past; here its traditional culture of self-help has been a factor. But Europe has learnt about moral hazard and has toughened up considerably – as the examples of the UK, Sweden and Germany show us. So it is hard to understand why Dr Michelmore is so depressed about the failure of US liberalism.

The second concern I have is over the book's treatment of ‘tax expenditures’ as on a par with public spending. A tax system levies taxes after providing certain allowances. The system including the allowances creates a structure of marginal and average tax rates; one can also add in benefit systems like AFDC and the EITC. But by no stretch can one treat a positive average tax rate on a middle-class family which receives a mortgage allowance in the computation as a ‘welfare transfer’. Yet this treatment is key to the book's thesis that the middle classes were massive recipients of ‘welfare’. The truth is that throughout the post-war period the middle classes paid net taxes and thus received no net transfers. Social Security was paid for by National Insurance on a pay-as-you-go system; so again no net transfer. Basically the middle and upper classes have paid through various taxes for US public spending, including the transfer programmes to the poor. Not surprisingly they have paid close attention to the efficiency of this latter ‘safety net’.

Thus, this is an able history of the politics of tax and spend in the US post-war period. But the author suggests a liberal strategy to promote the welfare state that would surely have failed and bewails a failure to create it that surely does not exist. To me the US looks like just another western country journeying on the path to the Entitlement State, assisted on its way by all the same rent-seeking pressures on politicians. For all the efforts of supply-siders and Tea Partiers to head it off, the journey's progress has been as relentless in the US as it has been in most of Europe. What may eventually reverse it in the US as has happened in some European countries is the understanding of how it damages economic performance. But of that aspect there is no hint in this book which sees the welfare state as the ultimate nirvana.