Ben Carson's Economist Seeks Tax System Overhaul
Get Thomas Rustici talking about the current state of U.S. economic policymaking, and the adjectives start flowing: Corrupt, worst, wasteful, bloated, dangerous.
And at least one important person is listening. Rustici, a professor at George Mason University in Virginia, is now the senior economic adviser to Ben Carson, the retired neurosurgeon and Republican presidential candidate who is surging in polls nationally and in Iowa.
It's up to Rustici to figure out the details of Carson's big-picture policies—balance the budget, impose a Biblically inspired flat tax—and he's got plenty of ideas. In his first interview since joining the campaign, he outlined some of them.
To Rustici, 54, the nation's biggest economic problem is the country's long-term structural fiscal imbalance, enabled by a Congress captive to special interests. A bold revamp of the tax system, he says, is the first big step to sparking short-term growth. Rustici waves off the idea that mandatory balanced budgets would leave the government enfeebled in a crisis that calls for deficit spending to stimulate the economy, arguing that government needs outside constraints and tends to be destabilizing anyway.
“I don't trust Congress,” he said, citing the late conservative economists Milton Friedman, Friedrich Hayek, and James Buchanan as his academic influences. “I don't trust their ability to manage things, regulate things correctly, and I don't want our monetary system to acquiesce to that responsibility.”
Carson's big idea is to remove much of the progressivity from the tax system, imposing a single rate of about 10 to 15 percent. "The one that I've advocated is based on tithing, because I think God is a pretty fair guy," Carson said during August's debate in Cleveland. "And He said, you know, if you give me a tithe, it doesn't matter how much you make." What the campaign hasn't figured out yet, Rustici said, is whether it's an income tax or a consumption tax and what deductions should vanish.
But Carson, who met Rustici through one of the economist's former students, isn't exactly a supply-side conservative. Rustici adopts some of the populist themes that have animated Donald Trump's campaign, vowing to end a system where some wealthy people can pay very little. “The people who have profited from gaming the tax code are not poor people,” he says.
There's an inherent contradiction here, of course. According to the Tax Policy Center, the average federal tax rate for households making between $500,000 and $1 million is 28.1 percent, about double the rate in Carson's plan, while the average rate for households under $40,000 is below 10 percent.
Rustici's answer, at least in part, is to separate the tax system from spending programs that are run through the tax code. Take, for example, the earned income tax credit. It's effectively an employment subsidy for low-income households: In many cases, they get more from tax refunds than they pay in income and payroll taxes combined. To Rustici, that's a spending program in disguise and it should be analyzed as spending, not a tax refund.
So would poor families get more cash from President Carson than they get now? Probably not, given his support for lower taxes and a balanced budget, but at this point, it's hard to tell. "By muddying the waters, it actually does no one good, including poor people,” Rustici said. “There's going to be a whole lot of affluent people upset when we get there.”
With the government projected to run $7 trillion in deficits over the next decade, or about 3 percent of the economy, Carson will be scouring the government for areas to cut. The campaign hasn't settled on any proposals, but the first two things Rustici mentioned as his own ideas were federal support for the International Monetary Fund and the World Bank, both relatively small in the broader budget context.
Those institutions, he said, fund foreign “thugs” and corrupt governments, creating moral hazard for leaders in developing countries. “They steal it and line their pockets,” Rustici said.
More details of the Carson plan will get rolled out soon, said Rustici, who has never before worked in presidential politics or, it appears, donated to federal political candidates. For now, he's got an economic team to build—and classes to teach at George Mason, suburban Virginia's hotbed of libertarian economic thought. Every Monday, Wednesday and Friday, you can find Rustici instructing undergraduates in economic history. The rest of the week, he's trying to make history.