But the differing emphasis of the two approaches may eventually create disagreements over which kind of taxes to employ. For traditional progressive liberals, the measure of a tax is how much revenue it raises -- thus, they’ll be drawn to ideas like value-added taxes, or higher income taxes on a broader swath of the affluent, which are good at filling government coffers. Left-populists, however, will want punitive taxes on very high incomes or wealth concentrations, even if these don’t end up raising much revenue.
Ultimately, left-populists will be tempted to pay for government spending with deficits. This will naturally push them toward embracing modern monetary theory, a popular new idea that asserts that fiscal spending is funded by government money creation rather than by tax revenue. If that theory turns out to be flawed, and ballooning deficits eventually create inflation that the government can’t easily control after it gets started, the result could be a rapid and devastating economic collapse.
If the people of the U.S. desire left-populism, then so be it -- citizens have a right to soak the rich if they so choose. But it’s a strategy with uncertain benefits, which may eventually start to interfere with more traditional progressive priorities such as income redistribution and a larger safety net. The left should think carefully before starting down the populist road.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.