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Potomac Crossings
--By George Mason Robert Reich, Clinton Secretary of Labor from 1993-97, raised the issue of the death of the Democrats in a recent column. He said: I know a dead party when I see one, and I’m looking at a dead party right now. Just consider the past eight years: lost the presidency, both houses of Congress, almost all of its majorities in state legislatures, most governorships. Will lose additional House seats in the next redistricting. Most of the current justices of the Supreme Court appointed by Republicans, also most current federal judges. And the interminable Bill Clinton scandals. The Democratic Party is stone dead. Dead as a doornail. That’s a view from the Left. From the Right, in a column for the Wall Street Journal, Pete Du Pont quotes the ever-lovable and cuddly Judge Thomas Penfield Jackson of Microsoft fame. When you discover you are riding a dead horse, the best strategy is to dismount. But … other strategies with dead horses include the following: buying a stronger whip; changing riders; sayings things like ‘this is the way we have always ridden this horse’; … and, finally, harnessing several dead horses together for increased speed. The Democratic anti-tax cut strategy to dither, delay and divide is fast becoming a victim of receding economic prospects and a tumbling stock market reacting to a tepid and slow Fed. In general, the Left finds itself in the driver’s seat of an obsolete and stuck-in-the-mud economic stagecoach. The passengers are beginning to notice. The first dead horse occurs when the Left puts government spending at the core of their beliefs. They oppose tax cuts for a simple reason - they want to spend the money. They harness a second dead horse to the stagecoach with their belief that reducing marginal rates also reduces revenue. They hitch up a third dead horse when they refuse to cut taxes for the "rich." Finally, the fourth dead horse is a lack of trust in people and their own judgements. When asked about a tax cut, Bill Clinton said " I suppose we could give it all back to you and hope you spend it right." "Taxes are not just about money", says Linda Bowles. "Every tax represents a transfer of power and freedom from the people to the government." Government does no economic work. It has no money of its own. It simply takes. Taxes are a drain on the productive for the benefit of the parasitical. There are ample economic studies to show that at some point the parasite kills the host. As the French have said, the art of government is to get every quill you can without disrupting the flow of eggs from the golden goose. In feudal times, the lord of the manor took one-third and provided land and protection for the serf. He took no more so that both might prosper. Today, the debate is about whether or not to exceed one-half. The median household pays one-half of its annual earned income for taxes in all its forms. The Left portrays tax cuts using static analysis because that method favors their views. Static analysis says that lower government taxes means less revenue for the government. Both the Kennedy and Reagan tax cuts prove precisely the opposite. Dynamic analysis recognizes that cutting taxes actually increases revenue by having a positive impact on consumer confidence, business spending, interest rates, incomes and savings. A tax-rate cut increases the after-tax rate of return on capital investment, on starting a business, on saving and on work. Stephen Moore has insisted for ages that when you tax something you get less of it. When you tax something less, you get more of it. The more is capital investment producing growth. The recent Heritage Foundation’s dynamic analysis report shows the difference. The static Democrat position says that the Bush proposal to return $1.6 trillion of tax overpayments will actually "cost" $2.6 trillion in lost government revenue. The dynamic model shows that the $1.6 trillion will reduce government revenues over ten years by about $939 billion. The $1.66 difference is the growth caused by the reduction in taxes. The Washington Post decided to address the issue of whether or not the Bush tax-cut plan tilted too heavily towards the rich. What they discovered is that the nation’s progressive tax system has accelerated to the point where an increasingly small segment of the population pays a huge share of federal taxes. There is, says the Post, a powerful constituency in favor of soaking the rich. The 400 wealthiest tax payers pay as much in federal income taxes as the more than 40 million Americans at the bottom of the income scale. These lucky 400 paid about $8.7 billion in taxes last year. On average, each one paid more than $21 million in federal taxes on incomes of more than $64 million. The Bush plan would cut their taxes by $4 million, to $17 million. Because the Medicare payroll tax is uncapped, they also paid $1.748 million in Medicare taxes. These highly skewed incomes illustrate the point vividly. The Left always wants to eat the seed corn. Whether it’s $4 million or $4,000, that difference represents capital available for re-investment which is currently being taken by the government over and above what our elected representatives have agreed to spend. This is the time of year when Citizens Against Government Waste (CAGW) publishes its annual Congressional Pig Book. The study reports on the "biggest, fattest and most expensive pork barrel year in American history – some $18.5 billion. To make the list, an expenditure must be a project that serves only a local or special interest, be requested by only one chamber of Congress, greatly exceed the president’s budget request or greatly exceed the previous year’s funding. One example? A $ 400,000 parking lot for 300 Alaskan citizens. The idea that a private decision to fund an after school project for latchkey children at a church is less sound thinking or less morally worthy than a government expenditure to build a statue to Vulcan for $1.5 million is patently absurd. Unlike our friends in the socialist states of Europe, America is not yet crippled by redistributionist tax policies.
The United States has prospered, says Daniel Mitchell, because success is admired rather than envied. Cutting taxes
is not a policy to favor the rich but a strategy to help everyone else become rich or at least rise as far and
as fast as their talent, ability and willingness to work will take them. As for the poor, increases in real wages
over time, Mitchell says, is closely correlated with the average amount of capital available per worker. Capital
formation is the key to faster growth and higher standards of living. If workers are paid on the basis of what
they can produce, then tax policies should encourage investment in tools, equipment, machinery and technology to
help them produce more. Pitting one group against another for political advantage at the expense of producing wealth
for all is a final sign that the Democrat stagecoach looks like an ancient artifact and not a vision of tomorrow. |
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