Five Ways Not to Cut the Deficit…And One Real Answer
The good news is that cutting the budget is easier than everyone says. The bad news is that they’re wrong about everything else too.
Conservatives seem to be all over the map about the foremost issue of our day (of our lifetime really) what to do about the Federal monstrosity. And we know where the liberals stand on this, their handy work. So, here is a guide to some of the nonsense you’ll be hearing from all corners over the coming weeks and months:
1. Those reasonable tax hikes:
Writing in National Review on Line Duncan Currie says “Tax hikes in one form or another, are simply unavoidable.” He then goes on to advocate a “Value Added Tax,” perhaps the most destructive and pernicious form of taxation devised by man, on the compelling argument that it “does not inevitably (emphasis his) lead to higher spending.” Yeah, just 99 ½ % of the time! (You know, The Free market Warrior was OK when National Review came out for legalizing drugs. But moments like this, I fear they’re smoking them too!)
The argument that tax increases must be part of any reasonable compromise is mostly heard from the left, after a massive and highly unreasonable increase in Federal spending. Likewise, you may have noticed, “bipartisanship” only seems to come into style after the Republicans win an election. After the Democrats win? Well, I believe the quote was: “But we won.” So now, to balance the budget, we must all be reasonable and understand that taxes will have to be part of the solution. Because, you know, everyone has to give a little, right? So what if Republicans weren’t allowed into the room when these massive new expenditures were added to the budget? That was then and this is now!
In fact, there is nothing reasonable at all about yet more government confiscation of private resources. Moreover, it is based on an entire misunderstanding of the problem. We’re in trouble not, primarily, because the revenue taken in by the government is less than the government’s outlays. That may be our second biggest problem. But our first biggest problem is that our government spends obscenely, insanely, ridiculously too much money. So, those who believe that tax hikes are part of the solution just don’t understand the problem. Supposing it was possible (and I highly doubt it) to solve the whole deficit with tax increases. If we could squeeze every last nickel out of tax payers so that the American people would live in homeless, penury on concentration camp diets, but the budget would balance and government would go on as before. Would that solve our problem? Whose problem are we supposed to be solving anyhow?
In truth, there is nothing that government ought to be doing that can’t be done after cutting revenue in half and still balancing the budget. And this is the course we must take. We need way less government. Period. That means cutting taxes a lot and spending even more than that. None of which will mean less money for education or for food or medical care, only that the people who earned the money will be able to spend it on what they actually want instead of what is calculated to get some Congressman re-elected.
2. The Obama Freeze.
Back in the 80’s I calculated that we could have balanced the Federal budget by freezing spending for any two years. That would have allowed revenue (which went up every year including when Reagan cut taxes) to catch up with expenditures. But Barak Obama’s proposed freeze is about 30 years too late. Moreover, it reminds me of something else from the 80’s. The soviets (and their American 5th columnists) were keen on a nuclear weapons “freeze.” Why? Because they had spent the 70’s catching up with and then surpassing our stockpiles. So it seemed to them like a good time for a freeze. Likewise the Democrats. But, what kind of conservative thinks the best we can do after two years of Obama-Pelosi-Reid and budget levels going through the roof, is to freeze it all in place?
3. The Laffer Curve
What every conservative does know is that tax cuts increase revenue and pay for themselves. And they certainly can. The argument found so often in the New York Times, and other liberal sources, that tax cuts will increase the deficit is pure nonsense. I’ve never seen revenue actually go down after a tax cut. But this argument can be dangerous for two reasons. First, the Laffer Curve only curves so far. Lower rates may increase government collections but there is no supply-side stimulus big enough to pay for Nancy Pelosi style spending. Secondly, the whole rational ought to be problematic. For too many years we’ve argued (correctly) that lower taxes will increase government revenue. But should that be our objective? I want lower taxes to increase everyone else’s revenue. If the government ends up with more money, that’s too bad. So, if the revenue goes up, let’s cut the taxes again!
4. The Gentle Phase-In
As soon as it looks like there is some actual political momentum for shrinking the governmental monstrosity, you will here earnest sounding commentators explain that you can’t eliminate these bureaucracies over night. They must be phased out, slowly, over many, many years. How long? Long enough to let the Democrats get back into power and undue the whole thing. Now, just imagine you lost your job. Would you slowly phase-out your habit of spending $1000 a week on clothes at Macy’s? I’m thinking you’d stop it immediately. (And, if you didn’t, it would be proof of serious psychological problems.) And what of the effect on the macro economy? Some years ago people who were invested in the further expansion of our ever expanding government came up with a neat economic theory that holds that everything that works on the micro-economic level: Thrift, hard work, market signals, productivity, becomes bad when practiced by the government where, uniquely, profligacy and waste lead to prosperity. This, of course, has always been self serving drivel (like my 350 lb cousin who insists that, for him, Twinkies are dietetic.) In truth, every dollar taken from the non-productive sector and returned to the productive sector of the economy acts as a stimulus. And, the sooner the better.
5. Across the board Cuts
No less a conservative icon than Rush Limbaugh has been arguing that the best solution is a 10% across the board cut. While the tidiness of this idea will appeal to many, it ignores (in a way difficult to reconcile with Limbaugh’s usual astuteness) one of the fundamental realities of politics. Government programs have constituencies. Both the bureaucrats who get paid to run them and the ultimate recipients of the largess, no matter how unproductive and undeserving, are constant advocates for the continuance and expansion of their livelihood. They may be few in number but they care far more about preserving their boondoggle than the vast multitudes who are barely aware of it. If you leave even part of it in place, they will be constantly maneuvering behind the scenes for its complete restoration. And they will succeed. History shows us that government programs (like the NEA for instance) that are once cut, end up growing to twice their original size. Programs eliminated (e.g. The Civil Aeronautics Board) are gone for good. This is why surgeons don’t remove only 10% of your cancerous tumor.
The Real Solution:
And so, real reform must be about eliminating, not reducing government programs. This is certainly more intellectually challenging than a 10% cut. It requires us to actually have the national debate that has been lurking in the shadows. We must decide what government should be doing. In the long run, however, this way will be fundamentally easier. As long as we are debating which government program is going to be cut and by how much, every beneficiary group is going to be angling to get the best deal for themselves, whether that be the smallest cut or the largest increase. But if we are prepared to reassert our national creed of limited government, we are more likely to get a broad agreement that we stop all the nonsense, limit government to its constitutional role of national defense and criminal justice and we all get our money (and our freedom) back. Once Americans understand that this is really a new day and that the money saved from eliminating their favorite government program isn’t going to someone else’s program because the other guy’s Congressman is more connected; once they see that all the money will go back to the Tax Payers who earned it. Therein lies both a majority coalition and an accomplishment worthy of our founding fathers.
Loren Spivack (The Free market Warrior) is the author of the recently published book: The New Democrat available at OBAMAPARODY.COM
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