by Sheldon Richman
Sheldon Richman is the editor of The Freeman and In brief.
Why cut taxes? Judging by the popping corks at the White House this week, taxes are cut to increase government revenues so the budget deficit can be shrunk without reducing government spending. Tax cuts are good, but this justification leaves me cold.
President Bush announced the other day that This economy is growing, federal taxes are rising, and we're cutting the federal deficit faster than we expected. The latest numbers bear him out. The Washington Post reports a 13 percent rise in tax receipts for the nine months ended in June. Thus the administration projects that the deficit will narrow to about $296 billion. That would be down from the $318.3 billion of 2005. Only $296 billion!
And the Wall Street Journal added, Government revenues are expected to grow 11%, or $246 billion, from 2005 to 2006, OMB said. So far this year, receipts have totaled $2.4 trillion, $115 billion higher than expected. That boost accounted for 90% of the reduction in the deficit projection.
An exultant President said, Some in Washington say we had to choose between cutting taxes and cutting the deficit. Today's numbers show that that was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring.
But we shouldn't want tax revenues to soar. They don't understand this in Washington, but nothing is more likely to produce mischief than a politician with a dollar in his hand. Imagine 535 politicians, and a President who misplaced his veto pen, with 115 billion dollars more than they expected to have! As the Antifederalist Melancton Smith wrote, [A]ll governments find a use for as much money as they can raise. That was in 1787. He must be spinning in his grave.
Federal spending last year ate up 20.1 percent of what Americans produced. That's more than when this President took office. And the administration's projections through 2011 don't have it falling by much. After that point the picture is far bleaker, when Social Security and Medicare hit their icebergs. This also leaves out the open-ended bill for war spending.
It's easy to blame military and homeland security spending for the increase, but it's also a mistake. Discretionary domestic spending, along with so-called automatic entitlements, are at stratospheric levels. Someone accurately said that this administration makes Lyndon Johnson look like a tightwad.
Mr. Bush concedes that economic growth alone won't end the deficit. According to the Post, He called on Congress to help cut 'wasteful spending' and to tackle what he said was 'unsustainable growth in spending for entitlement programs,' such as Social Security, Medicare and Medicaid.
But how credible are those words coming from a veto-less president who's approaching the halfway mark of his second term. Besides, little or no progress will be made in cutting government if the objective is to reduce waste. In politics one congressman's waste is another's essential project. I doubt that the biggest spender in Congress ever woke up in the morning and said to himself, How much money can I waste today?
The only way to shrink government is to approach it at the mission level. Every line in the budget should be subjected to the question Should the government be doing this?
On second thought, that's not likely to get us very far either. If no one thought the government should be doing something, it wouldn’t be doing it. Gremlins don't take over the Office of Management and Budget each midnight and insert projects no one asked for.
Not a Good Place
So where does that leave us? Not in a good place.
The government is out of control; in principle there are few remaining limits on what it may do. It got that way through a combination infelicitous developments. Too many people want things from the state that they can't get through production and voluntary exchange. It's tempting to blame the poor, but the great offenders are the middle and upper classes. The state and federal governments have been handing out tax-financed goodies to the well-connected for over 200 years. People in government are happy to oblige because that's the path to influence, prestige, and power. As a result, government expands. The taxpayer who foots the bill might object if he caught a glimpse of the big picture, but that glimpse is denied him through a multitude of clever devices that obscure the workings of government. Those devices include deficit spending (making government look cheaper than it is), off-budget projects (ditto), and a general complexity that makes a mockery of the idea of an informed citizen. Try reading the budget some time.
Even a badly hampered market economy is capable of producing a huge amount of wealth. But that also means it's able to sustain the weight of big government with little obvious and immediate pain. So government can work its mischief even while living standards increase. The key questions are: how much better off would we be (especially those with the least wealth) if government didn't have all that cash to play with, and how far off is the day of reckoning from all the political misbehavior?
We shouldn't take our eye off the explicit tax burden, but that is not the only burden to watch. Spending is a better (albeit incomplete) measure of how much the government hurts us.
If tax-rate cuts leave the government with more revenue than before, that only means tax weren't cut nearly enough. Let's start talking repeal. To answer the opening question, there are two reasons to eliminate taxes: out of respect for individual rights and out of fear of muscular government.