Double trigger for tax cuts
By Bruce Walker
Faced with the obscene spectacle of gross price gouging by the federal government for good and services that very few consumers (i.e. taxpayers) really want, liberals have responded with their new found friend: The Deficit Bogeyman. "Tax revenues will not grow at the rates expected, and so reducing tax rates risks returning to the deficits of the 1980s which led to the worst"...etc. ad nauseam.
Any well informed conservatives can punch gaping holes through this illogical and ahistorical whining. Cutting marginal tax rates, particularly among the most productive citizens (that nasty top two per cent) leads naturally to increased economic activity which produces a deliberately misnamed "trickle down" which is actually a "Niagara Falls" of wealth to those who work less or produce less than more successful taxpayers.
This waterfall of economic well being in turn generates higher overall tax revenues among the most productive and increased economic activity (and so tax revenues) among the rest of us. Prosperity also reduces dependence of the poor on government largesse, and raises consumer and investor confidence, which decrease the need for welfare programs and increase the entrepreneurial spirit.
Deficits and the national debt ought to shrink. Ronald Reagan did not achieve this goal for two primary reasons: (1) He rightly saw the vastly more important investment in gold-plating our military and also in recruiting and training our best to serve as a powerful deterrent against communism and other threats to our nation. This investment saved peace, advanced freedom, and gave us the very Peace Dividend that makes current surpluses possible; (2) He trusted congressional Democrats to honor a solemn commitment to provide two dollars in spending cuts for every dollar of tax increases in the ill fated 1986 tax increases.
Is it right to be concerned about the prospect for future federal spending? Is the national debt a real problem for America? The short answer to both questions is "Of course." Conservatives have long understood that deficit spending is one of the countless shell games liberals play to preserve current power by making short term decisions that feel good but lead to future disasters. Most notably, interest on the national debt consumes hundreds of billions of dollars each year (one thousand dollars per year per American citizen - think about it!)
Paying down and then paying off the national debt will reduce the mandatory influx of tax revenues just to service the debt, and would allow a sensible Congress and president to cut taxes without any prospect of reduced services or future deficits. Deficit spending also sucks capital out of the market, and this capital is most helpful to small businesses that lack the muscle and assets to borrow money cheaply.
So what is wrong with a "trigger" that would come into play if the revenue forecasts and spending forecasts in the next ten years begin to converge again, and then cross so that we risk again adding to the national debt and increasing the burden on our grandchildren? The problem is that politicians will spend money to buy votes, targeting specific groups whose votes and support can be bought, over keeping tax rates low which helps all of us - political friends and foes alike - equally. Our nation, despite being the richest and healthiest in human history - is still a bottomless pit of putative unmet needs and notional good public investments.
There is, however, a way to de-fang the "tax trigger" argument. Most citizens are shocked to learn that presidents, ever since 1974, have been compelled to spend federal appropriated dollars even if they find that there is no need to spend funds at all. Until Congress passed The Federal Budget Act, it had always been assumed that appropriations constituted the ceiling, not the floor, on federal spending. The president's power to impound funds not needed to run his departments was always considered an inherent part of his role as Chief Executive of the United States.
If we run into choppy waters three years after having passed a tax cut, so that it appears that extending future rate reductions could cause deficits, the proper response should first be to eliminate wasteful federal spending. If that does not provide enough help, then an argument for freezing tax rates is not manifest idiocy.
So if the only way to get moderate Republicans and Democrats to hop on board the tax cut Superchief, then why not build a double trigger? If a future tax cut appears likely to cause a deficit, or even if it appears that the federal government will not continue to pay off the national debt, then both freeze any pending additional cuts in rates and grant the president to impound enough federal expenditures to insure a balanced budget and continued repayment of the national debt.
Suddenly, all the advantages of pork barrel spending vanish. Although some federal spending relieves misery in truly bad economic times, the president need not choose that area in which to freeze funds. There is plenty of blubber in the budget, and it does not take a team of CPAs to find it.
George W. Bush can sell this to the American people because it relates so closely to how all of us live our lives. If our family is chugging along fine, and then a spouse loses his or her job, we do not just insist that the still employed spouse work overtime, but we also tighten the belt in the family budget.
Giving Bush an impoundment tool to balance to the tax rate freeze, should revenue not reach projections, that double guarantee of fiscal responsibility will also reassure investors and businessmen. Democrats, who live solely to give your money to their political friends, will scream and holler and curse - but amid their sputtering and moaning Americans will see that they have no good answer, because this simple system would so clearly work.
Bruce Walker is a frequent contributor to The Pragmatist and The Common Conservative.
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