Fox News Ticker

Saturday, January 8, 2011

It's the spending, stupid

I've not been a fan of the New York Times for some years, the "Grey Lady" has been infested with ideologues, pinheads, incompetents and plagiarists for so many years it's actually become a source of amusement to me to see what they'll come up with next.
This latest idiocy, is just a case in point. In a recent editorial entitled "The Economy in 2011," the geniuses at the "Paper of Record's" editorial board came out and said, and I quote: "The federal deficit must be addressed. But cutting too deep, too fast will stall the recovery. There will have to be painful cuts ahead, and everything will have to be on the table, including entitlements and defense. Despite what the Republicans claim, there is no way to tackle the deficit and keep growing without raising taxes."
Let us tackle the second part of that statement first.
In point of fact there is an easy way to tackle the deficit and keep growing, and I'm not convinced the economy is actually growing, without raising taxes — cut spending.
The problem with the deficit is not the tax rate. As my old friend and colleague Charlie Martin once pointed out in one of his columns, any tax scheme will eliminate the deficit, balance out and eventually produce a surplus if only one condition is met — spending must not increase faster than Gross Domestic Product. In other words, you simply cannot spend more than you make. Something that is painfully obvious to most average Americans, but not apparently to liberals whose grasp of money is a bit fuzzy. Now, if we wish to eliminate the budget deficit we will need to balance tax rates and spending. A delicate game, but something the Congressional Budget Office is more than capable of doing.
The tax rates are not the problem, spending is. The current deficit is about $1.5 trillion, which means we're spending about $1.5 trillion more than we make. Now to the NYT the solution to this is simple, we simply have to raise taxes. And to some degree they have a point. Nearly 50 percent of the American public either pays no taxes at all or actually gets back more than they paid in due to things like the Earned Income Credit and the Extra Child Tax Credit. It reasonable to suggest the bottom half of the tax bracket should be paying more of their fair share.
This, of course, is not what the NYT and the liberals in Congress suggest, they seem to think the top two percent of wage earners, who are already paying 40 percent of the tax burden should pay more. I'm not sure exactly how this is fair, but it's really beside the point, if we raise taxes too much on the people with money, and it's not the ultra rich they're actually talking about soaking, it's upper middle class folks who own small businesses which are the job creation engine of the economy who will be most hurt by tax increases.
The NYT is right, (and yes my fingers nearly burst into flames writing that), entitlements must be on the table for cuts. However, I do not concede that defense should be on the table. As Adam Smith said "Opulence must take second place to defense."
The NYT hates the military, as do most liberals it seems. They also seem to be constitutionally incapable of realizing we are at war and live in dangerous times. Moreover according to usgovernmentspending.com in 2010 the defense budget was about $900 billion. Education spending was $1 trillion, health care was $1.1 trillion and government pensions totaled $1 trillion. I'm sure there is waste, fraud and abuse in the Department of Defense, as I'm quite certain there is in the other departments as well, and that needs to be addressed. But we simply cannot afford President Barack Obama's health care plan, or many of the other entitlements so many Americans have become used to.
Spending has got to be cut, and even European nations are figuring that out and instituting "austerity programs" — witness the rioting in Greece.
Meanwhile we're actually increasing spending.
The only way to help this economy rebound is to create a business friendly environment by reducing corporate tax rates, reducing burdensome regulations and cut spending. Do those three things and America will be back, stronger than ever.
All IMHO, of course.

2 comments:

  1. Excellent piece.

    I too am perplexed by the left's infatuation with increasing tax revenue. Though I think you nailed it with "liberals whose grasp of money is a bit fuzzy." They're more interested in class envy. And they don't seem interested in learning more about how money works and how their policies cause more of what they dislike.

    I would also like someone on the left to set a target for just how progressive they'd like tax rates to be, so we'll know it when we get there.

    Instead now they can always say, "it needs to be more progressive."

    Alan Reynolds recently pointed out in the WSJ that a 2008 OECD study showed the U.S. already has the most progressive tax system.

    Also, other downsides of attempting to increase tax revenue through tax rate increases are 1) there's no guarantee that a tax rate increase will actually result in more revenue and 2) Robert Higgs' government ratchet.

    Cutting spending is the right track. We can first start by simply identifying spending that is not authorized by the Constitution.

    ReplyDelete
  2. I appreciate the kind words Seth, if you like my work here may I suggest you check out my work at Pajamas Media. There are a great many fine bloggers there doing great work.

    Patrick

    ReplyDelete