The View From 1776

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In the October 13, 2005, edition of the Wall Street Journal, Tom Vilsack, Governor of Iowa and Chairman of the Democratic Leadership Council, has an opinion-page article proposing ways to bring the Federal budget deficit back into line.

Some of his proposals make sense: declare war on pork, end corporate welfare, cut oil and gas subsidies, and trim government waste.  These, of course, have long been advocated by conservatives.

Then he reverts to type by mouthing the liberal-socialist campaign slogan made familiar by Al Gore and our would-be French president, Jean Francois Kerry:

“We continue to believe the Bush tax cuts targeted to the wealthiest are economically nonsensical and fiscally and morally ruinous.  If it were up to us, we’d cancel all the cuts other than those benefitting low-to-moderate income citizens, restoring the top tax rates to those of the Clinton era and saving $315 billion over ten years.”

This is obviously going once again to be a major liberal-socialist rallying cry in next year’s Congressional races. And it will be just as phony then as it was in 2004.

First, let’s look at Governor Vilsac’s “ If it were up to us, we’d cancel all the cuts other than those benefitting low-to-moderate income citizens..”

The clearly intended innuendo is that “the rich” have been given tax cuts and an extra tax burden has been loaded on “the little guy” to make up for the top-bracket reductions.

But as Bruce Bartlett wrote recently, “...the top one percent of taxpayers paid 34.3 percent of all federal income taxes in 2003, although they earned just 16.8 percent of the adjusted gross income.  The top five percent of taxpayers paid more than half of all federal income taxes, the top 10 percent paid two-thirds, and the top half of taxpayers paid 96.5 percent, meaning that the bottom half paid just 3.5 percent.”

Completely eliminating income taxes for the bottom half of all people filing tax returns, who pay only 3.5 percent of all income taxes, would do very little for low-to-moderate income citizens.  In other words, cutting taxes for “the little guy” is either an ignorant misunderstanding or a deliberate lie.

What, in fact, Governor Vilsac and his fellow socialists are talking about is the fundamental socialist policy of collectivized government redistributing income by taking from those who produce the most and giving to those who produce much less, if anything at all.  That can also more accurately be described as buying votes at the expense of economic growth.

Despite endlessly repeated real-life experience to the contrary, liberal-socialists still believe (or cynically proclaim) that human existence would magically become all peaches and cream if everybody had the same income and lived in the same way, with only a limited array of goods and services available to them, all selected for them by liberal intellectuals.  That, of course, is simply a description of life in a prison, as Soviet residents discovered.

Next, let’s focus on the word “saving,” as Governor Vilsac applies it to restoring high Clinton-era tax rates.  As every non-Marxian economist has repeatedly observed, taxes taken by the government are the opposite of savings.  Only a person who earns money, by producing useful goods or services that people will buy of their own free will, can save it or spend it.  The government can only spend, and that it does without restraint.

Contrast real savings with government spending.  Real savings are invested, via banks, insurance companies, pension plans, and mutual funds, in some endeavor that either improves productivity per worker or expands total production capacity, thereby employing more people.  Apart from national defense and diplomatic relations abroad, the government can only employ more people to produce services like the enervating, servile welfare state and “bridges to nowhere.” Other expenditures are what Governor Vilsac characterizes as corporate welfare.

A further crucial distinction is that, with very rare exceptions, government spending is inflationary, because it puts more money into the economy without expanding the pool of truly useful goods and services that, given a free-market choice, people would spend their own money to acquire. 

It is no accident that commodity prices in the United States were stable, except during wartime periods, from the 1700s until the 1930s.  Beginning with Franklin Roosevelt’s New Deal, when the socialist welfare state was formally instituted, prices have risen steadily every year as the welfare state has expanded. 

Today’s Consumer Price Index, adjusted for changes in the series, is a bit more than 14 times higher than it was in 1932, when Franklin Roosevelt was elected to the Presidency.  Another way to look at it is that a shirt that today would cost $35, would have cost only $2.50 in 1932. 

Ironically, when Fascist dictator Benito Mussolini was asked to comment on the New Deal’s NRA imitation of Fascist State Corporatism, Mussolini said that the New Deal was much too harsh on business, compared to Fascism, and that President Roosevelt was making a mistake in his assumption that inflating the dollar would revive the economy. 

Mussolini was correct.  President Roosevelt never did end the Depression; astronomically high taxes and punitive regulations on business mired the economy at 1932 levels until Japan attacked Pearl Harbor and the nation mobilized for war.

Government programs are never measured by their efficiency.  The opposite, in fact, is the criterion: politicians always aim to spend as much money, for as long as possible, in all of their home districts.  Hence the proliferation of programs, duplication of services all across the country, and the absolute inability ever to kill any program, even, for instance, ones instituted in the Civil War to fill needs no longer existing.

Raising taxes is like paying vandals to shovel manure into your house.

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