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Bring Back the Deficit!

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Should we cut taxes or should we pay off the national debt?

What’s missing from this picture?

Aside from the fact that paying off the debt need not be a priority (there is no connection between the debt and economic growth), the question is a classic case of the Fallacy of the False Alternative.

If we accept for argument’s sake that the debt should be paid off right away, there’s a way to do it and cut taxes! And I doesn’t involve magic. It’s really quite simple.

The way to do it is to (houselights out, drum roll, spotlights wash the stage):

Cut government spending.

Duh.

Aside from a congressman or two, apparently none of your brilliant, highly educated, extravagantly paid, and tenured representatives in Washington — Republican or Democrat — thought of this. Kind of makes you wonder what you’re paying them to do, doesn’t it?

The federal budget is closing in on $2 trillion a year — nearly 20 percent of GDP. (Tax revenues are at a record 20.4 percent.) The government is so big, no one can possibly know all that it is doing. In the nation’s capital every nook and cranny has an office with federal bureaucrats ladling out money to some favored constituency.

And yet: every penny is being so wisely spent that we cannot even consider whether the budget can be reduced, even for something allegedly so important as paying off the debt. Not only that, the 106th Congress, controlled by Republicans, thought too little was being spent. So they increased spending by even more than President Clinton asked!

I find all this a bit too convenient. The taxpayers — Remember them? The people who produce whatever the government has to spend? — can go without relief indefinitely. But do not ask the politicians, bureaucrats, and their dependents to forgo even a buck out of 2 trillion. Forgo? Heck, don’t even suggest they make do on what they had last year!

Please don’t insult people’s intelligence by saying that everyone is for tax cuts, but responsible ones would be “targeted to those who need them.” Those aren’t tax cuts; that’s social engineering through the IRS.

There’s always a reason for not cutting taxes. A few months ago the reason was that it would overstimulate the booming economy. Now that the economy isn’t booming quite so much, it’s that the tax cut will do nothing to stimulate the economy. This is long-debunked Keynesian claptrap. The main reason to cut (or repeal) taxes isn’t economic — it’s moral. The money belongs to its producers. Period. Any conceivable second-party claim is derivative of the primary claim. The taxpayer should get first — not nth — consideration. That is true in good times or bad.

The big-government types who suddenly care about the debt are the biggest phonies around. They don’t really care about it. It has value to them in only one respect: it can be used to stop tax cuts. Let me amend that. They have another reason to hate the debt. They drool at the social engineering they could be doing with the money that now goes to paying interest.

And that means there’s a darned good reason to keep the debt. During the Reagan years, when the government was running up record deficits by outspending the revenue gusher, no one could seriously propose big new spending programs without being dismissed as out of touch with reality. Deficits had a blessed chilling effect on those who live by spending other people’s money. Surpluses have the opposite effect. Clearly, we taxpayers cannot afford surpluses.

So I say bring back deficits and protect the debt. The economy can do just fine with them. Interest rates are higher now than when we had deficits in 1993.

But not all deficits are equal. It would be a mistake to create one by raising spending. Let’s cut spending, but create deficits by cutting taxes — big time.

To that end, I proclaim the founding of the Committee to Restore the Deficit through Tax-cutting (CRDT, pronounced “credit”). All who value freedom, unite! You have nothing to lose but your chains.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.