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Surplus Balderdash

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The projected budget surpluses are useful in revealing the political philosophies of Democrats and Republicans. None of the revelations is flattering.

The Democrats hold that lowering taxes in light of the surpluses constitutes a form of government spending and should be judged against other ways government could spend the money. That approach implies that government has a claim to 100 percent of our income and that we should be grateful for any amount it lets us keep.

President Clinton insists that a tax cut is as irresponsible for the country as a pricey vacation would be for a family that can’t pay its mortgage and meet other important expenses. Speaking to a women’s group, the president said, “One of my bright staff members said, it’s kind of like a family sitting around the kitchen table saying, you know, we have always wanted to plan a really fancy vacation to Europe – let’s just do it and blow the works, and when we get home, we’ll figure out whether we can pay the mortgage, [make] the car payment, and send the kids to college.”

That staff member is more clever than bright. If Clinton is listening to him or her, he’s not quite as bright as he’s reputed to be. Actually, this is not a matter of intelligence but ideology. Mr. Clinton’s premise is that the country is like a family, only bigger. This is collectivism pure and simple and must be rejected. The analogy jeopardizes the principles of liberty that this country was founded on and, ironically, subverts the integrity of real families.

Taxes are forced extractions from productive people that are used to finance projects chosen by politicians. Most of these projects consist in transfers of wealth to favored constituencies of nonproducers (many of whom are wealthy). Much of the money is taken from families, leaving them less not only for vacations, but for housing, education, medical care, and other priorities. Many people pay more in taxes than they do for food, clothing, and housing.

Clinton went on to ask, “Why are we even discussing it [a tax cut] before we decide what it takes to save and strengthen Medicare, and what it takes to save Social Security, and what we have to invest in the education of our children, the defense of our nation, the protection of our environment?” Because the money doesn’t belong to Clinton and his fellow spenders of other people’s money. He himself proposes a trillion dollars in new spending. He’d rather expand the welfare-warfare state than let people keep what belongs to them, an outrageous, inverted set of priorities.

As for saving Medicare and Social Security, Mr. Clinton continues either to engage in rank demagoguery or to live in deep denial. These programs are doomed and there is no saving them. They have always been pay-as-you-go schemes, which means they simply transfer money from producers to nonproducers. No money is invested, and the systems are susceptible to the aging of the population. When the baby boomers retire, two taxpayers will be forced to support each retired person. The cost of Medicare skyrockets well beyond the government’s projections. Clinton’s heralded plan to save these disastrous programs only pushes the problems a bit further off into the future, when someone else will have to deal with them. His budget magic would get a private financial officer thrown into the hoosegow.

If he were more interested in people and less in government, Clinton would dump the programs and recognize each American’s right to keep his money and invest for his own retirement. Not only would citizens make better provision than a bureaucracy ever could, they would regain their autonomy and dignity. Why should Americans be dependent on shortsighted, scheming politicians for retirement income and medical care?

Finally, Clinton’s collectivism is starkly revealed whenever he asks how tax cuts are to be paid for. Tax cuts don’t have to be paid for. They are not a form of government spending. They consist of leaving money in the hands of the people who made it. If there’s a cost, it’s only to the people who haven’t made it. It’s the same as the cost to a robber who is scared away by his would-be victim before he commits the crime.

The Republican tax cut is pitifully small. That Clinton is so adamantly against it shows what a man of government he is.

The Republicans of course object to the Democrats’ refusal to consider a surplus-based tax cut. In doing so, they show an appalling naivet about government that raises doubts about whether they can be trusted in any political office. If it isn’t naivet, it is a profound dishonesty.

Republicans have responded to the Democrats along these lines: A budget surplus is equivalent to citizens’ being overcharged for government services. Therefore, they should have their taxes cut.

The call to cut taxes is unobjectionable (repeal is preferable), although the GOP proposal is outrageously small. What’s philosophically wrong with the Republican response is the premise that taxes are charges for government services. That is untrue. It has never been true. And since taxes are not charges for services, there can’t be an overcharge.

The purpose of taxes is to raise money (by force) for the government. True, the government uses the money to provide some services – whether wanted by taxpayers or not. But there is no direct connection between taxation and services.

When the government plans a new fiscal year, the budget people do not estimate how much money they will need to render services and then adjust tax rates to raise that amount of money. Rather, they estimate how much money they expect the tax system to harvest in the following year and then make plans to spend it. If they see they will have more money than they are currently spending, they increase spending or start new programs. That is what the Clinton administration wishes to do. At times, politicians cut taxes to score points with voters or to stimulate the economy. But they never cut taxes because people have a right to their own money. Tax-cutters sometimes say that people have a right to keep more of their own money. But if they have a right to that, why don’t they have a right to keep all their money?

There are other reasons to reject the idea that taxes are charges for services. When the government taxes you and gives the money to someone else (such as in Social Security, food stamps, corporate welfare, you name it), what service is being rendered to you ? What about when your money is taken so the government can put peaceful drug users in prison? Or when it uses your money to bomb Serbs and Iraqis?

Another tip-off that taxes are not charges is the income tax itself. Under the income tax, the more you earn, the more you pay. Yet a wealthy person may get fewer government services than a poorer person. Where’s the connection between tax and service?

No sober person really believes taxes are payments for services rendered. When the income tax was being promoted by social engineers in the early 20th century, some of them said that people should pay on the basis of the benefits they get from government. The pro-tax economist Edwin Seligman, however, knew that was a poor argument and in its place advanced the ability-to-pay argument. A person, he said,

“does not measure the benefits of state action to himself because such measurement implies a decidedly erroneous conception of the relationship of the individual to the modern state. [It] is now generally agreed that we pay taxes not because the state protects us, or because we get any benefits from the state, but simply because the state is part of us.”

That astounding presumption is at the heart of government. Any intelligent self-supporting citizen knows he is not part of the state and would just as soon keep his money in his own pocket.

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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.