Lousy Lawmakers, Not Low Taxes, are the Problem
In her August 12 Washington Examiner column, Amity Shlaes writes that the White House argues that “you can have low taxes, or you can have an economic recovery, but you can’t have both.” She also writes that “Democrats argue in particular that extending President George W. Bush’s rate cuts on people in the top tax brackets will damage the budget to such an extent that our economy will suffer.” She says, however, the argument is hypocritical.
Shlaes, a senior fellow in economic history at the Council for Foreign Relations, Bloomberg News columnist, and author of The Forgotten Man: A New History of the Great Depression, notes that the tax cuts Treasury secretary Tim Geithner “would like to see expire cost taxpayers by his own estimate $700 billion over 10 years.” But she points out:
“Plenty of other items in the federal budget cost $700 billion over 10 years, or a much shorter period. Yet you don’t hear the administration positing apocalyptically that those outlays will darken the future.”
About the role of the lawmakers, Ms. Shlaes writes:
“Democrats are willfully overlooking a general record that shows that tax cuts can increase revenue. The last two times the U.S. trimmed the capital gains rate, in the late 1990s and under Bush in the early 2000s, the lower rate generated extra activity and the Treasury Department saw more cash flow in than predicted.
“Unfortunately, Republicans liked their tax cuts too much. They failed to use their political capital to control spending and push through entitlement reform.
After walking the reader through the role of former Federal Reserve chairman Alan Greenspan and the “Social Security fixes recommended by the commission he chaired, Ms. Shlaes closes her column by writing:
“In other words, the Greenspan fix was a poison pill of its own. It didn’t prevent huge cash deficits in the long run. To use Greenspan’s own phrase, the commission itself and the politicians who implemented its short-term fixes borrowed from the future. Those are the deficits that are in the news in 2010, the first year Social Security will pay out more than Americans paid into it.
“Had the Greenspan commission come up with a long-term reform, and had other reformers come up with better formats for our other entitlements, Greenspan wouldn’t need to talk about “borrowed money” as a rationale for preventing tax cuts today.
“The nation’s real ailment comes from having swallowed those entitlement poison pills, not annual budgeting or even financial crises. Yet lawmakers and commentators are not talking about fundamental entitlement reform. Democrats are scolding tax cutters in the hope of diminishing Republican chances in the next election. What a shame. Taxes aren’t the economy’s big problem.” (emphasis added)
To repeat the title of a John Stossel column from last October, “It’s the spending, stupid.”