Free Liberal

Coordinating towards higher values

Making a Recession Great

by Ron Paul

House Democrats recently adopted a budget with massive tax hikes, many of which are directed at those Americans who can least afford them. By allowing the Bush tax cuts to expire in 2010, this budget will raise income taxes not only on those in the highest income brackets, but raises the lowest bracket from 10% to 15% as well. Estates would again be taxed at 55%. The child tax credit would drop from $1000 to $500. Senior citizens relying on investment income would be hurt by increases in dividend and capital gains taxes. It's not just that the Democrats want to raise taxes on the rich. They want to raise taxes on everybody.

The problem is, policing the world is expensive, and if elected officials insist upon continuing to fund our current foreign policy, the money has to come from somewhere. The wars in Iraq and Afghanistan have already cost us over $1 trillion. The Democrats' budget gives the President all the funding he needs for his foreign policy, so one wonders how serious they ever were about ending the war. While Democrats propose to tax and spend, many Republicans aim to borrow and spend, which hurts the taxpayer just as much in the long run.

Supporting a welfare state is expensive as well. Over half of our budget goes to mandatory entitlements. The total cost of government now eats up over half of our national income, as calculated by Americans for Tax Reform, and government is growing at an unprecedented rate. Our current financial situation is completely untenable, and the worst part is, as government is becoming more and more voracious, the economy is shrinking.

The bottom line is that Washington has a serious spending addiction. While both parties debate how to raise the revenue, both parties seem happy to spend over $3 trillion of your money in various ways. While some in Washington criticize the war in Iraq, very few are criticizing the interventionist mindset that got us into the war in the first place. Many so-called "Iraq War critics," criticize this administration rather than truly opposing the decades old policies that led to war. They claim they will eventually get the troops out of Iraq, but the danger is that they simply plan to move them around to other countries, not bring them home. The American people want peace. Minding our own business is the best way to achieve it. Not only is it also a whole lot cheaper, but free trade and friendship with other countries benefits all involved.

This spending spree is exactly the wrong policy for an economy on the brink of recession. History has shown that all empires eventually crumble under a worthless currency and with an exhausted military. Since too many of our nation's leaders haven't taken the time to learn from history, we are seeing mistakes repeated through recently enacted policies such as the new House budget.

Dr. Ron Paul is a Republican congressman from Texas.


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Comments

Starving the beast doesn't work. Cutting the spending first and pay off the debt, then we can talk about eliminating the taxes, especially the ones on the wealthy. (Which I am all for, by the way).

In neo-Keynsian terms, increasing taxes on the wealthy is actually expansionary fiscal policy (macro economic analysis confirms this) because money is moved from the wealth holding sector into consumption, profit and investment. Investment funding is demand driven, rather than supply driven (or else you get junk bonds, housing bubbles, stock bubbles and securitized mortgages). If a good investment rolls around, money will become available to fund it.

The problem, Michael, is that by taxing rich people more (rich people who probably invest in business or own businesses), they will carry out those lost profits on the American people. In a perfect, liberal society, they would tax oil much more and cut into their profits. Unfortunately for liberals, they neglect the fact that those oil companies up their pricing to compensate. And with the raising of taxes and elimination of tax breaks on middle class and lower class families...the American people pay taxes three fold.

By cutting taxes, you FORCE the cutting of spending. It's a like a parent who takes away the credit card of a teen and tells them to only use cash. The government does not have the ability to restrain itself, however.

# posted at by Garrett

Garrett: By cutting taxes, you FORCE the cutting of spending.

Me: This hasn't worked too well. Tax rates have been cut, yet government spending increases. "Debtmail" or "starving the beast" seemed like a good idea in the 80s, but as a strategy, it seems to be a poor mechanism to roll back the State. We need to get more creative.

# posted at by Robert Capozzi