From: ipser@solomon.technet.sg (Ed Ipser)
Subject: On Taxes and Deficits (Re: Bush a failed President)
Organization: TECHNET, Singapore
Date: Sat, 11 Apr 1992 06:19:25 GMT

In article <2616@abcom.ATT.COM> mlh@abcom.ATT.COM (XXXX Mark Hampton ) writes:
>There is only one way to cut the defecit and that is to reduce services
>and raise taxes.

You are right about "services" wrong about taxes:

  The proponents of higher taxes accept as a matter of faith that deficits
  will fall if taxes are raised.  But recent historical experience at both
  the state and the federal levels demonstrates convincingly that there is
  no such iron law of politics.  Indeed, a sizable body of statistical and
  anecdotal evidence shows that trying to reduce deficits by increasing
  taxes is an exercise in futility:  Lawmakers invariably respond to higher
  taxes principally by raising spending by an amound about equal to the
  additional revenue, thereby leaving the deficit fundamentally unchanged.

  The description of this effect is often called the "tax-and-spend
  hypothesis."  Many years ago Milton Friedman stated the point this way:
  "You can't reduce the deficit with higher taxes.  Political rule number
  one is: government spends what government recieves plus as much as it can
  get away with."  Not surprisingly, the Washington establishment dismisses
  Friedman's "rule."

  Nonetheless, several studies have verified the tax-and-spend hypothesis.
  In 1986 economist Paul Blackley published a study in 'Public Finance
  Quarterly' that examined the relationship between federal taxes and
  deficits during the period 1929 to 1982.  Blackley found that revenue
  increases led to spending increases, not to smaller deficits.  A
  subsequent study by Neela Manage and Michael Marlow, formerly with the
  U.S. Treasury Department, supported this finding.  The authors found
  statistical evidence of "one-way causality from tax receipts to spending,
  suggesting that tax increases result in higher spending levels - and
  possibly larger deficits."

  Perhaps most controversial was a 1987 paper published by the Republican
  members of the Joint Economic Committee (later disavowed by Democrats),
  which examined federal revenues and deficits from 1947 to 1986.  The
  authors JEC staff members Richard Vedder, Lowell Galloway, and Chris
  Frenze - concluded that each dollar of new taxes had triggered $1.58 in
  new spending.  In other words, the deficit has tended to *rise*, not
  fall, after a tax hike.

"Liscense to Spend", _Reason_ magazine, October 1990 by Stephen Moore.

Bush's subsequent tax increase resulted in nearly doubling the deficit at
a time when Ghramm-Rudman would have mandated its being cut to $64 billion.

Raising taxes are the surest way of increasing the deficit.

  Between the time that Reagan left the White House in 1989 and next
  year (FY 1992), domestic spending will have climbed by $300 billion--from
  $670 billion to $970 billion. Since 1989 the federal government's
  domestic outlays, adjusted for inflation, have grown by an enormous 10
  percent per year. Domestic spending is expanding at a faster clip under
  Bush than it did under other recent presidents typically labeled as big
  spenders, including Lyndon Johnson, Richard Nixon, and Jimmy Carter.
  Incredibly, Bush is on the way to being the biggest champion of new
  domestic spending since Franklin Rosevelt.

  ...

  George Bush frequently likens the federal budget deficit to a cancer eating
  away at the nation's future economic health.  His preoccupation with the
  deficit is what eventually led him down the slippery slope of new taxes.

  The irony of the Bush fiscal policy record is that an administration
  presumably committed to fighting the deficit has been completely impotent
  in preventing its growth.  Despite Bush's $150 billion tax hike and $350
  billion in other purported budget reforms enacted last year, the OMB now
  concedes that the 1991 deficit will be a record $325 billion, while CBO
  projects a $253 billion deficit.  Such deficit levels contrast with the
  Gramm-Rudman-Hollings deficit-reduction timetable, which required a 1991
  deficit of $64 billion, a 1992 deficit of $28 billion, and a balanced
  budget in 1993.  Worse yet, a study by the Dallas-based National Center for
  Policy Analysis predicts that the government forecasters are too
  optimistic; it places the Bush bidget deficit at $335 billion in 1991 and
  more than $300 billion in 1992.[14]

CATO Policy Analysis No. 147, February 4, 1991, "The Profligate President:
A Midterm Review of Bush's Fiscal Policy", by Stephen Moore.

Xref: sparky talk.politics.misc:17129 alt.individualism:2301 alt.activism:7311