From: ipser@solomon.technet.sg (Ed Ipser)
Subject: Re: What is a fiscal conservative?
Organization: TECHNET, Singapore
Date: Thu, 12 Nov 1992 09:56:54 GMT

It is no wonder that the tax-and-spend policies of the Republicrats
and Demopublicans keep driving up the debt. Fool me once shame on you,
fool me twice shame on me.

In article <1992Nov11.081757.25504@europa.lonestar.org> tom@europa.lonestar.org (Tom Kimball) writes:
>In article <1992Nov10.021714.506@nuscc.nus.sg> ipser@solomon.technet.sg (Ed Ipser) writes:
>>In article <1992Nov9.055700.6470@europa.lonestar.org> tom@europa.lonestar.org (Tom Kimball) writes:
>>>Historically, people who were fiscal conservatives considered government debt 
>>>as something to be avoided at all costs except during special circumstances
>>>(temporary debts during war or recession were OK), and rightly so.
>>
>>Funny, this is the same drivel that the press tried to sell the American
>>people on when George Bush rased taxes in 1990 and Pete Wilson raised taxes
>>in 1991. The result of both tax increases, and indeed all tax increases
>>throughout 20th century history, was to increase the deficit.
>
>Lets see, your theory is that an increase in government taxation results in 
>an increase in the deficit.  I'm not going to refute this, because my guess
>is that 99% of usenet can already spot the flaw in your logic.

It is not merely a question of theory or logic but of historical record:

  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
  by Stephen Moore
  _Reason_ magazine, October 1990:

Now, a reasonable person might ask WHY the deficit increases when
taxes are raised but only a ideologue would make such a blanket denial
of what is a matter of public record.  I can rattle off a list of
explanations if you wish but they would only obfuscate the facts.

For those of you interested in tax trivia, the US income tax was
instituted for the purpose of closing a federal budget deficit of a
few millions dollars. Didn't seem to work to well but, hey, maybe
just one more tax increase will do the trick. After all, they're
the government; they know what's best for us little people.

>  What may not
>be as obvious to some people, however, is that the REVERSE of this theory
>is in fact true.  That is, an increase in the deficit is a guarantee that you 
>will pay more taxes over the long run.  If you doubt this, check out how much of
>your taxes now go towards paying interest on debts acquired in past years. [One 
>quarter of the total!]

This is absolute nonsense. It doesn't matter if 100% of your taxes go
toward financing the debt. If your taxes are not going up, they are
not going up.  What is going to happen if taxes are held constant or
even reduced (setting aside the difference between rasing tax rates
and increasing tax revenues) is that the politicians will finally have
to make some hard choices about what things government should be
involved in and what things it should not.

The only legitimate reason for being concerned about the deficit in
the face of supply-side tax cuts is on the spending side. If you are a
socialist, a fan of big-government solving every problem from
houselessness to hangnails, then, yes, you have something to worry
about. For the rest of us, this is little cause for alarm.

>>The modern definition of a fiscal conservative is one who doesn't trust the
>>government to handle his money. 
>
>With a $4 trillion debt, I don't trust the government to handle my money
>either.  And we all know who the two most powerful men in the government have
>been in the last 12 years.

Yeah, the Democrats have controlled congress for well over 12 years. But
seriously, the problem is bigger than you are admitting or acknowledging.
The budget deficit is the oil on which the federal machine runs. If the
government was to balance the budget, people might just realize how 
corrupt and inefficient the whole enterprise is.

>>There are still some people who actually
>>wish the government would take more of their money but they are increasingly
>>in the minority. 
>
>The people who seem to want the government to take more of their money are
>the supply-siders, since that policy insures that our total lifetime taxes
>will be increased.

More rubbish. What you are arguing is that if we cut taxes now, we will have
to raise them later (I assume). Not only does this fly in the face of logic
(why would people take a tax cut now only to agree to an increase later) but
it ignores the whole point of supply-side tax cuts: to move spending back
into the private sector where it belongs.

>A Perot-like plan is the only way we can eliminate the
>deficit, thereby reducing our taxes in the long run.  I don't like paying taxes
>either, and that is precisely why I'm in favor of Perot's plan.

A Perot plan is a sure-fire way to further increase the deficit and to sink
the economy in the process. (Yes, it is possible for things to get worse than
they are. Imagine the income tax going back up to 75%.)

>>The federal government has simply become a big money sink.
>
>To be more specific, the 25% of government revenue that goes towards paying 
>interest on the national debt is a big money sink.

It is probably the only portion of government spending that is not wasted.
I look forward to the day when the proportion pushes toward 100%.

Of course, this discussion is completely academic. Clinton will only
increase the deficit further putting to rest the tired notion that it
was the Republican's fault.

But perhaps Reagan should get the credit for the collapse of American
socialism if and when it does finally occur since the liberals are so
eager to pin the deficit on him.
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