WE NEED HIGHER TAXES

WE NEED HIGHER TAXES is the headline for an op-ed piece in the Washington Post by Robert J Samuelson and he’s right.

We need to raise taxes for two reasons:

1) To pay for what we spend (pay as you go) rather than pass the deficit spending bill to our children, and their children, and their children with ever increasing interest amounts added to the bill.

2) To bring a halt to profligate spending by the President and Congress because if its “okay” to pass along all the increasing debt to future generations, why it’s easy to just go “skies the limit” on authorizing a continuing raid on the treasury and continuing increases in the debt ceiling in order to allow it.

When Jimmy Carter left office, we had a national debt of just under one trillion dollars and it had taken 190 years to amass it.  Today, in just another thirty six plus years we’ve piled on another eighteen Trillion dollars. The debt as I write is just under twenty Trillion and by the time you read this it will be just over twenty Trillion.

How did we get into this mess?  We started believing that somehow we could pay for what we were spending by not raising enough revenue  through taxes to cover it,  but I tell you this, perhaps for the first time,  the “tooth fairy” to put money under our national pillow does not exist.

So, what made us deviate from the course we had followed from the founding of our Country? An economist named Arthur Laffer was the unwitting culprit.

In 1979, at the Occidental Restaurant in Washington, D. C., while at dinner with friends Laffer drew a curve on a napkin. The curve purported to show the relationship between taxes and economic growth. At some point, Laffer argued that as you increased taxes on the ascending side of the curve you would kill the goose that laid the golden egg, would stifle growth and fewer people would be able to pay taxes while on the descending side of the curve lowering taxes would enable business to expand and hire more workers, consumers would therefore have more money to spend thus energizing the economy. The result of a rising economy would be that more people would be paying taxes which would mean we could raise more tax revenue even with lower tax rates.

The Laffer curve became the symbol of something called “Supply Side” economics and presidential candidate Ronald Reagan who was looking for an economic plan to campaign on bought it.

Laffer’s theory makes a lot of sense up to a point. John Kennedy signed a small tax cut in his administration and the economy seemed to respond positively.

But Reagan’s Republican opponent in the 1980 primaries, George Herbert Walker Bush, called it “Voodoo Economics.” And why? Because it was clear than neither Arthur Laffer or anyone else could tell you in advance how much of a tax cut was too much.

In fact, one year after the Reagan cut which amounted to about three billion dollars, the Congress with the approval of the Administration restored about one third of the cut because it was clear the numbers wouldn’t add up. But even in doing that, when Ronald Reagan left office the national debt had risen to over two and a half trillion dollars.

And the debt kept rising until President Clinton’s second term, when he, and the Republican Congress reached a budget agreement that actually increased taxes. And, lo and behold, we experienced four years of surplus. Other favorable factors helped produce that surplus but clearly increased taxes not only did not keep it from happening but contributed to the good news.

When President George W Bush took office, the debt was about 5.6 Trillion, and the Republicans enacted another huge tax cut. Supply Side economics was in the saddle again. The debt promptly rose by another five Trillion to ten Trillion before George W Bush left office.

In the eight years of the Obama Administration with the low rates in effect and the near depression taking its toll on the economy plus new spending for a Health care plan not offset by new taxes the debt rose to about 19 trillion.  And now the Republicans are plotting to cut taxes once more. Yes, I know, they say their tax bill will be “revenue neutral” in that they intend to eliminate enough so-called tax loopholes to offset the lower revenue from the lower rates.

Excuse me, but Ha, Ha, Ha.

In 1986, President Reagan and Congress to their credit reformed the tax system and cut loopholes. With the speed of summer lightening, Congress, bowing to special interest pleadings, put them all back and added new ones. I assure you, history will repeat itself again.

Listen – if we want to repair and upgrade the nation’s Infrastructure, if we want to get serious about first class education for our young people and good medical care for all our citizens,  if we want adequate remedial help for drug abusers, better training for Law Enforcement personnel,  more aid for medical research, and better programs to make the lives of all our citizens more productive  and happier while providing what is truly necessary for our national defense, why, we need to spend trillions of dollars of new money. And where will we get it?

We can either pay for it the old fashioned way by taxing ourselves to the extent necessary or charge it on the national credit card made out in the name of future generations of our children.

Supply Side Economics has not worked. That’s a fact and you know the old definition of insanity: Doing the same thing over and over again and expecting a different result.

Finally, remember (and I tell you this for the second time), There Is No Tooth Fairy.

 

 

Leave a Reply

Your email address will not be published.