« Gagging Google | Main | Does America Need a Trade Surplus?» Don Boudreaux
September 09, 2008
Budgets Have Two Sides
Don Boudreaux
Here's a letter that I sent yesterday to the Washington Post:
Sebastian Mallaby wisely argues that reducing Uncle Sam's budget deficit is desirable, but he unwisely supposes that the only means of doing so is raising taxes ("McCain's Convenient Untruth," September 8). Not once in his column does he plead for reduced spending.
If Mr. Mallaby's brother-in-law persistently lived beyond his means by borrowing money to buy lots of luxury automobiles, vacations in Tahiti, and expensive gifts for sponging friends, would Mr. Mallaby scold his brother-in-law only for earning too little income? Would Mr. Mallaby's advice be limited to "Earn more money!"? Would he not also recommend that his brother-in-law spend less?
Clearly, the most straightforward way for his brother-in-law to avoid bankruptcy is for him reduce his expenditures. And while advising him also to earn more income is generally a good idea, such advice would be irresponsible and downright anti-social if the brother-in-law's chief source of income is robbery (that is, taking money by force from productive people).
Sincerely,
Donald J. Boudreaux
Posted by Don Boudreaux in Myths and Fallacies, Politics | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d834518ccc69e200e55512d0a78834
Listed below are links to weblogs that reference Budgets Have Two Sides:
Comments
Your pencil's quite sharp, sir. Great letter!
Posted by: Mark | Sep 9, 2008 3:41:02 PM
There are two ways to raise taxes:
(1) Raise tax rates
(2) Keep tax rates the same, but raise incomes
#2 happens by adopting pro-growth policies. Oddly, #1 is not a pro-growth policy.
Posted by: Chris | Sep 9, 2008 4:37:45 PM
A reduction in Federal expenditures would be real nice - but how about we first make a trial run of just holding the three trillion dollar Federal budget steady for, say, the next three-four years? No increase in the bottom line budget number allowed, so we American taxPAYERS get a chance to catch our breath, add some value to the private economy (and our own lives), and improve our savings and investment rate.
Posted by: persiflage | Sep 9, 2008 4:45:57 PM
There are two ways to raise [tax revenue]:
I don't want to increase tax revenue. Increasing tax revenue increases the authority of central planners who can't possibly know what they're planning.
#2 happens by adopting pro-growth policies
#1 can also lower tax revenue by discouraging people from earning taxable income. For example, a high marginal tax rate accompanied by an exemption for investment can encourage very wealthy people to reinvest more of their income, thus exploring a greater variety of productive organization geared toward producing more common goods and thus increasing the rate of economic progress.
This assertion is not simply theoretical. We've had 90% marginal income tax rates in this country, and we've had impressive economic growth at the same time. In fact, we've had higher growth rates with high marginal income tax rates than we've had with much lower rates.
Lowering tax rates to increase state revenue is very questionable policy from a libertarian perspective. We want less central authorities elected by markets organizing productive resources. We don't want majoritarian statesmen working deals with lords of capital (who are also statesmen) to entitle both parties to more toys.
Posted by: Martin Brock | Sep 9, 2008 5:11:50 PM
Chris #2 can also be accomplished through the printing press. You could say that is pro-growth, but only in nominal terms.
Posted by: Kevin | Sep 9, 2008 6:07:43 PM
Chris,
You left out a third way to raise taxes
(3) increase the deficit!
while we're at it, increasing regulation amounts to a tax as the government demands fees for licenses, registrations and permits and companies spend more money on compliance. Oh, there are just so many ways to raise taxes without calling it taxes that we could go on all night.
Posted by: Methinks | Sep 9, 2008 10:30:01 PM
If you give it to them, they will spend it.
I think the point of Don's post is pretty clear. We don't need more money going into the tax collectors coffers, what we need is less spending out of congress. Less spending out of congress. Less spending out of congress.
Simple. Congress spends money on wants, not needs, and what are the wants of congress? To be re-elected, which means vote buying by spending on things that make constituents fat, sassy, and happy.
If you give it to them, they will spend it.
Your most important priority as a patriotic American is to find a way not to give it to them. Choke the bastards off.
Posted by: vidyohs | Sep 10, 2008 6:16:48 AM
Vidyohs,
While I generally agree... they spend it even if we don't give it to them... hence the $9 Trillion federal debt, plus another $75 Trillion or so in unfunded liabilities.
"There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers."
- Richard Feynman
Posted by: Gary | Sep 10, 2008 9:54:45 AM
Gary,
You're correct of course. The solution I spoke of is just the first half of the equation.
The second half is a tad more confrontational.
Posted by: vidyohs | Sep 10, 2008 2:31:32 PM
Total government tax receipts (2008; tax foundation): $3.91 Trillion.
Number of full-time workers in the U.S. (2007; BLS): 121 million
Taxes collected per full-time worker: $32,300
And we need more tax revenue?
Posted by: Morgan | Sep 10, 2008 2:40:57 PM
Morgan,
Those stats are amazing. Thanks for sharing.
Posted by: Gary | Sep 10, 2008 6:08:15 PM
The comments to this entry are closed.
