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Monday, March 05, 2007
Herman Cain :: Townhall.com Columnist
Creative rhetoric masks fiscal reality
by Herman Cain
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Politicians use words to inspire, cajole and convince people that their particular policy prescriptions are without fault and beneficial to both the least among us and the nation as a whole. Unfortunately, some politicians also use words to deceive people with a rhetorical frequency and intensity that overshadow reality for the uninformed voter.

Pundits often analyze a politician’s positions on the most prominent issues as distinct from his vision of sound fiscal policy. The shrewdest of lawmakers, however, seek to blur the distinctions, arguing that their brand of fiscal policy is a sure-fire cure for all of our social ills. The blurred lines are most apparent when the political rhetoric turns to discussion of taxation and government spending.

Examples abound, and politicians are careful to couch their desire for higher tax rates as benefiting some sort of common good. Presidential candidate Sen. Hillary Clinton (D-NY) recently stated that she wants to “take those profits” from oil companies to fund alternative sources of energy. House Ways and Means Committee Chairman Charles Rangel (D-NY) said last week that he wants to “rearrange” tax rates to achieve a more “equitable distribution” of the 2001 and 2003 tax rate cuts. His goal is to “offset” the “cost” of limiting or eliminating the Alternative Minimum Tax, which threatens millions of taxpayers. The website Politico.com reported last week that Democrats plan to pay for $700 million in health care for poor children with “revenue enhancements.”

Taking corporate profits, rearranging tax rates, offsetting tax rate cuts and enhancing revenue are clever rhetorical twists for advocating the same goal – raising tax rates on corporations and individuals deemed most able to pay more taxes.

The tax pushers buttress their arguments not only in terms of all the common good they plan to achieve, but in the “scoring” estimates of tax legislation produced by the Congressional Budget Office (CBO). Since the CBO was created in 1974, one of its duties is to estimate the “cost” of a proposed tax rate increase or decrease. That is, the supposed positive or negative effect of tax rates on the rate’s ability to generate federal revenues. The problem is the CBO uses what is referred to as static, instead of dynamic, scoring methods.

Static scoring estimates merely look at the proposed tax rate change and calculate a corresponding increase or decrease in federal revenues. A static CBO score would estimate, for example, that a 5 percent income tax rate reduction would reduce federal revenues by the same 5 percent. The tax pushers then argue that the 5 percent tax cut will cause a budget deficit. Therefore, Congress can’t possibly pass the tax cut because it “costs” too much and we can’t “pay for it.”

The claim that reductions in tax rates have a “cost” is ultimately an argument that we all work for the federal government. Politicians who decry the alleged cost – in their minds, a reduction in federal revenues – either do not understand the positive economic impact of low tax rates on growing the economy, personal wealth and the federal coffers, or, they want to deceive the public. I think the latter.

At the 2006 Conservative Political Action Conference, Vice President Cheney stated that the 2001 and 2003 tax rate cuts contributed to an historic surge in federal revenues. Cheney was correct. The Heritage Foundation found that capital gains tax revenues doubled following the 2003 rate cut. Tax revenues in 2006 were 18.4 percent of gross domestic product, a percentage that is above the 20-year, 40-year, and 60-year historical averages.

Though Cheney is correct, he is, in fact, making the wrong argument for low tax rates. Supporters of low to zero tax rates on income are not necessarily fans of more taxpayer dollars poured into the congressional trough.

Big government advocates focus the argument on taxation levels and not on federal spending, which is the real root cause of budget deficits. Look at your personal finances. No matter your level of income, if you spend 100 percent of your money and max out your credit cards you have a personal budget deficit. If you spend only that amount of income needed for necessities, you run a personal surplus.

The problem is not in the amount of income, but in the amount of spending. When members of Congress argue that lower income tax rates will cause budget deficits, they are acting disingenuous to say the least.

The entire 20th Century is a testament to the folly of believing that the Marxist philosophy of “from each according to his ability, to each according to his needs” can outgain or outlast a governmental form that pledges to protect individual rights and the pursuit, but not the guarantee, of happiness.

Political rhetoric around the issues of taxation and spending, the two issues from which Congress derives its power, will be with us as long as politicians have to stand for election.

Deceptive rhetoric is a reality, but it can’t distort reality for truly informed voters. We just need more of them.

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About The Author

Herman Cain is the National Chairman of the Media Research Center’s Business & Media Institute. He is the former president and CEO of Godfather’s Pizza, Inc., and currently is CEO and president of T.H.E. New Voice, Inc., a business and leadership consulting company.

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Yes the Democraps ran on
a platform of physcal conservatism. We of the real conservatives knew that it was the old time tax and spend Demos. We see that that is exactly what is happening. Also, before the election, and even just after the election, the Dems were saying tax increases on those making over $1M. Now we see that it has worked it's way down to 100K, we knew that was coming also.

Yes the Dems are socialists and communists regardless of what platform they run on. What is funny is that we are about to go into a downturn and they are going to try to raise taxes in the middle of that. Add the AGW penalties to that and we will be in another great depression.

The Dems will, at the very least, restore the maylaise of the Carter years. If that happens, this time the Democrap party will cease to exist.

Oh well, perhaps GWB will prevent that from happening by finding his veto pen.

Flat Tax!
Need I say more?

Not a good issue
If the Republicans want to impress voters in 2008, they probably should not run on their fiscal management record in Washington. Stick to gay bashing. At least they're honest about that.

Both parties financially irresponsible
Republicans and Democrats both are experts at spending money that they don't have. The Republicans talk a lot about limited government, but they don't walk the walk. The Democrats justify their spending by saying they'll tax the rich. Common denominator is that both will spend the hell out of our tax money.

to Vic
What happens if they overshoot the carter malaise and give us another F-amous
D-emocraticsocialist R-at (aka the worst President EVER)?

Liberal goodman,
Why don't you Democrats stick to killing babies? It's what you do best.

Vic
1. Please list those bills that President Bush has vetoed. I think there was one, wasn't there?

2. You are right about the old days. The big tax and spenders tended to be Democrats. However, these days, the Republicans are giving them a run for their money. Our debt is astronomical. ... and what the heck is with the Medicare drug coverage that was just enacted and the bright idea of giving illegal aliens, social security? Is this conservatism? I don't think so. Nope.

The reality is that we have very few real conservatives in office. What we have instead are big government statists going around calling themselves conservative. They aren't doing us any favors, Vic, because others see their actions and mistakenly associate it with a conservative ideal or principle. We both know that it is not.

I for one, hope we can get the Republican Party back on track and get real conservatives in office. If it's going to happen, it's up to all of us.

Flat Tax - NOT!
The flat tax is just another way of socking it to the wealthy - what is needed is the Fair Tax!

However, even the Fair Tax will not solve the problem of runaway Federal spending. In the booming economy under the Fair Tax, Congress will just have more money to spend, so we must have a two pronged approach - the Fair Tax to make tax revenues equitable to everyone, and reduce spending on pork and entitlements.

Hilary Clinton for PM of Canada!
That's exactly what the "Conservative" government of Canada is doing or proposing to do -- grab money from people You Don't Like and give it to people You Do Like (provided they have lots of babies.)

This platform will get you elected every time; and in Canada you don't even have to actually give anybody anything. The Liberals stayed in office for 13 years while openly stuffing the tax money into their own and their relatives' and cronies' pockets, all the time promising MommyGoodies and never delivering anything.

Of course we already have a failing socialist health care system, but she could take over the rhetoric as she already knows that song...

HILARY FOR PRIME MINISTER OF CANADA! She could run for any of the parties -- Liberal (Quasi Socialist), "Conservative" (Secretly Socialist) or "New Democratic" (Openly Socialist) and be sure to win.

Fair Tax
YES, the fair tax is the ONLY tax that allows each tax payer to determine how much tax they pay by how much they spend. With a prebate of the sales tax on what each tax payer would spend on the necessities of life low income earners would be relieved of the federal income tax, the SSI tax and the Medicare tax. What democrat would not want that?

P-O-W-E-R
Democrats, Republicans, whoever, for politicians one single word is preeminent, POWER. How many politicians willingly limit themselves to one or two terms? Tax and spending policy is all about bribing ignorant and greedy voters and maintaining politicians in office. This is why the Fair Tax (which could only work with govt spending limits) is D.O.A. The Founding Fathers, for all their wisdom, did not foresee the penchant of democratic systems toward increasing socialism. Had they understood the inherent human characteristic of greed, especially as it pertains to politicians, they would have instituted constitutionally a term limits provision for any and all elected officials as well as the judiciary, AND given the Executive Branch line item veto power to curtail the excesses of the legislative branch. The government "of the people, by the people, for the people" will eventually be responsible for this civilization's downfall.

Buzzkat Buzzkat Buzzkat
The Founders did not make any of the mistakes that you attribute to them. It is we-the-people that perverted their vision. The Founders did not create a democracy. We-the-people motivated the shift toward democracy that is undermining our Republic.
They knew the corrupting influence of power, so they divided it. We-the-people, in our ilwisdom, eliminated State representation when we decided we wanted "elected" U.S. Senators.
We-the-people further concentrated power when we limited the number of congressmen to 435. Fewer seats equal more power per seat.
The Founders recognized the power to tax as the power to destroy. They gave the Federal Government no direct taxing authority. We-the-people did that in 1913. The Fair Tax, though imperfect, would correct some of the more egregious errors in our taxing policy, and perhaps open the door to further reforms.
The Founders also built term limits into the system. They tried to make government jobs thankless, and financially unrewarding. We-the-people exalted our "bean-counters" above their naturally low status, and gave them the power to set their own compensation levels. What scoundrel would not want a job like that!
To be sure, The Founders made some mistakes, but be fair; we cannot blame them for what we did with the promising start they bequeathed us.

Hovelslug
Great post, I cannot disagree. I guess my point was that the Founding Fathers, although they instituted radically new (for the time) limits on government power, they didn't go far enough, as it turns out. Where is the line drawn between politicians and "the people"? After all, it was politicians who initiated and instituted all the onerous changes to the original federal system.

Another major major flaw in our system of government is the virtual impossibility of repealing laws.

The whole point is that the system as it exists today seems to be destroying itself piece by piece in the inexorable creep toward more and more socialism. History shows that nothing lasts forever; why should the U.S. be any different? Will the U.S. exist 2000 years from now? Most probably not, I would say. I just hope that my 10 y.o. daughter can live out her life within the semblance of freedoms remaining to us today.

Agreed on the Fair Tax, but I'll point out again it is a pipe dream. The entrenched political class will never allow it.
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