Fred Thompson

So we meet again, and I'm honored, because I know we're here for the same reasons: Love of our country and concern for our future.

A lot of Americans have these concerns tonight. They are concerned about the way things are going in our country right now. Some fear we may be in the first stages of decline. We've heard this malaise talk before.

Of course Iraq is a large part of it. Not only is it tough going, but the effort is besieged on all sides. From those playing the most crass kind of politics with it at home to criticism from around the world.

Even at home, as we enjoy the benefits from one of the best economies we've ever had, people seem uncertain; they raise concerns about global competition or a growing economic disparity among our citizens.

These are challenges. But how we react to them is more important than the challenges themselves. Some want us, to the extent possible, to withdraw from the world that presents us with so many problems, in the hope they will go away. Some would push us towards protectionist trade policies. Others see a solution in raising taxes and redistributing the income among our citizens.

Wrong on all counts. These are defensive, defeatist policies that have consistently been proven wrong. They are not what America is all about.

Let's talk about the issues here at home, first. A lot of folks in Washington suffer from a big misconception about our economy. They confuse the well-being of our government with the wealth of our nation. Adam Smith pointed out the same problem in his day, when many governments mixed up how much money the king had with how well-off the country was.

Taxes are necessary. But they don't make the country any better off. At best they simply move money from the private sector to the government. But taxes are also a burden on production, because they discourage people from working, saving, investing, and taking risks. Some economists have calculated that today each additional dollar collected by the government, by raising income-tax rates, makes the private sector as much as two dollars worse off.

To me this means one simple thing: tax rates should be as low as possible. This isn't anything ideological, and it really isn't some great insight. It's common sense arithmetic.

That's why the economy booms when taxes are cut. When the Kennedy tax cuts were passed in the 1960s, the economy boomed. When Reagan cut taxes in 1981, we went from economic malaise to a new morning in America. And when George Bush cut taxes in 2001, he took a declining economy he inherited to an economic expansion -- despite 9-11, the NASDAQ bubble and corporate scandals.


Fred Thompson

Fred Thompson has been a lawyer, actor and United States Senator. He writes exclusive analysis and commentary for Townhall Magazine.

Be the first to read Fred Thompson’s column.
Sign up today and receive Townhall.com delivered each morning to your inbox.
Sign up today