As Election Day approaches, more Americans are paying attention to the developing Democrat agenda, in hopes that there is a better alternative to Tom DeLay, Jack Abramoff, Duke Cunningham and the seemingly unrestrained growth of government witnessed under recent Republican rule. The 109th Congress has overseen the largest expansion in federal spending in years. Democrats are pledging to “do better,” and we want to believe that it could be true. Unfortunately, their vision looks even less satisfying than Republican rule in practice.
Agenda Item #1: Raise Taxes: House Minority Leader Nancy Pelosi and the Democrats blame President Bush’s 2003 tax cuts for increasing the deficit, calling them the “unraveling of fiscal responsibility.” Their strategy to fix the tax cut “tragedy” is simple: roll-back the cuts “for the wealthiest Americans” and use the surplus revenue to pay off the deficit. Yet they ignore one crucial fact: the 2003 tax cuts are decreasing the deficit. Since the cuts went into effect, GDP growth and federal tax revenues are significantly higher than originally projected, due in part to lower capital gains and dividend tax rates. Increased savings and investment has fueled growth, generating income growth, yielding more tax revenue and a lower deficit. Raising tax rates would stifle this increase in tax receipts. Republicans – some of them – at least are getting it half right. Fiscal responsibility depends on both spending restraint and tax policies that do not punish economic activity.
Agenda Item #2: More Spending: Democratic Leader Pelosi has pledged that a Democrat majority would bring spending restraint back to Washington. There is very little factual evidence that this is true. Since 2001, for instance, Senate Democrats have proposed 70 amendments for additional spending, to the tune of $2.3 trillion. To finance these initiatives without increasing the deficit, the Democrats plan to follow a “fiscally responsible pay-as-you-go” strategy. But Pelosi and others should not fool you—“pay-as-you-go” is the nice way of saying they will increase taxes each time they want to spend.