It's budget time again

Posted: Apr 20, 2001 12:00 AM
WASHINGTON -- Oh weary topic; oh dismal science; oh 'tis springtime and the Washington insiders are absorbed with economics, or at least with the federal budget. For some of these eminentoes, the budget has something to do with economics, which is a boring subject. Thus most Washington insiders transform the budget from a discussion of economics to a discussion of politics, which is a livelier subject. It is drama, the rich against the rest of us. It is magic, our political fairy godmothers distributing money to the needy, to corporations, to unions and to waifs, all with open, trembling hands outstretched. The budget is also the fairy godmothers' sustenance, that is to say the source of their re-elections. They take the revenue of the United States Treasury and distribute it to their constituents. In other words, they buy votes. Let McCain-Feingold rid the Republic of that corruption. Naturally this spring's budget debate will stay as far away from the dismal topic of economics as is possible and present the budget as politics. The suave George W. Bush and his Republicans are again endeavoring to enrich the top 5 percent or 10 percent on the economic pyramid at the expense of the rest of us. That is the way the Democrats and all other soi disant progressives always phrase the debate, and that is usually the way the debate is argued. When you hear this hoary argument, do you ever stop to wonder why the Republicans, who need a majority of the electorate, would be so stupid as to side with the rich against the rest of us, with those whom President Roosevelt the First termed so flavorously "the malefactors of great wealth" back nine decades ago when this infantile debate first began? Are the Republicans so benighted that they think they can win elections while favoring only 10 percent of the voters at the expense of the remaining 90 percent? Some really are that stupid, I have no doubt. Yet there are others who insist they are on the side of the rest of us. They note that we are paying rich people's taxes. In fact, owing to tax bracket creep, which has heaved us into ever higher tax brackets during these two decades of economic growth, federal taxes now are at the highest level of GDP since the waning of World War II, and there is no VE-Day in sight. Actually, GWB wants to lower everyone's taxes, but progressives and Democrats erupt that once again he is on the side of the rich against the rest of us. His response is, "It's not the government's money, it's the people's money." The response of the Washington insiders is that to cut taxes is to cut government revenue and that will mean increased deficits. It is at this point in the argument that the dismal subject of economics needs to be reintroduced along with the livelier topic of history -- economics with its off-putting charts and academic notions, and history with dashing fellows and calamitous events. The economics of the Bush budget is growth. If the government lowers marginal tax rates, it removes impediments on economic activity and sets off economic growth. The history of tax cuts is an increase in government revenue. All around the world tax cuts have led to increased tax revenue. Banish the federal budget from your mind and from the Democrats' rhetoric. In the early 1980s, when that dashing fellow Ronald Reagan lowered tax rates, the consequence was not, as the Washington insiders claim, a budget deficit, but a one-third increase in federal revenue. And as Steve Forbes reminded us recently, the rich ending up carrying a higher tax burden as a percentage of federal income taxes. The top 1 percent of income earners moved from paying 17.6 percent of the income tax burden in 1981 to paying 27.5 percent by 1988. Yet because their marginal tax rate was cut from 70 percent to 28 percent, they had more money available to spend, save and invest -- as did workers in lower tax brackets with the cuts in marginal tax rates that Reagan gave them. The consequence was huge economic growth (the nation's wealth grew by $17 trillion) and -- to repeat -- federal revenue growth, as well as state and local revenue growth. That is the history of tax cuts everywhere in recent years. Consider the country that now is the economic miracle of Europe, Ireland. Yes, lowly Ireland. All of a sudden the average Irish worker has a higher income than the average German. The economic rise of Ireland is recent, and it has been rapid. Thus this spring when the talk turns to the budget, let us hope it foregoes politics and sticks with economics. The economic argument for cutting taxes is also good politics.