Tax Cuts Make Money, But We're Spending It All and More!

I'm not turning this into a political blog -- and especially not a philosophical political blog -- but when I see a piece titled "tax cuts make money," I have to post on it.

This article is written by Senator Bill Frist, R-Tennessee, the Senate majority leader and makes the following points:

Many people in Washington have long known a dirty little secret about tax-cut measures: When done right, they actually result in more money for the government.

Republicans' decision to reduce taxes on capital gains and dividends provides a good case study in effective tax policy. When we enacted these measures in 2003, the Congressional Budget Office estimated that revenues would decline by $27 billion over the next two years. Instead, it turned out that the tax cut stimulated investment and increased revenues by $26 billion — a $53 billion difference.

If we really want to avoid burdening our children and grandchildren with debt — which does represent a major problem — we need to reform entitlement programs. Within the lifetimes of today's college students, the combined budgets of Social Security, Medicare and Medicaid will consume all federal revenues, leaving nothing for defense, education, housing or any other program.

Making sure that our children and grandchildren don't face the burdens of debt requires that we reform these entitlement programs and set them on a sustainable course for the future. A sensible low-tax policy that keeps the economy growing will play a major role in confronting our fiscal challenges.

Whoa. I don't know where to start on this one.

I'll begin by saying that I like Frist. I lived in Tennessee for five years and got to know him a bit and he's just enough "not-Washington" to be likable (plus he's a doctor in the mold of Marcus Welby, so that doesn't hurt). I also find him to be well-spoken and generally reasonable.

Furthermore, I'm not a lover of big government and high taxes. In principle, I'm supportive of smaller government and lower taxes.

I also agree that something needs to be done about Social Security before the whole thing implodes.

And I could even be convinced of the fact that lowering taxes does increase revenue. I understand the theory, though am unsure how it plays out practically. But I'm willing to accept the argument that it could happen.

But what bugs me about this piece is that he neglects the elephant in the room -- rampant government spending. We've seen ever-increasing deficits from the government over the past several years. It's worse than the typical American in debt who can't stop spending because the government has the power to borrow at will.

So while the tax cuts may have resulted in revenue gains, we know for a fact that spending has gone higher and higher. That's debt that we're going to have to pay back someday and, at this rate, that day is coming faster than I'd like.

Comments

[TaosHum]

Not only do they spend every buck they can borrow, they spend the Social Security taxes on everything but social security. then there's the trade deficit... add it up and it's about $4B/day going out of the country. How long can that keep going?