Dennis Campbell
March 5, 2008
Basic economic principles the left cannot grasp
By Dennis Campbell

I am no economist, but I can comprehend basic economic principles. Apparently, that puts me miles ahead of your typical liberal.

Recently, I was taken aback by an opinion piece in far-left magazine The Nation lamenting Sen. John McCain's promise to cut taxes if elected president.

That would have the effect, said the writer, of delivering "more boodle to the corporates and high-end incomes, so the federal government will be starved for revenue."

Liberals would take the opposite route and raise taxes on business, but any added cost of doing business simply will be passed on to the consumer. Businesses that do not maintain an adequate level of profitability eventually fail. If we increase taxes on businesses, that increase will be paid by you and me.

On the other hand, as a business increases in profitability it typically expands perhaps opening new locations, adding to its inventory, or investing in new plant and equipment. By doing so, it creates jobs and opportunities for those of us who work for a living.

Personally, I like the idea of more jobs and greater opportunities. Apparently, the kind of people who write for and read The Nation do not share that appreciation.

And what are we to say of the government being "starved for revenue"? We could start by saying that the federal government that is, politicians could make a reasonable attempt at living within its means, but that seems unlikely. We also could point to the results of past tax cuts.

After President Ronald Reagan cut taxes, income tax revenues rose from $244 billion in 1980 to $446 billion in 1989. Does that sound like starving the treasury?

And what happened when President George W. Bush cut taxes? In 2006, federal revenues increased by 15%, followed by a similar increase last year. Some starvation diet.

And as far as "more boodle" to those with high incomes, so what? They already pay far more than their proportionate share of taxes. The top 50% of wage earners pay 96% of income taxes. The top 5% of taxpayers pay almost 54% of all income taxes. However, they earn a tad more than 30% of all income.

Common sense says these folks have the money necessary for investment in the economy. Investment may be a nasty word to liberals, because it means those who already have money will make more money, but to someone with a modicum of economic literacy it means more jobs and greater opportunities for the rest of us.

Reducing taxes to spur economic growth is not a new idea. President John F. Kennedy a hero to Democrats who most certainly would have to run as a Republican today said in 1962, "It is increasingly clear that, no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenue to balance the budget just as it will never produce enough jobs or enough profits.

''In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now.''

In an address to Congress in 1961, he said that "The tax system ...must encourage efficient use of our resources. It must promote economic stability and stimulate economic growth. Economic expansion in turn creates a growing tax base, thus increasing revenue and thereby enabling us to meet more readily our public needs, as well as our needs as private individuals."

Kennedy got his tax cuts. What was the result? Federal tax receipts increased from $94 billion in 1961 to $153 billion in 1968, an inflation-adjusted increase of 33%.

Surely, this is not so complicated that even liberals cannot grasp it. The suspicion is that they do understand it, but just do not care, because they are ideologically committed to bleeding every possible dollar out of the most productive segments of society.

No doubt they think of those times 50 years ago when the top wage-earners paid more than 90% of their incomes in taxes as some sort of golden age. Elect a Democrat in 2008, and we will start marching back in time as economically imbecilic "progressives" seek to take our standard of living to the level of Albania or Zimbabwe.

It is not a pleasant thought to me, but what do I know? I'm just a working guy who would like to hold onto his money.

© Dennis Campbell

 

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