Of course. Reagan's cuts doubled tax revenues. Give people more of THEIR money, and they spend it. Its easy man.
On Nov 22, 11:19 am, MJ <[email protected]> wrote: > NOVEMBER 21, 2010Higher Taxes Won't Reduce the DeficitHistory shows that when > Congress gets more revenue, the pols spend it.By STEPHEN MOORE And RICHARD > VEDDER > The draft recommendations of the president's commission on deficit reduction > call for closing popular tax deductions, higher gas taxes and other revenue > raisers to drive tax collections up to 21% of GDP from the historical norm of > about 18.5%. Another plan, proposed last week by commission member and former > Congressional Budget Office director Alice Rivlin, would impose a 6.5% > national sales tax on consumers. > The claim here, echoed by endless purveyors of conventional wisdom in > Washington, is that these added revenuespotentially a half-trillion dollars a > yearwill be used to reduce the $8 trillion to $10 trillion deficits in the > coming decade. If history is any guide, however, that won't happen. Instead, > Congress will simply spend the money. > In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio > University co-authored a often-cited research paper for the congressional > Joint Economic Committee (known as the $1.58 study) that found that every new > dollar of new taxes led to more than one dollar of new spending by Congress. > Subsequent revisions of the study over the next decade found similar results. > We've updated the research. Using standard statistical analyses that > introduce variables to control for business-cycle fluctuations, wars and > inflation, we found that over the entire post World War II era through 2009 > each dollar of new tax revenue was associated with $1.17 of new spending. > Politicians spend the money as fast as it comes inand a little bit more. > We also looked at different time periods (e.g., 1947-2009 vs. 1959-2009), > different financial data (fiscal year federal budget data, as well as > calendar year National Income and Product Account data from the Bureau of > Economic Analysis), different lag structures (e.g., relating taxes one year > to spending change the following year to allow for the time it takes > bureaucracies to spend money), different control variables, etc. The > alternative models produce different estimates of the tax-spend > relationshipbetween $1.05 and $1.81. But no matter how we configured the data > and no matter what variables we examined, higher tax collections never > resulted in less spending. > This is exactly the opposite of what the tax-increase lobby in Washington is > preaching today. For example, Erskine Bowles, co-chairman of the president's > deficit reduction commission, suggested at a briefing several months ago that > there will be $3 of spending cuts for every $1 of tax increases. Sound > familiar? Reagan used to complain that he waited his entire presidency for > the $3 of spending cuts that Congress promised for every dollar of new taxes > he agreed to in 1982. The cuts never came. > We're constantly told by politicos that tax increases must be put "on the > table" to get congressional Democratswho've already approved close to $1 > trillion of new spending in violation of their own budget rules over the last > two yearsto agree to make cuts in the unsustainable entitlement programs like > Medicare and Social Security. > Our research indicates this is a sucker play. After the 1990 and 1993 tax > increases, federal spending continued to rise. The 1990 tax increase deal was > enacted specifically to avoid automatic spending sequestrations that would > have been required under the then-prevailing Gramm-Rudman budget rules. > The only era in modern times that the budget has been in balance was in the > late 1990s, when Republicans were in control of Congress. Taxes were not > raised, and the capital gains tax rate was cut in 1997. The growth rate of > federal spending was dramatically reduced from 1995-99, and the economy > roared. > We suspect that voters intuitively understand this tax and spend connection, > which is why there is such hostility to broad-based tax increases. "Polls > consistently find that a majority of Americans believe any new taxes will be > spent by the politicians," pollster Scott Rasmussen told us recently in an > interview. > The grand bargain so many in Washington yearn fortax increases coupled with > spending cutsis a fool's errand. Our research confirms what the late > economist Milton Friedman said of Congress many years ago: "Politicians will > always spend every penny of tax raised and whatever else they can get away > with."Mr. Moore is senior economics writer for The Wall Street Journal > editorial page. Mr. Vedder is a professor of economics at Ohio University and > an adjunct scholar at the American Enterprise > Institute.http://online.wsj.com/article/SB10001424052748704648604575620502560925156.html?mod=WSJ_hpp_sections_opinion -- Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more.
