Conservative News & Commentary

Jul 16, 2011 — by: A. Smith
Categories: Economics, Government

In the latest round of debates concerning the Federal Budget and Debt Ceiling, President Obama said we need a "balanced approach". The President claimed in order to solve the government shortfall we need to cut spending and raise revenue. This is the only sensible approach. 

Additionally, Mr. Obama mentioned we need "shared sacrifice". But what does that exactly mean? The term stems back to World War II when the country, on whole, had to give up certain amenities in order to help win the war. The idea is if everyone gives a little, it adds up to a lot and great good can come of this. Liberals love this concept.

However, that's not what Mr. Obama is asking for. When he talks of shared sacrifice he would like to raise tax rates on those making above $250,000 a year (including businesses). Notice he is not demanding everyone contribute a little more, just those over making $250,000 a year. The President's idea is that the "millionaires and billionaires" can afford to give more and strongly suggests they have a moral obligation to do so. They ought to give more for the greater good. This is what is fair.

The fact is that 39% of Federal income taxes are paid by 1% of the population. Now how is that fair? Because they can afford it? No, there is nothing fair about that.

Suppose you went to a restaurant and ordered a hamburger and coke. In the booth next to you another customer is also having a meal like yours. After a while the man in the booth next to you gets up and walks out. You notice he didn't pay for his meal. The then waitress brings you your bill. It is $8.00 for your meal and another $8.00 for the man who sat in the booth next to you. Of course you complain — you shouldn't have to pay for the other person's meal. You slap down $8.00 (to pay your fair share) and start to walk out. Suddenly two large men appear, who look like they know how to rough someone up, and block the door. They "suggest" you pay the full bill if you know what is good for you. Is this fair? Now let's say they want you to pay even more, because the owner of the restaurant bought a new car, needs to make his monthly payment and is a little short. Your bill in now $20.00! ($8.00 for your meal, $8.00 for the other man's meal and now a $4.00 surcharge for being able to afford to eat in this restaurant). Of course you would never eat there again. But when it comes to the Federal Government increasing taxes, there are very few options.

That said, the President does have something right. We need a balanced approach to solving our budget deficits. We need to decrease the spending side of the ledger and increase the revenue side. However, increasing revenue doesn't happen by increasing taxes. In the short-term raising taxes generates additional revenue, but soon after the increased revenue begins to decline because the "wealthy" curb their economic activity. All of a sudden the wealthy don't invest as much, they don't spend as much and the overall economy suffers. A suffering economy means lower revenue to the federal treasury. The liberal solution to this new problem then is to raise taxes again... and the cycle continues.

The answer to increasing the revenue side of the ledger is to promote growth. Economic growth creates more, sustainable tax revenue than tax increases. Moreover, economic growth puts people back to work, which not only helps the increase revenue, growth also helps decrease spending — less money is spent on unemployment insurance. How do you get economic growth? By lowering marginal tax rates. Yes LOWER them. It works every time it is tried: Kennedy did it in the 1960's, Reagan in the 1980's and Bush in 2001 and 2003. Each time rates went down, strong economic growth followed.

Here's is a core difference in philosophy between liberals and conservatives:

Liberals believe government knows how to best use money to spur economic growth and create a fair society. Therefore the more money in the government coffers, the better it is for society in general.

Conservatives believe people and businesses know best how to use money to spur economic growth and create a fair society. Therefore the more money in the private sector, the better it is for society in general.

It would be an interesting argument to debate in a classroom, if the facts weren't already available. The conservative view corresponds to reality. The liberal view matches the reality of theoreticians in the faculty lounge. The next time you hear the claim we need shared sacrifice, let's respond by agreeing — but this time it's the government's turn. The private sector has sacrificed enough already.

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