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Memo to President Obama: Cut Taxes!

By Scott Tibbs, February 18, 2009

A February 16 letter to the editor in the Herald-Times made the following proposal:

We would be willing to give $5 a month out of our checks to something like a “national deficit program.” If you could get millions to do this, we could all in our own special way help with the economy.

That is an empty gesture and will not come close to reducing the budget deficit, much less paying down the national debt. Even if we assume that 200 million of the 300 million people in this country are in the workforce, that only amounts to $12 billion per year. The estimated federal deficit for 2008 is $239 billion, according to White House estimates.

Even then, unless we make spending the money on anything other than reducing the deficit a criminal offense punishable by death (which would obviously be an outrageously disproportionate overreaction) there is no way to guarantee that the politicians in Washington won't simply spend the extra money.

In any case, the problem is not that we are not being taxed enough. The government has more than enough revenue to run a balanced budget, but politicians consistently spend more than they have. A rare exception to this was in the late 1990's, when the Republicans took over Congress and limited spending. Disgraced ex-President Clinton bitterly attacked the GOP Congress for this, and then took credit for the surplus.

Ronald Reagan is known for cutting taxes, and is also known for running a large budget deficit. Were the tax cuts responsible for the deficit? Nope. Federal tax revenue was $599 billion in 1981, and had increased to $991 billion 1989. Government spending, meanwhile, went from $678 billion to $1.14 trillion in the same time period. Had spending been kept under control, there would have been no budget deficit in the 1980's.

What about the much-maligned tax cuts and budget deficits of the Bush administration? The federal government took in $1.99 trillion in tax dollars in 2001. White House estimates for tax revenue in 2008 is a whopping $2.66 trillion. Meanwhile, government spending has exploded from $1.86 trillion in 2001 to an estimated $2.9 trillion in 2008. Revenue temporarily dipped during Bush's first term, but it has increased since then.

The problem is that, despite having Republicans in control of both the Congress and the White House, there has been no discipline on spending. If only Republicans had not forgotten all about fiscal conservatism and limited government after Bush took office, we might have a Republican President today, and we would be in a much stronger position fiscally. If Republicans are to have any hope of regaining the Congress and the White House, they must embrace limited government again.

Take a look at your paycheck or direct deposit slip, and think about the percentage of your money that goes to government at some level before you even see it. That's only part of the taxes you pay. You pay sales taxes on most things you buy, property taxes (which are figured into the cost of your rent if you do not own property), automobile excise taxes and gasoline taxes. The taxes paid by corporations are figured into the cost of items you purchase, as are the costs of government regulations.

An additional "contribution" of $5 a month to the budget deficit is symbolism over substance, but the symbolism is important. Rather than expecting politicians in Washington to discipline themselves and not spend more than they take from us by force in taxes, too many people think that if we just give them a little more of the money that we (not they) worked to earn, we could solve the deficit. That was the idea behind those pathetic bake sales in the early 1990's. Without fiscal discipline, though, sending more money to Washington will be about as effective as giving a gambling addict money to pay off his debts.

I agree with President Barack Obama that we need an economic stimulus package. Where I disagree is that we need more government spending to stimulate the economy. What we need is a tax cut that is deep and wide, especially on investments. We should cut capital gains taxes. We should offer tax credits for investing in new equipment or expansion of a business. In other words, we should get government off our backs and trust the American people to pull us back to prosperity.