Saturday, July 23, 2011

Cut Spending or Enhance Revenue?

Here, one of my favorite classical liberal writers, Jeffrey A. Miron, summarizes in clear, simple language 10 principles that every member of Congress should read, as its members continue to wrangle about raising the debt ceiling.

Does the federal government need more revenue?  Definitely, it does, if the meteoric rise in federal spending over the past three years is to continue.  Should federal spending continue to rise?  Where you come out on that question will pretty much reveal to one and all whether you vote Democrat or Republican.

If you're like lots of Americans, you probably don't care if federal spending increases --- so long as someone else pays for it.  Here's an important question, though.  Will someone else be able to pay for rising federal spending on Social Security, Medicare, and Obamacare (don't forget, Congress did actually pass the miserable piece of legislation)?

Put aside whether you think federal spending should continue to rise.  Instead, think about how that could be possible.  If you think that increasing taxes is the answer, see if you can explain how increasing taxes will increase production of real goods and services.

In the end, the only way federal spending can continue to rise is if production of real goods and services continues to rise.  What is it that the 545 are doing that favors or facilitates rising production of real goods and services?  That's right; pretty much nothing.

All the smoke and fire about raising the federal debt ceiling diverts attention from the really important questions that need answers.  How federal spending is financed (taxes, debt, or money creation) is much less important than the really important questions.  Here they are:

1.  What percentage of annual GDP (which is the same thing as annual income) do We the People want  spent at the command of the 545, instead of spent at the command of the 125 million or so households that comprise America?

2.  What percentage of annual GDP can be confiscated from those who produced it, without killing the goose that's laying the golden eggs?

Congress doesn't talk about these questions much.  Neither does BHO.  Why do you suppose that is?

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