« I'd pay. | Main | Workers compensation reform. »
September 28, 2004
Paying for it
One of the most basic problems in all of the social sciences (especially political and economic) is that of scarcity. The problem of scarcity is, simply put; there isn’t enough to do everything at once. This seems like a simple issue, but has profound implications...
To choose an example at random, take the Bush (43) and Reagan administrations. Both slashed taxes under the theory that Government was unable to provide the same benefit per dollar as the Private Sector*. What we ended up seeing were soaring deficits. Oops...
Reagan learned from his mistake (sort of) and gave us the largest tax raise in modern history. Most of this money went to a “social security lock box”...
We see this sort of thing happen over and over again. There are things we want to do, and would have real benefits. But to do them, we can’t do something else. If we wish to have a war on terror, for instance—or even a “major combat operations against Iraq—we can’t have a tax cut. Someone has to _pay_ for it...
*This is actually something of a simplification. Since the Laffer curve is a curve, rather than a strait line, there are points along the curve under which this theory would have worked. Laffer himself was the first to admit that we don’t know where we are along the curve. Apparently we’re not at the “too much taxation” part, though...
Posted by Andrew at September 28, 2004 12:29 PM
Trackback Pings
TrackBack URL for this entry:
http://www.punningpundit.com/cgi-bin/mt/mt-tb.cgi/540
Comments
End Bold tags are your friend.
Posted by: John Foelster at September 28, 2004 01:44 PM
Be fair. Reagan's tax hike wasn't as much as his tax cut was... Net effect was still a reduction.
Reagan's (and somewhat Bush Sr's) biggest problem wasn't the tax cut, by itself, but the fact he couldn't get government spending under control. It didn't help that he increased military spending (Yeah, yeah, star wars...), while not being able to cut anything else. While I'd love to blame the Democrat controlled congress, and I don't think it would have been much different if it was Republican controlled.
Clinton on the other hand... While it wasn't "the largest tax hike in history" was a _huge_ hike (2nd or 3rd largest in history, depending), and had no preceding cut.
Bush Jr's cut can and has been shown to have helped the recovery we have going. The problem is that we also had a major event during his time, that caused a huge boost in spending, and again, no real government spending reduction. And yes, I'm very aware that it's effectively a Republican controlled congress. See the above Reagon comment.
It's hard to compare the last 4 presidents together, fairly, because thier tax policies (and general economic policies) and the actual performance of the economy has been so disjointed. Clinton had a huge boost in money, not because of taxes raised in 93, but because of the internet boom, and the extremely low unemployment. The two are _not_ connected; however, the combined effect was one of the best financial situations we've had. However, government spending was absurdly high, and remained so, even after the bubble burst. Then there was the redunction in military he was able to pull off, due to the Cold war coming to a close. He did have several conflicts that we were in, but most of those were done with low cost solutions. And 12+ years of more economic theory development.
Reagan on the other hand, was dealing early on, with run away inflation, large scale unemployment, a mismatched in imports and exports (remember the "buy american" campaigns?), a war (and an economic one at that), and a not so developed field of study in economics. Remember, "Reaganomics" wasn't just a political phrase.
Bush Sr. had a recession on his hands, a campaign promise to enact, another war, and the legacies of Reaganomics, trickle-down economics, and junk bonds. Let's not forget the Savings and Loans scandal, that cost us big. Yes, that one could be blamed (rightfully) on Reagan as well, but the actual fiscal bill was largely in Bush Sr's day.
The current Bush has been dealing with a recession , and the aftermath of the dot com bubble. He's also been running a war, and has created (whether we needed it or not) a whole nother branch of government. Indeed, Bush, when compared to the last 3 or 4 presidents has been the most pro-big government.
On the other hand, while those have been expenses, he's also declinded to spend large amounts of money on long-shot military research (star wars), has managed to reduce taxes (and wouldn't be nearly so far in debt if it weren't for the unexpected expenditures of above), has declined an expensive (whether you believe in it or not, it's going to cost alot) national health care setup, and hasn't tried to drum up money (and thereby setting a tax, no matter how indirect) by sueing the pants off of industries.
And I've now wandered off, and spent to much time on this.
Posted by: Rand. at September 29, 2004 12:16 PM
If I wanted to be super-scrupulously fair, I would have noted that Reagan’s tax cut was aimed at income-taxes (which affect mainly middle-class and rich) and his tax raise was mostly on payroll tax (which affect mainly the poor-- me). So, net result was the poor paying more taxes while the rich paid less taxes. This doesn’t seem fair to me, but I admit that it may be my wallet speaking...
Clinton’s tax increases is irrelevant—what matters is what he did with it. Clinton paid down the national debt-- which freed up money for the private sector to invest—which they did (mostly) wisely-- which created the internet boom...
Your last point mostly agrees with mine: Both the tax cut and the war can be viewed as government expenditures. The fact is that we can’t un-happen 9/11. Since that is the case, we had to re-think our spending priorities. Bush pretty much refused to do that, and decided to spend money that wasn’t there. He has ignored the fact that the universe has limited resources, and as a result our debt is once more soaring...
And as far as national healthcare goes-- something is broken in our system. I haven’t yet seen a good plan for fixing it...
Posted by: Andrew Cory at September 30, 2004 12:43 PM