Posted by
Curt Ferguson on Sunday, December 07, 2008 3:00:00 PM
Rep. Louie Gohmert, Newt Gingrich and others whom I respect greatly are advocating a two month "tax holiday" in lieu of spending $350 billion on a "stimulus" package. Although I agree with Newt on nearly everything about economics, I am hesitant to buy into this idea. A temporary tax holiday is gimmicky and won't really get the root of the problem. Democrats are always pushing gimmicky solutions to problems, generally aiming at symptoms instead of causes. I think this "tax holiday" idea is a conservative version of that method.
The real problem in our economy is progressive taxation and over-regulation (central management). Instead of targeting a symptom, we should focus our efforts on educating the public on The Wealth of Nations (Adam Smith) concepts. We need to educate the public on how the free market model always outperforms the centrally-managed economy. The free market always creates more wealth for all to share...and the sharing is generally allocated according to each individual's contribution to the well-being of others.
After all, in a free market, no one can take anything from anyone else; all exchanges are voluntary. I can only therefore make money by figuring out something I can offer that other people want, and making it available at a price they are willing to pay. I can only "get rich" in a free market by contributing significantly to the well-being of other people, giving a lot of other people something they want.
We must educate people on the truth about Reagan tax cuts and deregulation, and how they led to direct growth in standards of living for all. Let's educate people on how actions of the '94 Congress coupled with the "dragged along kicking and screaming" Clinton presidency provided another surge in economic activity and growth. While we're at it, illustrate how two Bush Presidencies with weak-to-liberal Congresses set up recessions, deficits, and "crises" like we are seeing today.
Face it: the Republican party has not governed on conservative principles during the last 8 years.
Reagan moved government policy in a more conservative direction...the economy boomed back. Bush-I caved to a liberal Congress, and government policy swung in a liberal direction: the economy stagnated, leaving newly-elected Clinton with the "the deficit was bigger than we realized" excuse to skip his middle-class tax cut. His welching on that promise, and efforts to socialize health care, lead to the '94 Republican takeover of Congress, which was followed by generally more conservative economic policies through the rest of his Presidency. In the beginning of the Bush-II presidency we saw a few final conservative principles (mainly flattening tax rates) but as the power and lure of the MSM went to the Republican's heads they started swinging back to central-management government (continued and increasing regulation of banking and industry) and elitist, nanny-state socialistic policies (No Child Left Behind, new drug entitlement). In the middle of his Presidency, Fannie & Freddie were exposed and the liberal government pressure on them were examined, but(documented history shows it was largely at the insistence of the most liberal Democratic members of Congress) the Republican Congress and President looked the other way. These liberal trends in governing resulted in the defeat of the Republican Congress in '06...on the premise that "change" would make things better...and an acceleration of the liberal swing in the last two years. The wrong sort of change makes things worse!
Interesting now that Obama got elected largely on his promise of a "tax cut for 95% of Americans" and running against Bush's economic policies. But which Bush policies lead to our current problems, especially the economic crises? Liberal policies being embraced by a Republican President. Bush-II got rejected (at McCain's expense) for much the same reason as Bush-I got the boot.
Bush's tax cuts resulted in a higher revenues for the government, and a higher fraction of the tax burden being shifted to high-income tax payers! Yes, that's right, his tax cuts maligned as "for the rich" actually resulted in the rich paying a larger portion of the taxes, not less. This (along with the proof of the Reagan years) is direct evidence that tax rate cuts result in more government revenue; when you reduce tax rates on the most productive people, they work harder and smarter and produce more for others and make more net money...resulting in higher tax revenues.
These things are very predictable when one looks at human behavior. We work harder and smarter if we are rewarded in proportion to our productivity. We work less and produce less if our compensation is not tied to our productivity. We are more careful in spending if we are spending our own limited resources; we spend more freely and less judiciously when we are spending someone else's money, especially if we do not feel accountable to that someone.
As an alternative to the "stimulus spending" package by the government, the two month "tax holiday" is preferable. But let's not focus too much on the symptoms, let's get fundamentally to the core of the issues.