Cut taxes and spending

An historic debate is raging in Congress about how to stimulate the economy. The September terrorist attacks and the ongoing impact of massive high-tech spending to avert Y2K problems have slowed the economy to a crawl. As a result, the federal government will run a $1 billion deficit the fiscal year that started on Oct. 1. The projections for the next fiscal year are a deficit of $5 billion. To put things in context, these deficits are on budgets that are almost $2 trillion in size.

The Democrats have revived their "squandering the government's money" mantra. The worst thing, they say, is for the government to give "tax-breaks" to the rich when others are out of work. They place all of the blame for the deficits on the tax cut. What they don't tell you is that they insisted that the government send each taxpayer a $300 check last year to "stimulate" the economy.

The president wanted a more mature approach to reforming taxes, but had to give the Democrats their $40 billion PR ploy to get the rest of the tax bill passed. The fact is, the $40 billion "stimulus" is eight times larger than the next 2 years of deficits.

On Thursday, the Democrat-controlled Senate Budget Committee issued a report saying that the recession was the main reason that we went from a surplus to a deficit in one year. According to USA Today, "two-thirds of the expected 2002 surplus was lost because of the recession, which will lower tax revenue and increased spending for aid programs such as unemployment benefits. About 14 percent of the surplus went for tax cuts and 18 percent for extra spending, much of it related to Sept. 11."

What this report reinforces is the idea that the only way to stimulate economic growth is to allow those who create the businesses that create the jobs that create tax revenues to keep more of their money. The fact is a happy goose lays more eggs. What the Democrats haven't figured out is that you can't have eggs if you eat the goose. And that's what higher taxes do.

Everything boils down to a simple choice. You either allow those who create jobs and pay taxes to keep more of their money. Or you allow those who are the beneficiaries of government programs to take more of other people's money. You can't do both.

As I've said before, there is no such thing as federal funds. It is your money and my money. We earn it and then we give some of it to the government to fund needed societal purposes. In exchange for our taxes, we expect the government to do the best it can with the least possible money.

So what do we do about the coming deficits? What every business and family does when there is a shortfall between income and expenses. We must work to increase income by speeding up economic growth and reduce expenses by cutting back on spending.

The only way to increase economic growth is to give entrepreneurs and capitalists financial incentives to invest their money in new businesses that will create products and services that people want to buy. The Democrats want the government to pump money into the economy with wealth-transfer schemes. But any growth that comes from these schemes is transitory. Once the handouts stop, so does the growth.

The only recipe for long-term growth is the old-fashioned one of encouraging people to invest in business ideas that have real growth potential. And the only way to invest in the future is to have more money in the present.

On the expense side, there are so many places where we can cut waste that it is not funny. Let's take farm subsidies. Bet you thought that they had been eliminated, right? Wrong, not only are they still around, they are actually growing. And most of the subsidies are going to only 5 percent of the farmers.

We should also give federal employees a financial incentive for finding and eliminating government waste. Let's pay them five cents of every dollar they save, and put no cap of the amount of money they can make. So if federal employees find a way to reduce spending by $1 million, they get $50,000. If they cut waste by $10 million, they get $500,000. And if they get rid of a billion dollars of waste, that's right, they get $50 million – before taxes, that is.

Now some might say that paying federal employees "commissions" with taxpayer money for saving taxpayer money makes no sense. The problem is that the current system rewards government employees for spending as much as they can this year so they can get more money next year. That's why it is so hard to shrink government spending. The incentives are all wrong.

The only way to break this cycle that is breaking our bank is to change the rules. Today, you are a winner if you spend more. I want a government where the winners are those who spend the least.

Only then will we have a government that does the best it can with the smallest possible amount of our money. Only then will we have a government that acts like it is spending real people's money.