There’s an axiom among some free-market economists that goes something like this: A government cannot tax its way to prosperity. It is a fact that liberals and Democrats have never learned.
The San Francisco Chronicle reports this week that Democrats in Sacramento – led by Gov. Gray Davis – are consigned to destroying the last vestiges of their state’s viable economic activity. Because of overspending and bad planning during the years of plenty, “houses and apartments remain unaffordable, utility costs are among the highest in the nation, traffic is unbearable, taxes are going up dramatically, good-paying jobs are hard to find and businesses are fleeing the state,” said an op-ed published by the paper.
California is perhaps the best example of how tax-happy Democrats can destroy a once-vibrant economy. The state is running a $38 billion deficit; residents there are forced to pay for all kinds of things, including every service and benefit imaginable for illegal aliens. Democrats say they aren’t to blame, but they have controlled the state for years.
In Missouri, fiscal times are equally tough. Republicans there, who now control the House and Senate, inherited an economic free-for-all from Democrats who “ran things” during the 1990s. Led by the late Democratic Gov. Mel Carnahan, they bloated the state budget by more than 300 percent. Now, in bad economic times, there is no money to fund the bloat.
These stories are being repeated in states all across the country. And almost universally, Democrats believe the solution is to raise taxes, an “answer” that historically worsens, not improves, a wounded economy.
California’s Democrats are entertaining a series of fee hikes and tax hikes. Democrats in Missouri are calling for the same. And Reason Magazine reported this month that in Illinois, under Democratic Gov. Rod Blagojevich, liberals are fixing to tax one of the state’s largest employers into oblivion: casinos.
Whether or not you approve of gambling, casinos are one of the largest producers of revenue and jobs. But because of budget shortfalls, Democrats in the Land of Lincoln want to raise taxes on casino earnings to total more than 50 percent. Lawmakers, say experts, will ultimately accomplish the opposite of what they’re trying to do. In the end, they’ll drive away existing casinos. And, the new tax plan has already caused others who were looking to develop new casino projects to abandon them. That will result in less – not more – revenue.
In Illinois and elsewhere, Democrats believe they can simply tax government out of trouble. But Republicans have only figured out half a solution to the problem of fiscal strain.
Led by President Bush, the GOP has passed two tax cuts since 2001. While Democrats wail about rising federal deficits – as if they had nothing to do with helping to create them – they purposely ignore an economic fact about our consumer-driven economy: that it’s driven by consumers.
Bush and Republicans realize that taking less of what Americans earn – not more – means we will have more money to spend on consumer goods, the items that drive our $10 trillion economy. And over time, the federal government will ultimately reap the benefit because more spending means more income will be earned and more by producers of those goods and more taxes will be paid back to the U.S. Treasury.
In fact, there is preliminary evidence this is happening. The Commerce Department reported that in June consumer spending jumped by 0.5 percent, the largest increase in months. Imagine how much more it will be when tax-rebate checks begin arriving this summer in Americans’ mailboxes.
Also, Fed Chairman Alan Greenspan on Tuesday cited Bush tax cuts and record-low interest rates as catalysts that were leading to new U.S. economic growth.
The problem is, Republicans haven’t figured out that in order to finance quicker recovery via tax cuts, you also have to cut government growth (and the resultant spending it takes to support it). Under Bush, the federal budget has grown as much or more than it did under his predecessor, Bill Clinton. Smaller government requires less funding and is less prone to economic fluctuations.
In the 1920s, our nation rode a high economy and ignored warnings that the “good times” will eventually come to an end. Lawmakers in Washington and in the states did the same thing during the 1990s. Democrats want to pave over their fiscal irresponsibility by punishing taxpayers for their excesses – again.
