Countering Three Liberals On The Economy

Atrios, Kevin Drum, and Andrew Sullivan have been knocking heads over the economy. Here’s a short summary from Outside The Beltway of the positions they’re taking:

Duncan Black and Kevin Drum call B.S. on Andrew Sullivan’s statement that, “I’m in favor of Bush’s tax cuts, but want spending cuts to match them; I favor balanced budgets . . . .”

Black writes that, “It’s a nice little fantasy to fetishize ’small government’ and imagine that liberals fetishize ‘big government’ but that just isn’t the reality. Put up or shut up – what would you cut out of this budget?” Drum adds, “So: if you support the tax cuts, and you don’t want to cut defense spending, and you want a balanced budget, you need to slice about $400 billion out of the $500 billion that’s left.”

None of that makes much sense economically if you ask me.

To begin with, although tax cuts usually cause a short term dip in government revenues, they also lead to more economic activity which produces more money for the government. For example, as Bill Frist pointed out:

“Total government collections, in fact, increased more after President Bush’s 2003 tax cuts than they did after President Clinton’s 1994 tax hikes.”

Granted, we could reach a point on The Laffer Curve where cutting taxes would reduce tax income, but given how ridiculously high our taxes are in this country, I seriously doubt if that’s a big concern at the moment.

Given that government revenues were more than 350 billion dollars higher in 2005 than they were in 2003, why do we need spending cuts to match Bush’s tax cuts? We don’t.

Then there’s Black’s claim that liberals aren’t for ‘big government.’ Of course they are. Every liberal candidate comes to office with oodles of new regulations they want to impose on businesses and massive new taxpayer funded government boondoggles that they’re just dying to try out. Just to name one of many examples, look at socialized medicine, something that almost every liberal you run into seems to support; if that’s not, “big government,” I don’t know what is.

While I’ll grant you that Republicans often increase spending and the size of the government when they’re in office as well, that occurs over the objection of their conservative base who are without question several orders of magnitude more concerned about deficit spending and the size and power of the Federal Government than liberals.

Next up is the idea that you have to “slice about $400 billion out of the $500 billion” off what we’re currently spending to reach a balanced budget. To begin with, I support Mike Pence’s plan to cut “$650 billion over five years” off of the budget (Incidentally, how many of those liberals who are supposedly concerned about spending will get behind Pence on that?)

However, contrary to popular opinion, it’s not necessary to make those kind of cuts to balance the budget. All we’d have to do to get the budget under control would be to freeze the amount we’re currently spending.

Just take a look at these government revenue and outlay numbers from the Congressional Budget Office and you’ll see what I mean:

1972 — 200 Billion Federal Revenues — 220 Billion Expenditures
1976 — 309 Billion Federal Revenues — 345 Billion Expenditures
1980 — 521 Billion Federal Revenues — 532 Billion Expenditures
1984 — 674 Billion Federal Revenues — 816 Billion Expenditures
1988 — 867 Billion Federal Revenues — 995 Billion Expenditures
1992 — 1,127 Billion Federal Revenues — 1,313 Billion Expenditures
1996 — 1,415 Billion Federal Revenues — 1,511 Billion Expenditures
2000 — 1,823 Billion Federal Revenues — 1,714 Billion Expenditures
2004 — 1,880 Billion Federal Revenues — 2,293 Billion Expenditures

Take a look at the expenditures and then look at the revenues just four years later. You’ll note that in every case, had the government simply held spending constant for four years, they could have balanced the budget. The problem the Federal Government has isn’t that they tax too little, it’s that they spend too much (Hat tip to Ronald Reagan). It would probably take some sort of Balanced Budget Amendment in order to force Congress to put the brakes on, which again is something that I’d support wholeheartedly, but it is very doable.

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