| Why Worry About the Debt By Scott D. Gillette
The most recent dividend and capital gains cuts
enacted by Congress and the Bush Administration demonstrate a positive
development within the past generation. In the 1970s, tax cuts were considered
dangerous and eccentric. Today, it is the conventional wisdom that tax cuts
actually stimulate economic growth without inflation. This is huge progress. But this positive trend is dampened because too many
people cling to the notion that the enlarging deficits, exacerbated by the tax
cuts, create too great a burden on the national debt, and the nation’s
collective prospects. Well, the deficit does not matter. Neither does the
debt. So forget about it. When I walk down the streets of midtown Nope. All countries have debts. They have to maintain
a modern economy. The big question is this: can the countries pay them back?
That’s why the key statistic is to measure the national debt as a percentage
of the nation’s output (GNP) for any given year. The But what about the record deficits we’re running
now? Well, as a percentage of the economy, they are not record deficits at all,
but quite manageable. Second, when one considers the enormous costs incurred by
the recession, terrorism, two wars, corporate scandals, the deficit is
incredibly light. Now, I don’t mean to minimize the loss of 2.5
million jobs of the past few years. But that condition just proves how urgent
tax cuts have become. Here’s the most important point: the deficits we
are running now can increase so long as they are incurred to improve long-term
economic prospects. Here’s an example. Let’s say the government enacts an
educational program for children and prisoners that costs $50 billion a year
over several years. Let’s then say that the huge costs of putting a person
into prison are replaced with tax revenues because these same people are
working, and this swing comes to $100 billion a year. In the case, the original
deficit was well spent. Now, I don’t know if that specific federal program
would be wise or not. But tax cuts that encourage business activity and
investment, and the most recent cuts are just that, represent a sure thing and a
good investment. They will increase economic activity, guaranteed, so the
government will recoup the costs. So Republicans, the party of tax cuts, should push
for more tax cuts, regardless of whether the country has a large deficit or
large surplus. Then let others worry about the deficit. Jim Antle, a fellow writer and supply-side comrade,
recently argued otherwise: “Supply-siders
contributed to the undoing of their own policies by failing to favor reductions
in government spending commensurate with the reductions in taxes they
achieved.” But this means Republicans have to rob the political interests of
Peter in order to pay Paul. Remember the Contract with America? It proved that
Republicans cannot be a majority party if they want to reduce spending without
offering the American electorate anything in return. I’m not saying that
cutting government is a bad thing. But let’s face it, it’s not a winning
political strategy, and it makes future tax cuts less likely, because there
won’t be a majority of Republicans to enact future tax cuts. I admit I’d like the GOP to be a one-trick pony.
Cut prohibitive taxes and marginal rates now, tomorrow, and forever. These tax
cuts will depress revenues to varying degrees in the short-term, but increase
them in the long-term. After implementing those tax cuts, some may try to
reduce government spending. That would be fine. Or the government will keep
spending money as quickly as ever. That’s O.K. too. Because deficit levels and
the percentage at which federal spending increases pale in comparison to how
healthy the economy is. I’d love to have $600 billion deficits if it meant
that the unemployment falls below 4%, depressed areas around the country turn
around, and tens of millions of individuals find opportunity where once they did
not exist. So when Mr. Antle says, “most supply-siders were content to lower marginal rates and hope that the resulting economic growth would generate enough revenue to continue funding the welfare state,” he’s right. It should stay that way, too. For the long-term interests of the country, I submit it’s the best way to go.
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