Tax Cuts Are Not Enough To Save The Economy

by | Jun 3, 2011

The Democratic Party operates on the following assumptions: 1. Social programs such as Medicare and Social Security are entitlements, at least to certain members of the population. They can and must be maintained and expanded at all costs. 2. The best way to finance these programs is to increase taxes: Increase income taxes on those […]

The Democratic Party operates on the following assumptions:

1. Social programs such as Medicare and Social Security are entitlements, at least to certain members of the population. They can and must be maintained and expanded at all costs.

2. The best way to finance these programs is to increase taxes: Increase income taxes on those deemed “rich,” and impose a national sales tax on the general population.

3. The economy will improve only with government “investment.”

Essentially, the more money that government puts into the economy, the more the economy will prosper, grow and thrive.

The Democrats are wrong about everything. First of all, people are not entitled to have retirement and health care benefits given to them. In a free country, people are entitled to purchase their own retirement and health benefits. They are entitled to do so in a marketplace where government has refused to interfere, outside the context of fraud. The more choices people have, and the more open competition there is in the market for these services, the more affordable these products/services will tend to be, at least compared to what they cost in a restricted or government-controlled market.

The high value people place on these services does not make them entitled to them. There’s no such thing as “economic freedom” or “economic justice.” These notions are rationalizations for denying freedom or justice to someone else. For every person to whom wealth is transferred, someone else is being denied his rights and freedom under the Constitution. It’s discrimination in its purest, most irrational form. Needs do not create rights.

Taxes and government spending do not grow the economy. All money spent by government is created by the private economy. The plainest, biggest and most recent example of this is the gigantic economic “stimulus” package passed in 2009. Unemployment has gone up since that time.

Economic growth has been minimal to non-existent, and there has been no noteworthy improvement in the economy since that time. Gas and food prices are going up, and there are early indications that inflation is on its way back. This has always happened when government has expanded the amount of currency put into the economy, for political reasons.

The Republican Party, to hear how they fight with the Democratic Party, operates on totally opposite principles. Correct? Not so much. The Republican assumptions are as follows:

1. Social programs such as Medicare and Social Security are entitlements, at least to certain members of the population. They should be expanded when possible, or at least maintained, at just about any cost. They should be reformed as necessary to make them function more rationally and economically, to avoid bankruptcy.

2. Taxes should stay where they are, or even go lower.

3. Tax cuts are the engine of economic growth. So long as you cut taxes, it doesn’t matter how much you spend. However, it is preferable to cut spending. Balanced budgets also fuel economic growth.

In some respects, Republicans make more sense than Democrats. They’re not wrong about everything. Tax cuts are good for the economy, and they’re also just. They allow people to keep more of what they earn.

People are free to keep their wealth but also invest it, which the self-interested motive of profit leads most people with money to do.

This ends up being good for the economy, and is, in fact, the only way jobs can be created and the economy can be expected to grow.

However, tax cuts are not enough. If this were the case, the tax cuts of the Bush Administration would have prevented the disastrous economic collapse and sustained recession of 2007 into the present. Clearly, the government is too involved in the economy, tax cuts or not. Government controls the currency and government controls major sectors of the economy, including health care. In doing what it wants for short-term political gain, and for favored constituency groups, government has the power to hinder and even destroy.

Government has not (yet) destroyed the American economy, but it has hampered it to a point of outright stagnation for nearly five years now.

People are actually saying it’s a good thing the economy is “stabilized,” but how is America to continue to prosper if it does not economically grow?

Democrats answer that we need more socialized programs and higher taxes.

Republicans say no to those things, but they offer no alternatives other than tax cuts. In fact, they’re not even proposing new tax cuts. Lately, their main answer appears to be: Balance the budget. Like tax cuts, balancing the budget is a good thing. But if you seek to balance the budget outside the context of anything else, you set yourself a trap.

You cannot balance the budget without confronting Medicare and Social Security, something a few Republicans are willing to do. Republicans incorrectly concede that everyone is entitled to Medicare and Social Security. They also, unlike Democrats, acknowledge the programs are going bankrupt. What to do? Reform them, they say. This is like giving an alcohol or cocaine-addicted relative more money. We have to look at why these programs are going bankrupt. They’re running out of money because they unjustly transfer money from those making it to those who are allegedly entitled to it. They do this on the premise of, “When you’re older, your turn will come.” But clearly it will not, and cannot.

Particularly if jobs continue to disappear and inflation continues to rise, as they are under existing economic policies.

You can’t say, “Balance the budget,” and assume all will be well. It won’t be. This is probably the main reason Republicans cannot deliver on their promise to balance the budget, or even reduce the deficit at all.

Balancing the budget, like tax-cutting, are necessary goals. But they don’t supply the vision required for a free and prosperous economy.

That vision is very simple: The freedom of individuals to exercise their rights. Individual rights are moral, just and practical. Capitalism is the system of no economic policy other than government stays out of the way. When you leave everyone free, the best, brightest and most productive are free to prosper as well. The most prosperous tend to bring everyone along with them, without any hint of self-sacrifice on anyone’s part. That’s how America got this far; and this is the only way it will ever go any farther.

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Dr. Michael Hurd is a psychotherapist, columnist and author of "Bad Therapy, Good Therapy (And How to Tell the Difference)" and "Grow Up America!" Visit his website at: www.DrHurd.com.

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