Opinion Journal has a great piece today.
Apparently, former Treasury Secretary Robert Rubin is asking Democrats to raise taxes. He says, "I think if you were to increase taxes right now, you would have probably about zero negative effect on the economy."
The Wall Street Journal replies, "We
suppose it's reassuring that Mr. Rubin now thinks the economy is strong
enough to withstand a tax increase. That's a switch from his opposition
to the 2003 Bush tax cuts, which he predicted would bust the budget and
do little for growth. The U.S. economy proceeded to grow by an average
of nearly 4% a year for three years following mid-2003, until the
recent slowdown due largely to the housing slump.
Everyone makes mistakes, but raising taxes amid a housing decline doesn't sound like brilliant policy to us. Depending on inflation signals in the coming weeks, the Federal Reserve may not be done raising interest rates. The best hope for avoiding a recession next year and into 2008 is that strong corporate profits and the tight job market will lift business investment and consumer spending enough to offset the impact of tighter monetary policy. The last thing the economy needs now is a tax increase, too."
For help, let me add that an economic slowdown egged on by tax 'increases' would cause profits to slump, people to be laid off, therefore less consumer and corporate spending which leads to less goods and services being purchased and therefore less people (labor) needing to provide or manufacture goods and services. What would that do to revenues into the government? That would decrease revenues into the government as less people would be earning to be taxed and profits would be down and therefore less available to be taxed.
Additionally, the Wall Street Journal raises the question, "And what are the urgent "fiscal problems" that justify a tax increase, anyway? As the nearby chart shows, federal revenues in fiscal 2006 were 18.4% of GDP, higher than the 18.2% post-1965 average. In October, the first month of fiscal 2007, revenues rose by 12% from a year earlier."
That last sentence might be a little confusing. It's referring to a 12% rise in nominal dollars not percentage points. This nominal dollars increase has been a double digit increase in revenues for 3 years now. So, what brings in more revenue into the government? A strong economy does. More people working, higher profits, more people spending all lead to more revenues into the government.
Economic prosperity gives our government the ability to focus on:
1) National security
2) Environmental issues
3) Education
4) Health
Not that I agree with those priorities on a national level but I'm trying to appeal to liberals. It is good that we reduce dependency on government and are able to focus on other priorities right? When dependency increases it reduces government's ability to focus on anything else but the dependent class of people.
