Many of us never thought that the Republicans would hold tough long enough to get President Obama and the Democrats to agree to a budget deal that does not include raising income-tax rates. But they did — and Speaker of the House John Boehner no doubt deserves much of the credit for that.
Despite the widespread notion that raising tax rates automatically means collecting more revenue for the government, history says otherwise. As far back as the 1920s, Secretary of the Treasury Andrew Mellon pointed out that the government received a very similar amount of revenue from high-income earners at low tax rates as it did at tax rates several times as high.
Advertisement
How was that possible? Because high tax rates drive investors into tax shelters, such as tax-exempt bonds. Today, as a result of globalization and electronic transfers of money, “the rich” are even less likely to stand still and be sheared like sheep, when they can easily send their money overseas, to places where tax rates are lower.
Money sent overseas creates jobs overseas — and American workers cannot transfer themselves overseas to get those jobs as readily as investors can send their money there.
All the overheated political rhetoric about needing to tax “millionaires and billionaires” is not about bringing in more revenue to the government. It is about bringing in more votes for politicians who stir up class warfare with rhetoric.
Now that the Republicans seem to have gotten the Democrats off their higher-taxes kick, the question is whether a minority of the House Republicans will refuse to pass the Boehner legislation. Boehner’s plan could lead to a deal that will spare the country a major economic disruption and spare the Republicans from losing the 2012 elections by being blamed — rightly or wrongly — for the disruptions.
Is the Boehner legislation the best legislation possible? Of course not! You don’t get your heart’s desire when you control only one house of Congress and face a presidential veto.
The most basic fact of life is that we can make our choices only among the alternatives actually available. It is not idealism to ignore the limits of one’s power. Nor is it selling out one’s principles to recognize those limits at a given time and place, and get the best deal possible under those conditions.
That still leaves the option of working toward getting a better deal later, when the odds are more in your favor.
There would not be a United States of America today if George Washington’s army had not retreated and retreated and retreated, in the face of an overwhelmingly more powerful British military force bent on annihilating Washington’s troops.
Later, when the conditions were right for attack, General Washington attacked. But he would have had nothing to attack with if he had wasted his troops in battles that would have wiped them out.
Similar principles apply in politics. As Edmund Burke said, more than two centuries ago: “Preserving my principles unshaken, I reserve my activity for rational endeavors.”
What does “rational” mean? At its most basic, it means an ability to make a ratio, as with “rational numbers” in mathematics. More broadly, it means an ability to weigh one thing against another.
There are a lot of things to weigh against each other, not only as regards the economy, but also what the consequences to this nation would be if Barack Obama were to get reelected and go farther down the dangerous path he has put us on, at home and abroad. Is it worth that risk to make a futile, symbolic vote in Congress?
One of the good things about the tea-party movement is that it resisted the temptation to actually form a third political party, which has been an exercise in futility, time and time again, under the American electoral system.
But, if the tea-party movement within the Republican party becomes just a rule-or-ruin minority, then they might just as well have formed a separate third party and gone on to oblivion.
Writers can advocate things that have no chance at the moment, for their very writing about those things persuasively can make them possible at some future date. But to adopt the same approach as an elected member of Congress risks losing both the present and the future.
Now you just need Rush Limbaugh to endorse it and the GOP will cut next to nothing and give Obama another $1 trillion, and somehow the Republicans will magically win the White House, Senate, and House in 2012.
"Many of us never thought that the Republicans would hold tough long enough to get President Obama and the Democrats to agree to a budget deal that does not include raising income-tax rates."
I am sorry Dr. Sowell, but I never thought that the debt ceiling debate was going to end up with raised taxes back when we won 63 seats in November. We were all told that the debt ceiling debate would result in cutting "trillions not billions", and now we are supposed to be happy because the Republicans aren't raising taxes?
"...and now we are supposed to be happy because the Republicans aren't raising taxes?"
Yes. Because that's all we're going to get at this point. There is still much ground-prep work to be done with the public and four days before our perceived scheduled default is no time to be doing it. Accept where we are and as has been oft stated, live to fight another day. This isn't over.
They should have told us to expect that this is the best they could do, but they created a pledge and went to a hardware store to unveil it, and also said they would unveil spending cut legislation week after week. They lied big time in order to get 63 House seats, that is a fact.
Their promise has gone from "we'll cut spending" to "we won't raise taxes", and now the Republican voting base is supposed to shut up and "eat our peas".
If not raising the debt limit now will cause a credit rating downgrade, raising it the day after that happens will cause it to go back up. But let's wait and see if that really happens. Either the credit rating agencies are colluding with Democrats or they're independent. And if they're independent, an unbiased analysis would cause a lower credit rating for increased debt instead of maintaining the same level. That's what we're up against -- maintaining the status quo or spending more.
Let $14 trillion be the limit. In 2006 $9 trillion was enough. What can't we live with now that we didn't then?
TARP and Stimulus money were supposedly 1 time expenses. There's $2 trillion we shouldn't be spending again. Then there's the Iraq & Afghan wars -- winding down another $1 trillion in the bank, and we're almost there.
Obamacare is another $2 trillion, cut that unfunded legislation. We're bad to a reasonable level already can we can still work on No Child Left Behind and Medicare Part D. These will require legislation, so they might have to wait until 2013.
How about Sarbanes-Oxley too while we're at it, and prosecuting some banks and insurance companies & killing off some GSEs.
Once the rule of law is restablished, ridiculous regulation is removed, and the corruption (both private and government) is weaned out of the system, the economy will take off (not just Wall Street) and you'll start seeing some tax revenue increases (without raising rates.) That'll really help the government budget too.
With all that extra money, we can start paying down the debt, and the lower interest payments will free up more money to spend (or give back to the people.)
Most, if not all of the points in your manifesto sound great; the only problem is putting them into action. You forget that the Democrats control the Senate and the White House.
Leadership requires more than just good ideas and the will to win. Without pragmatism - and a bit of humility - the tea party is just another obnoxious fad.
There are two parties for a reason, and the US is divided between Red State and Blue. Without a healthy respect for compromise, the GOP will never accomplish anything.
If the tea party wants to draw a line in the sand, it should realize that all it is really doing is marginalizing itself.
It's time to wise up and show the best qualities of a conservative: sobriety, humility, and pragmatism.
Let's follow a similar scenario; I am the owner of a construction company, (I'm also the sole bread winner), if I want to upgrade the family's house by purchasing a $300,000 house but my wife who is half my size says she will only agree to place her signature on a $150,000 mortgage guess who wins?
Dr. Sowell offers sage advice to those out there that advocate the Captain Ahab approach to policy making.
We need to win what we can now and live to fight another day. We've made the point to the public (you know, the 40% or so independents out there who decide the elections and don't have the time or inclination to get involved in the minutiae of DC politics) and put a lot of day light between the conservative position of a limited government and the liberal position of the expansive state.
Do you really want to sacrifice that now for nothing more than a symbolic showing of your "principles"?
I'd rather win the long war, thank you very much...
The curtain has been drawn back on both the main stream media and their darling, Mr. Obama. The entire world can now SEE the profligacy hoisted upon a still naive nation willing to try, once again, the poison called socialism. There's no place to hide from the fiscal damage initiated by Reid/Pelosi in 2008 and the overtly anti-American policies of the Obama administration. No place to hide, no place to run - not even the left wing media can mask their massive fiscal harm.
It may take a while, but I believe in the spirit of the American people, of our jealous passion for freedom - we will survive these statists!
Thomas Sowell is a great thinker. But in this article he makes the cardinal mistake of believing that slowing down incrementalism will somehow lead to the reversal of socialism. Why not get together while you control the House and propose what is good and right instead of what is expedient?
Yes, the dishonest Democrats will attack you and say you are starving grandma. But they will do that no matter what you do, with half measures or full measures. I’m a bit disappointed in Dr. Sowell for giving such a weak argument.
The difference is that Dr. Sowell knows something about finance and economics and knows what a debacle will represent the US not meeting its financial obligations. He is not alone, the WSJ and many other conservative economists believe that the Boehner plan is the way to go. I don't know how Tea Parties believe that puting the country in default will be a victory. They might have an easy time explaining this in hobbitland but not to America.
@fijaaron Even in hobbitland they teach math. $507 billion Treasurys maturing in August against $172 billion revenues. Not even counting Social Security and other obligations of the US government. Do the math.
I'm almost half-way through Dr. Sowell's phone book-sized "Basic Economics" (a must-read, I might add). This man is so far out in front of everyone else in the category of "making sense" that 2nd place isn't even meaningful.
Dr. Sowell makes a cogent, strategic argument. And I love the Revolutionary War analogy. The real problem is that the Tea Party is not convinced that the Establishment is on the side of the patriots. December's phony deal didn't help, either. The Tea Party may go along with this second strategic retreat, and the next one that will be required after the Senate rejects this bill anyway. But, when the Republicans take the Senate and the Presidency, will the Establishment finally make REAL cuts? I hope so, but I don't really expect it ...
We can’t keep living off of borrowed money. And Sowell’s General Washington analogy is not apt. Washington wasn’t surrendering some of his troops at every encounter hoping that this would lull Gates into eventual defeat.
As for putting the country in default if we don’t engage in more reckless borrowing, does anyone perhaps see the illogic of this? The debt itself is the problem.
We will pay the piper today or tomorrow. All we are doing now is kicking the problem down the road. It’s as if General Washington had declined to fight the British and said “Oh, that will surely bring disaster onto our country. Let’s appease them now. Maybe somebody someday will fight for what is right.”
This is political suicide. Anything other than Cut, Cap, and Balance is giving Obama a lifeline. This will become the McConnell Plan in NO TIME. We are screwing ourselves....
I love Mr. Sowell, but I profoundly disagree. We are aiming the gun at our collective foot, and at our nation's heart in the long run.
Republicans need to play offense for a change and stop reacting and letting the Democrats constantly set the narrative!
