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of Washington is wringing its hands over the allegedly dwindling
budget surplus. The Washington Post reported on Monday that
we may soon see a return to the politics of the "deficit-ridden
years of the early- and mid-1990s." Senate Budget Committee Chairman
Kent Conrad says that the shrinking surplus is due to "Bush's fiscal
mismanagement" which has "driven us into a ditch." He predictably
advises cancellation of the tax cut passed last month. Is there
any time that Conrad and his Democratic cronies in the Senate think
is the right time to cut taxes?
The Left is on the political warpath armed with these new budget
numbers. The strategy of Tom Daschle et. al., is to run spending
through the roof (with the complicit aid of a lot of big spending
congressional Republicans), then to blame George W. Bush for imperiling
Social Security with his "giant tax cut."
Hold on here. How can the tax cut be blamed for slow economic growth
and shrinking surpluses when we haven't even gotten a dime of tax
cuts yet? This is like blaming rain on umbrellas.
Let's back up and get the facts straight. The tax surplus isn't
evaporating. Even with the updated and less bullish budget estimates,
we will still run at least a $150 billion surplus this year. A few
years ago that kind of budget picture would have been regarded as
fiscal utopia. Now it's true that virtually the entire surplus this
year will be a result of payroll taxes exceeding Social Security
funds spent. Nonetheless, that's an imprudent amount of excess taxes
for the government to be collecting in a flu-ridden economy.
Is the problem with the budget a shortage of tax revenues? Hardly.
For the past 4 years federal income-tax revenues have been flooding
the federal treasury as if pumped in through a fire hose. We averaged
8 percent federal revenue increases per year in 1998, 1999, and
2000. Since 1996 federal tax receipts have risen by $600 billion
aided by a surge in capital-gains receipts after the 1997 rate cut.
The $600 billion increase in taxes is more money than the entire
GDP of most nations. Even after the Bush tax cut, the federal tax
bite will remain higher than at anytime since 1980. Repeat after
me: There's no drought in revenues.
But there is gluttony on the spending side of the budget ledger.
In fact, over the past 3 years Congress has been on the most expensive
shopping spree in Washington since LBJ was in the White House. Last
year federal appropriations rocketed skyward by almost 9 percent.
(This was in a year with negligible inflation.) This year, I've
been predicting a 7 percent growth rate in spending.
Over the past 3 years the total number of pork-barrel projects
has more than doubled. It used to be that Congress spent $20 or
$30 billion a year on parochial projects like skating rinks, convention
centers, parking garages, dams, and hometown university grants on
honeybee mating behavior. This year, hold onto your hats, the total
cost of requested pork projects has reached $280 billion. That comes
to $3,800 this year for every family of four in America. And yet
now we're told that Congress can't afford to mail a $300 rebate
check to folks. Sorry, we've got to pay for that new Robert C. Byrd
light rail system in Morgantown West Virginia.
If Congress would just cut out the Jimmy Dean sausages from the
budget, we could all get a rebate check with an extra zero tacked
on.
Yes, Virginia, there is a budget emergency in Washington. It's called
spending. Here're some examples. Education funding is expected to
double over the next five years. Agriculture spending could hit
an all-time record of $50 billion in 2002 — making farming
the most subsidized occupation in America. The energy budget will
rise to its highest level since the Carter administration.
It gets worse. The prescription drug benefit program that is sure
to pass later this summer or fall carries with it a price tag of
$300 billion over 10 years. Runaway entitlement spending created
the budget crisis in the first place. Now we're into the game of
adding new entitlements — for seniors, no less, the wealthiest
of all age groups.
The budget surplus is shrinking for two reasons: too much spending
and too little economic growth. Tax cuts help solve both problems.
Growth oriented tax rate reductions tear down the obstacles to investment,
capital formation, and prosperity. Tax cuts also deprive Congress
of funds that would otherwise be spent. This is precisely why the
left is so obsessed with scaling back the Bush tax cut.
And this is why America's fiscal health and Bush's reelection requires
a parade of more tax cuts (especially a capital-gains reduction),
and fighting to retain the one that we just passed.
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