 n
the wake of Sept. 11, Congress and the White House seemed united on
the need for economic stimulus. The economy was, in all likelihood,
in recession on that date, with the added costs and fears resulting
from terrorist attacks pushing it lower still. Yet, more than two
months later, the so-called stimulus package remains mired in partisan
wrangling, with little reason to believe that any real stimulus will
be forthcoming.
A key problem
is that liberals simply refuse to accept the idea that meaningful
economic stimulus can only come from the private sector. It is private
businesses, both large and small, that employ the vast majority
of workers. These same businesses provide almost all the investment,
as well — plant, machinery, equipment, research and development,
and the like. Together, they originate almost all of the gross domestic
product, the combined total of all the goods and services produced
in the United States.
Individuals
also play a critical role. As entrepreneurs, they form the businesses.
As innovators, they get the ideas for new products and processes.
As inventors, they translate ideas into tangible goods and services.
And as savers and investors, they provide the capital that the business
sector needs to operate, and direct that capital through financial
markets to where it has the greatest economic value and will earn
the highest return
Although anyone
can participate in this process, the fact is that the preponderance
of those who do are wealthy. Indeed, the main reason why they are
wealthy is because they engaged in it. Contrary to popular belief,
most wealthy people in America made it themselves through hard work,
risk-taking, and self-sacrifice — not inheritances.
Yet, despite
the fact that private businesses and well-to-do individuals are
the basic sources of economic growth, the "stimulus" plans
being debated in Congress do virtually nothing meaningful for either
group. The centerpiece of both the Republican and Democrat plans
is a tax "rebate" for those who pay no income taxes, along
with a lot of new "pork barrel" spending and tax gimmicks
for the favored few with political clout.
The idea of
tax incentives for those who are the true sources of economic growth
and progress seems to be off the table. Whenever anyone suggests
the possibility of cutting the top income-tax rate, the capital-gains
tax, or other taxes on saving and investing, they are accused of
being plutocrats who favor the rich over average Americans. Hardly
anyone in politics seems to have the guts to come out and say that
if we want to really help average Americans, we have to first help
the businesses that employ the workers and pay the wages —
and those who save and invest and take risks to provide capital
to those businesses. In short, the politics of class warfare trumps
stimulus.
It is probably
too late to enact a stimulus plan that will actually stimulate the
economy. But it is still important that those who know better fight
the good fight. The class warfare crowd should never be given a
pass by those who know that the ultimate result of caving in to
them will be to kill the golden goose.
One useful
source of ammunition against the class warriors comes from the Congressional
Budget Office. It has just published a new study, "Effective
Federal Tax Rates, 1979-1997," which shows that the wealthy
already shoulder more than their fair share of the federal tax burden.
And contrary to popular belief, the tax burden on the productive
class has been rising, not falling.
According to
the CBO, those in the top 20% of the income distribution now pay
27.4% of their total income to the federal government, up from 23.7%
in 1983. And those at the very top — the top 1% of households
— have seen an increase in their effective tax rate from 26.8%
to 32.7%. As a result, the share of total federal taxes paid by
the top quintile has risen from 56.9% in 1983 to 65.4% in 2000.
The share paid by the top 1% has risen from 13.9 percent to 23.1
percent.
Concomitantly,
the tax rate on those with modest incomes has fallen almost continuously.
Those in the bottom quintile now pay just 5.3%, versus 8.1% in 1983.
Fortunately
for Congress, the Federal Trade Commission doesn't investigate its
false advertising claims. It is free to call some legislation a
"stimulus" bill even when it won't stimulate anything,
because none of the benefits go to those who produce, save, and
invest. Unfortunately, it looks like that is what we are going to
get.
|
