For all the hoopla about President Obama and Senator Paul Ryan’s budget proposals, the debate ignores two essential facts: Tax increases cannot save us, and spending reform is crucial.
Tax revenues correlate strongly with the size of the economy, not tax rates. Tax rates are subject to diminishing marginal returns; increase them too much, and the government receives less tax revenue than with a lower rate.
The idea that tax increases can balance the budget also relies on a weak foundation. It assumes the government sector is starving in favor of the economic sector. A review of tax receipts from only a decade ago renders such a claim laughable. The problem isn’t a lack of funding; it’s a problem of inefficiency and activity.
It also misses the elephant in the room: If the government spent only how much tax revenue it received, no budget problem would exist. The government budget is determined by the prevailing concept of what government should do rather than any budgetary restraint.
Since President Bush, budget deficits have been in excess of $1 trillion. Any increase in tax revenues will increase government activity, not decrease the budget deficit or national debt.
If the government desires more tax revenue to fiddle away, it should encourage economic growth because productivity gains increase tax revenue more than any arbitrary tax increases.
Taxation, however, proves irrelevant in the long run. Government spending is unsustainable at current levels. The United States cannot continue its military policy and entitlement programs with any semblance of reason.
Military spending must be drastically curbed and the interventionist foreign policy needs to be altered. Encourage private investment in Afghanistan and Iraq instead of bombing them, providing daily a reason to hate the United States.
Policy should be reformed to focus on national defense and strongly reject nation-building; at that point, we might notice success for once.
More than military policy, social security and Medicare reforms need to be implemented. A promising step would be to allow individuals to opt out of social security. The government cannot be a caretaker; it is an institution of force and law, not welfare and effectiveness.
When government is wielded as a paternalistic protector, liberty is curtailed and the paternalism is counter-productive. Any government failure, rather than being recognized as a limit of what government can accomplish, is heralded as evidence of the necessity of increased funding.
Obviously, dependents on social security and Medicare should not be cut off and left to fend for themselves. But the development of dependency on the political system should be extirpated. Healthy society inculcates self-reliance and charity, not dependence on a welfare system.
An atmosphere encouraging personal saving and investment that cares for the poor and indigent functions more smoothly and supports stronger communities than collective action implanted in politics.
Perhaps a stronger argument for entitlement reform: Not only is it inefficient and unstable, but it appears more likely that, when our generation retires, we won’t have any government program to rely upon.
Anthony Hennen is a junior studying journalism and a columnist for The Post. Do you think tax increases can save us from economic oblivion? Email Anthony at ah316808@ohiou.edu.
