Fiscal Responsibility?
There are two ways of defining fiscal responsibility when it comes to the federal budget. One was presented by the New York Times in its lead editorial on October 21 titled “Why Taxes Have to Go Up.”
The Times editorial was deeply disturbed by a federal budget deficit of $415 billion in FY2004, compared to a budget surplus of $236 billion before President George W. Bush took office in FY2000. While offering no cogent economic argument in support, the Times nonetheless sees nothing but economic doom resulting. What’s particularly instructive is what the paper’s editorial page proposes doing about the deficit.
Naturally, the Times offers nothing about reducing the size of government, or even restraining its growth. Instead, the editorial talks a lot about how to increase taxes. It does not like President Bush’s tax cuts, and proclaims that making this tax relief permanent is “ill-conceived.” To the contrary, the editors like Kerry’s class warfare economics of hiking taxes on upper-income earners, but they want to go much farther. The Times’ would prefer tax increases for the top 25 percent of income earners, along with an increase in the gas tax and “a new tax on industrial carbon emissions.”
So, in summary, the Times’ agenda for deficit reduction is to continue expanding the size of government, and imposing a series of enormous tax increases that will dramatically raise the costs of energy and severely restrain entrepreneurship, investment, economic growth and job growth. Given Kerry’s various agenda items to expand the size of government, I wonder how far off the Times’ tax plan is from what a President Kerry would actually try to impose.
Is that real fiscal responsibility? I don’t think so.
True fiscal responsibility isn’t necessarily about balancing government’s revenues and expenditures, as if that had some magical economic meaning. Instead, it starts with the premise that government action should only be a last resort. Fiscal responsibility means being responsible to the taxpayers. It requires narrowing government to a few, limited endeavors, and doing those jobs as well as possible. Elected officials have a responsibility to keep taxes as low as possible because, contrary to the Times’ views, government does not have the first claim on the earnings of businesses and individuals. Those earnings belong to business owners and employees. The government should take some of those earnings only when absolutely necessary.
Who is the more fiscally responsible presidential candidate? Well, neither President Bush nor Senator Kerry has shown much interest in restraining the growth of government spending. On taxes, Kerry calls for tax increases, which will only feed additional government expansion, while the President is focused on making the pro-growth tax relief measures of 2001 and 2003 permanent.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
