December 20, 2006

Don’t Feed the Beast, Starve It

Posted in National Politics at 7:13 pm by Paul Smith Jr’s Political Diary sent this note out on Monday:

The latest very good data on the federal budget last week didn’t get any attention from most of the media budget reporters, for whom good news is no news. Federal revenues are growing at a brisk pace, up 9% so far in the first two months of fiscal year 2007. That follows 11% growth in 2006 and 12% in 2005. Over the past 26 months, federal tax collections have grown faster than in any 26-month period in American history.

The fastest growth has been in corporate and personal income taxes, with the richest 1% of Americans now paying 34% of all federal taxes, an all-time high. Even better, federal spending is finally beginning to slow down. Expenditures are up 5% this fiscal year — still twice the inflation rate, but half the 10% growth we’ve seen since 2004. And the budget Congress approved last week slows spending growth to about 3% or 4% at least through February of 2007. Plus, no earmarks were included in that bill. Hooray.

This was a rare shining moment for the departing Republican majority and now puts intense pressure on Democrats, who advertised themselves as “fiscal conservatives,” to keep spending in check. If the Democratic Congress follows through, expect the budget deficit to plummet. We finished fiscal 2006 with a $248 billion deficit. David Malpass, chief economist at Bear Stearns, says the fiscal 2007 deficit could end up below $150 billion.

So what exactly is Bob Rubin talking about? The former Clinton Treasury Secretary, a Democratic elder statesman on fiscal policy, continues to lament the Bush investment tax cuts, enacted in 2003, though the Bush policy has yielded a gusher of new income tax revenue.

“You cannot solve this nation’s fiscal problem without increased revenue,” Mr. Rubin said in a speech last month, suggesting higher taxes should be Washington’s No. 1 priority right now. Mr. Rubin may be trying to shore up his legacy with the liberal media or preparing the way for a Hillary Clinton spendathon, but the numbers couldn’t be clearer: The nation has revenues aplenty; all that’s required is modest spending restraint from Congress.

They followed it up with this correction today:

The budget news just keeps getting better. The increase in federal tax receipts was 14.6% in fiscal 2005 and 11.8% in 2006, not 12% and 11% as PD reported on Monday. Sorry for the miscue.

I’m really not seeing this as something conservatives should be happy about.

While it may help bring liberals and other big-government types around to seeing the wisdom of tax cuts and does support the notion that Americans are overtaxed, it means that the government is taking still more money from Americans than it was before. Giving the spenders in Washington more money to spend will only result in them spending more money.

Our tax policy should reflect two goals at the present time:
1) letting the people keep more of their own money
2) cutting off the growth of revenue so that government doesn’t grow as large

A government with a lot of money to spend will find ever more creative ways to spend it and interfere with our lives. To promote the cause of freedom, we need to reduce the size of government and the only way to accomplish to reduce the amount of money the government has. Giving the government more money will not help us achieve the goal of limited government; we need to starve the beast or it will keep growing.

There’s another advantage to keeping government small as well: it focuses the attention on the things government should do, the things it needs to do well. As with any person or organization, when the government tries to do too much, it loses focus and doesn’t do much well at all. Focusing on the things that really matter is a good approach to take for an organization that’s lost it way. Government needs to take the same approach right now: it’s trying to do too much and doing the things that it should.

So, starve the beast and make it run the way it should. Don’t celebrate increased government revenues, let the people keep their money.

Crossposted at



  1. donviti said,

    shouldn’t the proportion of taxes being paid by the wealthiest 1% be commiserate with the amount of income they make?

    so if corporations and the wealthy 1% are paying on 34% of the taxes who is paying the other 66%? don’t the top 1% income earners earn over 50% of the income in this country?

    How is that fair?

  2. “don’t the top 1% income earners earn over 50% of the income in this country?”

    No, they don’t. According to the US Census 2005 Economic Income Data, the top five percent earn about a third of total US income. The top 2.5% earn about a fifth of the total. So the top 1% earn much less than 34% of the total income in the US, but pay 34% of the taxes.

    Is that fair? Maybe. I’d much rather take taxes from those who can afford it, but it is also possible for tax regimes to be too progressive and stifle advancement.

    What I find encouraging is that federal tax revenues are way up in absolute terms. The Treasure took in $2.4 trillion last fiscal year and $2.1 trillion in FY05, both are above the previous high of $2.0 trillion in FY2000. With the current rates of revenue increase, all we need to do is put a hold on spending and we’ll be back in the black.

Comments are closed.

%d bloggers like this: