Cutting spending

I really do believe that many contemporary liberals just do not want to see any cuts in spending. For instance, TNR is having a fit over the idea that the Bush tax cut was a good way to stimulate the economy. Their main argument is that the tax cut could have been designed to help poorer workers such that it could have been temporary and had similar benefits. This would have greatly reduced the long term budget implications of the tax cut.

Perhaps the tax cut could have been designed better, I will concede that point. But there are other reasons a permanent decrease in the tax rates are a good thing. All else being equal, lower tax rates are good for long term economic growth. It is not a coincidence that America grows much faster than European countries: we have lower taxes and less burdensome regulations than they do. The writers at TNR will probably respond that this is flawed because it ignores the long term budget implications of the current tax cut, which will raise interest rates mitigating the effects of the tax cut. This is true. If nothing is done then the budget deficit will eventually drive up interest rates. But for me, this is a call to decrease spending, not for raising taxes. So far Bush has accomplished one half of the agenda, he has cut taxes. Unfortunately, he has not reigned in domestic spending. Spending must be contained and welfare programs must be reformed to fix the long term fiscal solvency of the country.

As I mentioned below, one last retort to this idea is to claim that the government needs to step in and pay for health care insurance. I agree that some sort of government sponsered catastrophic health insurance program needs to be implemented. But this must be coupled with market reforms. A combination of efficient pooling and catastrophic health insurance coverage will go a long way to mitigating this problem. How will we pay for it? Well, for one, we can repeal this prescription drug benefit and redesign it to help the poor and not simply everyone. We can cut wasteful spending that is inefficient and bureacratic. The states should get involved and help out as well. And if this is not enough then we can talk about repealing segments of the tax cut.

But we should not be blind opponents to permanent decreases in the tax rates. Conservatives recognize that welfare, while necessary and useful, is not to be deified and can be dangerous. Furthermore, we know that if money stays in the hands of the politicians, it will be spent. There is no denying this. TNR and conservatives should be having a constructive dialogue on how to compromise on these two divergent political viewpoints.