How Much More?

Democrats in Congress are pushing for more "stimulus" money to aid a still faltering economy. The $787 billion allocated earlier this year has failed to bring about the results hoped for by the administration and Congress. They hope to get a bill to Obama by January. In defense of the original stimulus package, some in Congress claim it was a success, though in a way "not as highly visible as a lot of people would like" said Rep. Betty Sutton D-Ohio. What's the point of success if it is unnoticed? Others, such as Rep. Barbara Boxer decried the hundreds of billions already spent as "playing around the edges" and urged more government "investment." Still other members of Congress were described as "disappointed" that more wasn't spent in the earlier package and urged "substantial" spending in a new bill. Evidently, $787 billion is not as much money as it used to be. This all seems to be just another way of saying that the original package did not achieve results that reflect positively enough on those who voted for it. One can only speculate how the economy would respond if that $787 billion was placed in the hands of consumers.

Because the original stimulus package was not nearly as effective as hoped, it is proposed that tens of billions of dollars more be spent. If spending $787 billion doesn't work, the obvious solution is to spend even more. According to the White House, they are willing to accept the massive debt that will result from all the spending if new jobs are created. If people get jobs they will stop fretting over the economy and the government can get back to passing national health care. The Democrats don't seem particularly interested in the misery that all this government spending will someday will bring. Why should they be? Chances are, if the economy collapses under massive government spending, people will turn to the party which most sympathizes with their plight and offers to alleviate their misery: and that party will be the Democratic Party.

There is growing concern by some in Washington that the public will begin to turn on them if there is not significant job growth. Obama and the Democrats in Congress seem willing to spend however much money they feel is necessary to, if not create jobs and stimulate the economy, at least convince the public that it will. If the economy rebounds and new jobs are created, it is hoped by many in Washington that the huge increase in government debt - projected to rise this year to $1.58 trillion - as well as the expansion of government, (a cost that will not go away when the economy recovers), will be forgotten or overlooked by a grateful public. It is even believed by some that when good times return, and after national health care is passed, the government will finally address the deficit.

If the economy improves, there is little chance that people will be disappointed with a larger government and greater debt. They will have jobs and they will be happy, oblivious, (at least for the time being), to greater government control of the economy and the crisis that is in store when the debt reaches critical mass. No doubt Obama is hoping that day will not come for at least another seven years. Woe to whoever is president when that day comes.

Tax Reform Minutiae

Lost in the Health Care Debate and budget proposals in Washington are the minutiae of the tax proposals in Congress. In the various tax bills under discussion in Washington are issues such as the proposal to raise gasoline taxes to 40 cents a gallon. Also under discussion is a proposal to triple excise taxes on gun ammunition, and raise the beer tax; two items unlikely to affect liberals. There are proposals to increase enforcement of the tax code through more "aggressive activity" on the part of the IRS. Limiting charitable deductions is another policy under review. The list is a long and indeed tedious one. While most of the tax proposals and adjustments are not very remarkable in themselves, the cumulative effect on the economy will be felt. Taxes, no matter how obscure, always affect someone.

Interestingly, in Texas the Plano city council is discussing a proposal to grant tax breaks to Pizza Hut of America Inc. to encourage its relocation to their city in order to spur economic activity. Does Plano know something the federal government doesn't? Unlikely. It has long been conventional wisdom that decreasing taxes encourages economic activity and promotes desired behavior while increasing taxes discourages them. That is why the government is forever manipulating the tax code. They know that raising taxes on cigarettes, gasoline, or anything else, discourages use and consumption, while giving tax breaks and subsidies encourages it.

The debate over income tax is a little trickier. People will try to earn a living whatever the tax rates. Taxing income does little to discourage work. What it does do is create an industry devoted to helping people avoid paying taxes and encourages tax fraud.

In regard to the tobacco industry, if the government is ever able to tax it out of existence, how do they plan on replacing the lost revenue? No doubt they will have to raise taxes on something else.