How to strengthen the economy
October 12, 2006 | By Nathaniel Ward
Reining in runaway government spending and flattening taxes are two ways Congress can help strengthen the economy.
Despite what you might hear in the media, the economy is doing rather well. Why? Because government isn’t butting in too much to curtail free enterprise.
“Government is not the reason for the economy’s growth,” Heritage economists Dan Mitchell and Michelle Muccio explain in a new paper, “but policymakers can improve economic performance by reducing or eliminating barriers to productive behavior.” For example, they note that the 2003 tax cuts that reduced penalties on work and investment “encouraged growth and improved competitiveness.”
Mitchell and Muccio outline a six-step plan to ensure that America’s economy not only remains strong but continues to improve:
- Make the pro-growth portions of the Bush tax cuts permanent.
- Implement reforms to shift the Internal Revenue Code closer to a simple and fair flat tax.
- Cap the growth of federal spending.
- Eliminate programs or devolve them to the state and local levels.
- Reform entitlements.
- Use cost-benefit analysis to rein in regulatory excess.
Without these reforms, they warn, America’s economy could end up like Europe’s. “Comparisons between America and Europe show that a heavier burden of government is associated with weaker economic performance.” We should be careful that we do not follow Europe down the path to bigger and bigger government. Now is the time for change.
Reining in spending
Liberals said it wouldn’t happen, but it did. The 2003 tax cuts, as noted above, allowed the economy to grow at a solid clip. This growth has, in turn, driven a surge in tax receipts, so that the government has drawn record revenues this year even with taxes at lower rates.
But these revenues still aren’t enough to cover the government’s out-of-control spending. President Bush argued recently that because of the growth in government income he has made good on his promise to cut the deficit in half—but no real cuts have been made. In fact, overall government spending has risen 45 percent since 2001, and it will only get worse as the government spends more and more money on entitlements like Social Security and Medicare.
Heritage budget expert Brian Riedl tells The Chicago Tribune today that government revenue growth will not outstrip spending growth for long, meaning the budget will not be in surplus anytime soon. He explains that as the government spends more and more on entitlements over the next decade, the government will go further into the red.
Some like to argue that the deficit is the real problem, and they have proposed irresponsible tax hikes to cover government’s irresponsible over spending. But this is just a liberal myth. Overspending is the real problem; deficits are a symptom of the problem.
Read a full debunking of this myth on MyHeritage.org.
China as an ally on North Korea?
“Following North Korea’s claimed nuclear test, China’s diplomatic rhetoric is changing, and its policy may be, too,” Heritage Asia expert John Tkacik writes in a new article. “The United States should press Beijing to join in supporting tough sanctions on Pyongyang.”
China, Tkacik explains, has lately taken a firmer line on North Korea, even expressing openness to imposing sanctions on Kim Jong Il’s government. With the Chinese government seemingly willing to cooperate with Washington, “the United States now occupies the negotiating high ground, and Ambassador Bolton must take advantage of it.”
Tkacik says America should urge China to accept and enforce the proposed sanctions on North Korea—but whether China will comply remains unclear. “The new and mature tenor of China’s diplomatic rhetoric may signal a real change in Beijing’s policies on North Korea—or it may reflect a Chinese tactic of ‘soft on the outside’ but ‘hard on the inside’ when engaging Washington.”
Leftists intimidate judges
For the past 16 years, the Foundation for Research on Economics and the Environment has been hosting conferences on economic and political issues. FREE chairman John Baden explains on MyHeritage.org that “FREE’s conferences attract America’s leading scholars from its best universities.” These experts educate federal judges on issues of economics, drug policy, terrorism and civil liberties. Judges who attend the conferences regularly give the sessions high marks.
But one liberal group, the Community Rights Counsel, doesn’t like this one bit, and in 1998 they began attacking these educational conferences. “The CRC claims our speakers are corporate shills, when actually they are America’s most respected policy analysts from Berkeley, Chicago, Harvard, MIT, UCLA, and Yale, as well as MSU,” Baden writes. “CRC attacks are also orchestrated to intimidate judges who simply want to expand their intellectual horizons.”
“Suppressing ideas and intimidating judges is sorry behavior. The CRC’s attempt to restrict judges’ continuing education is censorship camouflaged by self-righteousness.”
In other news
- The popular online video site YouTube has censored a brief video critical of the liberal approach to foreign policy. Would-be viewers must now go through an elaborate process to confirm they are over 18—even though the clip contains nothing really objectionable save some slapstick violence and a critique of liberal policies.
- In a repudiation of liberal notions of relativism, Pope Benedict said yesterday that Christians should not compromise on their beliefs to appease the demands of other religions. He said any “dialogue” with other religions “must not lead us to forget the duty to firmly underscore the tenets and identity of our Christian faith that cannot be renounced.”
- The Christian Science Monitor reports that liberals are using selective numbers to scare voters about the economy's strength, which by most measures is doing rather well. Liberals have promised to raise tax rates on work and investment; the current low rates have allowed the economy to thrive since 2003.
- A report claiming the American presence in Iraq has killed 655,000 Iraqis is “not credible,” President Bush said yesterday. Iraq’s health ministry called the report “exaggerated,” and Australian Prime Minister John Howard called it “not plausible.” Like the previous casualty estimates from the same authors, this new study was timed for release immediately before a US election.
- The military scrambled fighter jets as a precautionary measure after a small plane hit a high-rise building in New York City yesterday. New York Yankees pitcher Cory Lidle was killed in the crash, which appears to have been an accident.
Coming up at Heritage
To attend these or any other Heritage Foundation events, RSVP at Heritage’s events website. Or you can watch these events live online at Heritage.org. All times are Eastern.
- On Friday, October 13 at 9:30 am, Heritage will host a panel discussion looking at how China’s neighbors view the communist country’s growing power.
- On Friday, October 13 at noon, Dr. Williamson Murray of Ohio State University and the Institute for Defense Analysis will discuss the importance of studying military history in this time of ever-changing military technology.
Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation.
