Don’t Stop Spending, Just Add A VAT
By Wes Keene | April 7, 2010 | In Category: Government Debt, Tax Policy
Paul Volcker might have surprised everyone when he announced that America should consider creating a “value added tax” to stem our growing deficits. One wonders if such a businessman ever had it dawn on him that reducing spending would achieve exactly the same effect and possibly prevent the problem from reoccurring. It’s startling to hear someone make such a sweeping statement as:
“If at the end of the day we need to raise taxes, we should raise taxes”
That statement makes the case sound pretty open and shut. It’s a good thing Reagan didn’t listen to everything Mr. Volcker said, or we’d be in even deeper trouble now. The Library of Economics and Liberty has this to say on Reagan and Volker:
“High inflation was the result of a dozen years of bad fiscal and monetary policy under two Republicans — Nixon and Ford — and two Democrats — Johnson and Carter — that was brought under control only when Paul Volcker, the Carter-appointed head of the Federal Reserve, jammed interest rates up to national-heart-attack levels and left them there until inflationary expectations were well and truly tamed. Reagan had nothing to do with unemployment and interest rates falling; that was the inevitable result of a drastic monetary tightening finally working its way through the economy.”
The more we hear about Volcker, the less there is to like. True, he brought down inflation, but only by raising interest rates. No one dares address out of control Washington spending, right? Instead, we’ll just tinker with the Federal Reserve piggy bank. A Democrat at heart, the only answer Volcker has to any budget crisis is higher taxes.
That’s a shame. With so much redundancy in government spending, so many failed programs, and funding of State programs that shouldn’t be Federally funded, it seems like there are lots of ways to cut deficits without raising taxes. Of course, no one can deny that pork is built right into Washington politics. If you try and rip away any entitlements watch the liberals go after you. If you try to take away a farm subsidy or military spending, watch the Republicans go after you.
Maybe Volcker is right, but for a different reason. If Americans won’t stand up and tell Washington to just stop the spending (even if it costs them personally to do so), we may just need to have another tax. At the end of the day, Volcker deserves this one piece of credit: A new tax is better than going further and further into debt.
Better still would be to knock off the out-of-control spending. But without government power and money, how would any votes be purchased?
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