Archives: December, 2012

Defense Lobby’s Scare Campaign Falls Flat

By
Christopher A. Preble

The defense contractors and their allies and advocates in Washington have been beating the drum against sequestration for over a year. They’ve commissioned studies purporting to show that sequestration will throw hundreds of thousands of people out of work. They’ve embarked on a “stop sequestration” road show, and boosted spending on advertising and gimmicks, including the Countdown to Sequestration clock.

And they’ve held press conferences, including one today at the National Press Club that I attended.

The contractors’ full-court press isn’t working. Polls show that the American people are more interested in cutting defense spending than domestic spending to reduce the deficit. (See, for example, The Economist/YouGov poll, .pdf, Q15) And they, and especially Republicans and independents, are opposed to paying higher taxes to fund a bloated Pentagon (.pdf, Q56).

The public isn’t falling for the lobby’s scare campaign for a few reasons. First, U.S. military spending remains near an all-time high in real, inflation-adjusted dollars. Second, sequestration would reduce the budget to 2007 levels, and reductions along those lines are consistent with other post-war drawdowns. Third, while Americans overwhelmingly support the troops, they appreciate that not every dollar spent on the military is spent wisely.

The United States will retain a state-of-the-art military even if total Pentagon spending declines by 10 to 15 percent. Such reductions might actually induce policymakers to be more responsible when it comes to military intervention abroad. The leading opponents of sequestration are big fans of open-ended, nation-building missions, but they are a small and shrinking minority. Most Americas have learned the painful lessons from the wars in Iraq and Afghanistan, and they are determined to avoid those sorts of expensive and counterproductive wars in the future.

A smaller U.S. military that costs less money cannot be expected to be everywhere all the time. U.S. troops should not be the first responders to every 911 call. Other countries will have to step forward to take responsibility for their own defense, and contribute their fair share to address common security challenges.

Topics: 
Foreign Policy and National Security, General

What I’m Telling Thursday’s Panelists

By
Jim Harper

This morning, I’m gearing up for Thursday’s noon-time Cato book forum on the Mercatus/Jerry Brito book, Copyright Unbalanced: From Incentive to Excess.

With the recent release and withdrawal of a Republican Study Committee memo on copyright policy, there is even greater tension around the issues than usual. So here’s a line from the planning email I sent to panelists Jerry Brito, Tom W. Bell, and Mitch Glazier.

Given how hot the issues we’ll discuss tend to be, I’ll emphasize that we’re all friends through the transitive property of friendship. I’ll be policing against ad hominem and stuff like that coming from any side. In other words, don’t bother saying or implying why a co-panelist thinks what he does because you don’t know, and because I’ll make fun of you for it.

It might be worth coming just to see how well I do with my moderation duties. Whatever the case, I think our panelists will provide a vibrant discussion on the question of where libertarians and conservatives should be on copyright. Register here now.

Topics: 
Telecom, Internet & Information Policy

White House Agrees with Me, Admits Tax Revenues Will Climb above Long-Run Average Even if All Tax Cuts Are Made Permanent

By
Daniel J. Mitchell

Earlier this year, I explained that tax revenues would soon climb above their long-run average of 18 percent of GDP, even if the 2001 and 2003 tax cuts were made permanent. In other words, the nation’s fiscal challenge is entirely the result of a rising burden of government spending.

Even though the data on tax revenue comes from the left-leaning Congressional Budget Office (yes, the same folks who seem to think you maximize growth with 100 percent tax rates), many folks on the left simply refuse to believe the numbers. In their minds, it is a religious tenet that red ink is the result of “tax cuts for the rich.”

So I wonder what they will think of this chart, produced by the White House, that shows tax revenues will…drum roll please…rise above 18 percent of GDP even if lawmakers decide to “extend current policy.”

White House Tax Admission

Apologies for the poor quality of the chart, by the way. It was sent out in an email by the White House and posted on the TaxProf Blog. It’s the best copy I can find.

But you don’t need 20-20 vision to see that tax revenues will get to about 18.5 percent of GDP 10 years from now if current tax policy is made permanent.

Here’s a chart I made. It’s not as fancy, but it shows tax revenue for the last 50 years of the 20th Century, plus the years leading up to Obama this century. The average is exactly 18.0 percent, with a slight upward trajectory according to the Excel auto-trendline feature.

The moral of the story is that the tax increase battle is not about deficits and debt. The President’s class-warfare tax policy is designed to enable bigger government.

In the short run, the tax increase will help lock in place the expansion of government that took place during the Bush-Obama years.

In the long run, though, the left will want even more taxes to enable the demography-drive expansion of the welfare state. Higher revenues, in other words, are a substitute for real entitlement reform.

What the left generally won’t admit, however, is that the rich are not a piñata, capable of disgorging limitless amounts of new money. There are big Laffer-Curve effects when tax rates climb too high, largely because upper-income taxpayers have considerable control over the timing, level, and composition of their income.

So the ultimate target will be the middle class, as more and more statists are admitting, and the most worrisome threat is the value-added tax.

P.S. You may have noticed that the White House used 20 percent of GDP as a benchmark in its chart, apparently because we should strive for the fiscal policy we had in Bill Clinton’s second term. I might be willing to take them up on that offer, so long as they’re also willing to accept Bill Clinton’s spending levels.

Topics: 
General, Government and Politics, Tax and Budget Policy

Framing the Issue: We Need Growth, Not Taxes

By
Roger Pilon

Today POLITICO Arena asks:

Is Grover Norquist right to warn of a looming tea party backlash?

My response:

Despite the mainstream media’s constant vilification of the Tea Party, especially in contrast with its treatment of the “Occupy” mobs, the movement remains a potent, albeit uneven, force in American politics. It reflects the responsible part of the American electorate, the part that recognizes the gravity of the nation’s economic and moral situation, unlike those Democrats and establishment Republicans for whom power is their only guiding principle.

Dutifully reporting White House talking points, the media that filters our public discourse has portrayed the “fiscal cliff” as a tragedy to be avoided only by raising taxes on the wealthiest Americans, failing which everyone will pay higher taxes, the economy will be plunged into another recession, and the blame will fall squarely on Republicans, the party of the rich, for their obstinate protection of their wealthy benefactors. Our demagogue-in-chief says it daily – as do some establishment Republicans. It must be true.

Rarely do we hear that the only way we can hope to reverse our economic course – the product of decades of irresponsible politics – is by growing the economy – precisely what raising taxes, especially on the productive class, will undermine. Tea Party folks may have difficulty breaking through the conventional clatter, but they know how to make those Republicans who subscribe to it pay the price.

Topics: 
Government and Politics, Tax and Budget Policy

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