Sunday, December 11, 2005

Subsidizing Television, Taxing Productivity

During the past week, we were treated to lots of rhetorical flourishes from democratic house members complaining about recent tax legislation, particularly the provisions extending preferential tax rates on capital gains and dividend income. The usual class warfare demagoguery included rantings about budget cuts of $10 billion on social programs, while giving tax cuts to the “super rich”.

Some perspective is necessary. First, the federal government spent over $2.292 trillion in fiscal 2004. The expected spending in 2005 is $2.479 trillion – an increase of more than 8 percent. The figure for 2006, according to White House Budget figures, is $2.568 trillion, another increase of more than 3 percent. These figures are available here: (table 21-1)

We are not starving the government. And not all of this spending is going to defense, which is an important – indispensable – government function. To illustrate, Health and Human Services had net outlays of 543 billion in 2004, and the 2005 figure is 585 billion, an increase of more than 7 percent. Education and HUD both get their increases, too. So, let’s just say that government programs are being fed. It would shock me if you couldn’t find $10 billion here or there that did not need to be spent.

Tax revenues are also growing. Our problem is that we can’t seem to find ways to constrain spending growth. I was particularly reminded of this fact in George Will’s recent column discussing recently passed bills in the House and Senate that will potentially spend billions on helping Americans of all income levels get new digital televisions. His excellent column is here:

If Americans want new televisions, there are ample stocks of them in the local Wal-Mart at affordable prices. We do not need to provide vouchers to help them buy new TVs. When we switch over to digital transmission, those of us who don’t have new digital TVs can make some choices as to what is important for us. We can buy a converter box, or a new tv, or we could just sit and read books or talk to our children. (Imagine that!)

Do you want to vote for someone who believes in subsidies for TV watching and more taxes for investment and productivity? This is not a prescription for fiscal or social prosperity.


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