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Hale Stewart

Why Fiscal Conservatives Are Really Democrats

There is an entire swath of the Republican Party that is not represented by the current group of Washington Republicans.  While there are many reasons why the current Republican leadership does not represent these people (Terry Schiavo, birth control, the separation of church and state, corruption, or simply a President who doesn't have a modicum of analytical ability), I am going to focus purely on economic issues.


First, here is the statement that will at first insult you, then confound you, then aggravate you and finally send you into a state of denial:


If you're a fiscal conservative you're really a Democrat.


Take a minute.  Breath.  Inhale...hold it....now exhale slowly.  It's OK.  I won't tell anyone.  Follow me below the break.



If you're a moderate Republican you probably believe in smaller, more effective government and sound fiscal policy.


So - in the last 25 years who increased the size of the Federal government the least?


Reagan increased discretionary spending from $307.9 billion to $488.8 - an increase of 58.75%.  At the same time, the GDP price deflator increased from 56.105 to 79.433 for an increase of 41.56%.  That makes Reagan's total increase in discretionary spending 14.54%.


Clinton increased discretionary spending from $539.4 billion to $614.8 - an increase of 13.97%.  At the same time, the GDP price deflator increased from 88.204 to 100.687 far an increase of 14.15%.  That makes Clinton's total increase in discretionary spending -.18% (Yes you read that right; a Democrat actually shrank discretionary spendinig).


Bush increased discretionary spending from $649.3 billion to $967.9- an increase of 49.06%.  At the same time, the GDP price deflator increased from 101.507 to 114.048 far an increase of 12.35%.  That makes Bush's total increase in discretionary spending 36.71%.


So, in the last 25 years, one President has controlled spending and increasing the size of government - Clinton.


Why is this?  Simple.  Democrats respect government.  We understand it can do good things if it is run properly.  However, Democrats also understand government must run efficiently.  Finally, Democrats understand government's limits - there are some things government does not do well.  We respect the private sector and what it can accomplish.  On the other hand, Republicans have nothing but disdain for government.  Therefore, they run it poorly.

 


Who has the soundest understanding of tax policy?  The Republicans advanced a new economic theory under Reagan, which Bush II has continued.  This is the "Laffer Curve" theory that cutting taxes increases the revenue from those taxes cut.  Because the Laffer theory didn't work as advertised tax revenues from individuals under Republican Presidents are incredibly low.  After adjusting for inflation using the GDP price deflator, Reagan's revenues from individual taxpayers increased 22% and Bush's have actually decreased 16%.  Clinton's increased 81%.


Now at this point most Republicans will argue that taxes are too high.  Well, no they aren't.  First, I didn't hear any of you complaining about the tax increase in the early 1990s which went to balancing the budget.  I am sure the increase in your stock portfolios more than made up for the pain of a few percentage point increase in your tax rate (admit it: you played the market like a banshee during the 1990s.  My dogs were playing the market like banshees during the 1990s).


If someone is making over $100,000/year a 39% tax rate is far from repressive.  In addition, it's important to remember a fundamental truth: government costs money.  You may not like taxes (I'm a tax lawyer and I don't like them per se) but I sure bet you like roads to drive on, air traffic controllers who keep your planes in the air, public schools to educate your workforce, a court system to solve grievances - you get the idea.  Simply put, it costs money to run a country.  There is no way around that.  If you want to run your country well, you have to spend money.  And running the country on the cheap gets you great things like the Katrina debacle, or massive lettuce and spinach recalls, or dead coal miners in mines where safety was lax, or a massive increase in mercury poisoning, or legalized discrimination - or any other of a host of problems.


And remember Republicans failed to cut spending (that's the politically hard part of the Laffer argument), ballooning debt issuance at a mammoth rate.  Here is the result:


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Look at that chart and ask yourself: which situation is better for business?


If you're a fiscal conservative, the above information should be damning to the party who claims to have your values.  Democrats know how to run government efficiently, prudently and effectively.

 

Hale Stewart: Author Bio | Other Posts
Posted at 8:29 AM, Oct 10, 2006 in Economy
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