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Why Tax Reductions are the Best Recourse

Posted By on March 28, 2010

With regularity, political pundits on the right will point to the Reagan-era tax cuts has having created millions of jobs while reducing deficits.  While the deficit reduction piece can be easily dispelled, the jobs created were real.  But, the cause and effect relationship between jobs and taxes is incorrect.

Much of the action of this administration is justified with the assurance that jobs will be created.  In actuality, nothing this administration is doing will create anything but additional government jobs.  The reason is that with every piece of legislation, this administration is negatively impacting the very thing that will create jobs.  Everything this administration and this congress does is reducing demand by reducing the ability of the American public to consume.   As I’ve addressed before, ours is a consumption-based economy, and only when we have the ability to consume is demand generated, and only when demand is generated will jobs be created to meet the increased demand.

Contrary to their stated goals of job creation, this administration’s, and this congress’s fiscal irresponsibility are reducing the availability of capital by dramatically increasing the deficits and the national debt.  These increases represent a demand on the money supply which is the single cause of inflation.  Additionally, the recently passed health care bill, sold as decreasing the cost of insurance, will cause the private insurance companies to increase the cost of their policies due to the mandated acceptance of those with pre-existing conditions, and/or place the cost burden on the federal government which will also increase the cost of insurance and will result in increased taxes to cover this ill-conceived welfare plan.  These tax increases will again pull money from the pockets of the consumer and have a negative impact on the economy.

Reagan-era tax cuts were successful because tax cuts placed increased money in the hands of consumers.  Consumption yields demand, and demand yields jobs.  If this administration has any true intentions of jump starting this economy to create jobs for the 8-ish million who have lost their jobs in this recent recession, they must abandon their silly ideology that pulls money from the individual and instead drive legislation that increases the ability of the American consumer to consume.  They must reduce taxes and do it now.

My recommendation for an immediate jump start for the economy–Implement the Fair Tax legislation that has been offered in both the House and Senate.  More to follow on the Fair Tax proposal.


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