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Permanent Taxes By: Larry Elder
FrontPageMagazine.com | Monday, September 02, 2002


Ed Crane, president of the libertarian think tank Cato Institute, supports term limits. He argues that term limits, among other things, prevent career politicians from becoming entrenched establishment figures no longer responsive to their constituents. I argue that we already possess term limits – elections – and that, right or wrong, people deserve to vote for politicians they want.

But tell me, does Sen. Joseph Lieberman, D-Conn., make Crane's case or mine?

Lieberman, in Iowa sniffing out a possible presidential run in 2004, criticized President George W. Bush's economic plan. Lieberman said Bush wanted "to make his tax cut permanent, which would cost $4 trillion (emphasis added). That's not spending restraint. Tax cuts are (emphasis added) spending."

Wow! To call Lieberman's definition of "tax cut" doublespeak insults George Orwell. Let's call it Potomac psychosis.

Democrats froth when Republicans remind them of former President John F. Kennedy's position on tax cuts. The Dec. 24, 1962, issue of U.S. News and World Report quotes Kennedy at length:

If government is to retain the confidence of the people, it must not spend a penny more than can be justified on grounds of national need, and spent with maximum efficiency. The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrence to private initiative which are imposed by our present tax system. It is a paradoxical truth that tax rates are too high today and tax revenues are too low – and the soundest way to raise revenues in the long run is to cut rates now.

The experience of a number of European countries has borne this out. This country's own experience with tax reductions in 1954 has borne this out, and the reason is that only full employment can balance the budget – and tax reduction can pave the way to full employment. The purpose of cutting taxes now is not to incur a budgetary deficit, but to achieve the more prosperous expanding economy which will bring a budgetary surplus.

What a difference 40 years makes.

President Bill Clinton frequently made Lieberman-like remarks regarding taxes. In December 1994, for example, President Clinton spoke about a middle-class tax cut, "I intend to impose one as long as I can pay for it (emphasis added)." As to his intentions for the then-budget surplus, President Clinton later said, "We could give it all back to you and hope you spend it right (emphasis added). But if you don't spend it right, here's what's going to happen." Geez, whose money is this anyway?

A historical digression. From 1791 to 1802, the government made do with taxes on things like whiskey and tobacco. Congress abolished those taxes in 1817, and relied on tariffs providing money for the prescribed functions of the federal government.

During the Civil War, Congress did pass an income tax, eliminated the tax 10 years later, resurrected it 12 years later, only to have the U.S. Supreme Court strike it down in 1895 as unconstitutional. The 16th Amendment, in 1913, allowed for an income tax, and in 1943, Congress authorized withholding tax on wages.

Defenders of the welfare state believe that the "general welfare clause" of the Constitution allows the federal government to tax for and provide things like Social Security, Medicare, Medicaid and all manner of federal mandates and regulations. Entitlement programs account for over 50 percent of federal expenditures, and the income tax accounts for nearly 50 percent of federal revenues.

As to this sweeping, catchall interpretation of the general welfare clause, James Madison, the father of the Constitution, said, "With respect to the words general welfare, I have always regarded them as qualified by the detail of powers (enumerated in the Constitution) connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators."

Even if the other Founding Fathers subscribed to the general-welfare-clause-allows-Congress-to-do-what-they-want school of thought, how did the Founding Fathers propose to pay for it? If the general welfare clause provided for what became the modern welfare state, surely somebody back during the deliberations over the Constitution said, "Gee, fellas, where do we come up with the money?" Again, the Supreme Court, in 1895, ruled as unconstitutional the current principal funding mechanism for the modern welfare state.

This brings us back to my term limits disagreement with Cato's Ed Crane. Joe Lieberman's remark – "tax cuts are spending" – reveals a strange mindset, in which our money magically becomes his. And returning that money, or not taking it in the first place, becomes a "cost" to government. Question: Did Lieberman always think the citizens' money belonged to government, or, as term-limits proponents believe, did Lieberman's length of time in Washington change him from normal to Potomac-challenged?


Larry Elder is the author of the newly-released Showdown. Larry also wrote The Ten Things You Can’t Say in America. He is a libertarian talk show host, on the air from 3-7 pm Pacific time, on KABC Talkradio in Los Angeles. For more information, visit LarryElder.com.


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