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Government Costs More When Paid for with Borrowed Money – Ep. 290

Government Is Not Measured by What It Taxes, It Is Measured by What It Spends

Democrats promise free stuff; Republicans promise free tax cuts.  What’s a free tax cut?  That’s a tax cut that happens even though you don’t reduce government spending. In a recent panel discussion with Steve Forbes, I made the point that government is not measured by what it taxes, it is measured by what it spends. So, if the government is spending money, there is a cost associated with that, whether or not we pay for it through taxation, we’re still going to pay for it.

Cutting Taxes, but Borrowing and Printing the Difference Is Worse

We’re going to pay for it through more debt, higher inflation, and ultimately higher taxes in the future to not only repay the debt, but to pay the interest on the money we borrowed to finance the tax cuts.  So cutting taxes, but borrowing and printing the difference is worse.  I would rather pay for government with taxes than debt and inflation and higher taxes in the future. That is the argument I made with Steve Forbes is: If the Republicans are going to tell their constituents that they can get tax cuts even though the government continues to grow, they how do they have the political ability to generate the swell of public opinion to shrink government?

You Can’t Have Big Government and Low Taxes

What I want the Republicans to do is make it all about less government.  I want the Republicans to say, “You’ve got a choice. You can have big government and high taxes, or you can have small government and low taxes.”  That’s it.  You can’t have big government and low taxes. That’s what the Republicans want to sell and that’s what Steve Forbes was advocating, but if people think they can have their cake and eat it too, they they will vote for that.  But if you put it in those terms: “You want lower taxes, you need less government. If you want to pay less for government, then government has to cost less. Yes you can have a big tax cut, more take home pay, but these are the government programs you have to eliminate in order to make that possible.”

You Can’t Tell the Voters They Can Have Tax Cuts First and Cut Spending Later

You might be able to generate support for cutting government spending if people realize there is a reward for that. You cut government spending and then you get the tax cuts.  Steve Forbes was arguing to give the tax cuts first. If we get the tax cuts first, you will never get the cuts in spending.  It’s like young kids who want dessert first, but if they want dessert, they have to eat their dinner. If I give my kids dessert first, they’ll never eat their dinner! So you can’t tell the voters they can have their tax cuts first and then we’ll cut spending later because we we’ll never get smaller government.  The tax cuts must be contingent on the spending cuts.