The Gospel According to Paul (and Preston)

By Gord Gekko
web posted November 1996

Arthur Schlesinger Jr., historian and hero to the sandal wearing leftists of the world, propounds the theory that history and economies run in cycles, roughly thirty years in length. The theory itself has been proven rather flawed (except of course to Larry King), but it does have some general applicability to actions in the world of politics, or more specifically why a federal finance minister will repeat errors committed so many times before and bury us deeper into problems of government creation.

I speak, of course, of Paul Martin’s recent comments about not cutting taxes. According to the fairie land at the Parliament Buildings, we are fortunate because it seems that the budget deficit will be lower this year than projected. When faced with calls from many, including Reform Party boss Preston Manning, to cut taxes, Martin demurred, stating that it was too early to start cutting taxes. Fitting that the words ‘politics’ and ‘arena’ fit together, because we got to see one during a hearing of sorts. Martin and Manning faced off as each explained why his was the responsible course of action. Martin, as usual, was completely wrong. His plan will reduce the deficit to be sure, but the moment that an economic downturn occurs, spending will balloon and his projections will become as real as the federal Progressive Conservative’s chances of winning the next Federal election.

So what is wrong with Manning’s plan of reducing the deficit? Nothing, if you believe that the government has a right to tax you. Manning’s clever plan will lower tax rates, which will allow more money into the real economy, creating both jobs and increased revenues for the Fed. It’s been done before and worked, and it will be done again and work. At the heart of Manning’s philosophy, though, is the belief that he has a right to tax you. Fine thinking from someone who’s always portrayed himself as anti-government.

Well, here then is a gift to all the Commerce students. I don’t know what your professors are teaching you, with today’s political climate, no doubt you’re being taught all sorts of garbage. Here then is something you can take to the bank.

Pay attention! Raising taxes places a drag on the economy and increases deficits. Lowering and eliminating taxes increases your revenues and cuts that pesky deficit.

Some of you will of course be reading that statement with a healthy disbelief. You, of course, are the leftists of the world. Feel free to leave now. Good, the secret will remain with us. It works and there are two stellar examples of how tax cuts can create prosperity.

The first occurred under the stewardship of the Liberal’s liberal. John F. Kennedy cut taxes by a third in 1964. The result? The United States saw the unleashing of the economy. Revenues doubled in eight years and helped to reduce unemployment to three percent. The Democrat controlled G.A.O. screamed that the tax cuts would destroy the economy and create a third world state. Oh, how history proved them wrong. Of course it took another liberal to destroy Kennedy’s accomplishment; Lyndon Johnson’s "Great Society" massive spending not only screwed everything up, but created more poor and made them worse off.

We all know that Ronald Reagan applied the same principles to even a greater degree. With a massive tax cut, revenues doubled between 1980 and 1990 (the last true year of supply side economics, according to Rush Limbaugh), from $517 billion to $1 031 billion.

No doubt if you’ve watched Dan Rather or Peter Jennings, they told you that the rich got richer and the poor got poorer, and that the bad old deficit went through the roof. For them, here are some facts:

  • For the poorest fifth of Americans, real family income increased 15 per cent
  • The number of families earning $50 000 or more increased
  • The number of poor dropped. Between 1983 and 1989, the total U.S. population under the poverty line dropped by $3.8 million people.
  • The rich actually paid more income tax.
  • The deficit actually dropped, at one point, to $150 billion
  • 96 months of uninterrupted economic growth occurred.

So why did the deficit increase? In order for Reagan to get those tax cuts, he forced by the Democrat controlled Congress to increase social net spending. Even with those spending increases though, the deficit fell for three years.

In Canada, tax revenues as a percentage of G.D.P. rose from 38.4 per cent in 1983, to 42.7 per cent in 1993, with the deficit 7 per cent of G.D.P. By comparison, tax revenues in the United States were 29.9 per cent in 1983 and 30.8 per cent in 1993 (and 31.6 per cent in 1994), with the deficit sitting at 3.6 per cent of G.D.P.

Obviously the economy of Canada is not as dynamic as that of our southern neighbor. They like entrepreneurs, we look at them as uppity. Be that as it may, the principles of capitalist economics hasn’t changed. Increasing taxes places a lead weight around your neck, cutting them gives people the money to start doing things.

If Martin really wants to start cutting the deficit and get Canada back into the black, here are some easy starting points:

Cut the social net. Each of these programs is a huge albatross dragging both the economy and individuals. More importantly, it is immoral to rob the efforts of production from individuals to support those who will not, or cannot, produce themselves. Need does not create a right.

Start cutting taxes across the board. Let those who are most likely to invest money do it. Let them create the jobs, not wasteful and inefficient government programs. As above, it is morally wrong to take property from people without their consent. Money is the material manifestation of a person’s productive potential. How an individual earns their is a symbol of what they hold philosophically. Money then, is a symbol of their intellect. We charge a government to protect our rights, not to deny the freedom of the mind and take forcefully the proceeds of that intellect. Cutting taxes creates an increase in revenue…of course, only while taxes are collected.

Start cutting down on the regulations that tie up the hands of people for no good reason. There is no government regulation in existence today that the free market itself could not regulate. If individuals in a market place value something, then they will not engage in commerce with a business who holds interests contrary to that value. All regulations are an infringement upon property rights, something that the government has no authority to do. Let the marketplace regulate itself and stop all government intervention in the economy. Now. Screw the I.M.F.

Martin believes, as many leftists do, that the economy is a zero sum game. If the rich are earning more, then the poor are being robbed. If the deficit is to be reduced, Martin must think at night, then we have to wrest more money away from the people.

The economy is not a zero sum game. It is an ever-growing pie. The more people who are not stopped from fully participating, the larger it grows. Instead of punishing people for wanting, and getting more, we should be rewarding them. Cutting taxes and spending will enable more people to have an honest attempt at becoming successful.

So what can you do? I suppose if you want to waste some paper you can write to Martin and tell him that you won’t stand for sending your money away any longer, but you know you’ll get a letter thanking you for your valuable insight and nothing more. All you can do is to try to do your best, regardless of what the leeches in Ottawa do. Good luck.

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