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We’re All Tax and Spend Americans

Edward Faulkner

There is a perception in America that the recent Republican victory is a victory for smaller government and fiscal responsibility. This is a dangerous myth. While they pay lip service to such ideals, the Republicans are rapidly eroding the liberty and financial security of the nation. Both major parties work consistently to enlarge and empower the federal government.

Under George Bush and a Republican congress, the federal budget has undergone three of the five largest annual increases in the last 40 years. Even if we discount the “War on Terrorism,” non-defense spending has increased by 36 percent during Bush’s first term. The federal deficit is increasing by $1.61 billion per day. Bush’s tax-cut is nothing but sleight of hand -- in the long term we’ll all be paying more.

When you consider three other massive deficits America has acquired, the picture looks bleaker still. First, we have a record trade deficit, in both relative and absolute terms. Second, we have the huge, unfounded promise made by the government to the aging baby boomers. Finally, we have a record consumer deficit: American households on average are spending more than they’re making. Last quarter they spent $1.04 for every after-tax dollar they made. We can thank the Federal Reserve’s extremely lax monetary policy for this ballooning consumer debt; inflation-adjusted interest rates are negative.

In order to fund our spending, the U.S. relies on foreign savings. One might argue that foreigners continue to send their money to America because it’s a good investment. Historically, this was true. But right now, we’re not using that money to build infrastructure or fund profitable ventures. We’re using it to buy new SUVs and plasma screen televisions from Asia. And it seems that the foreign investors are catching on -- capital inflows have been decreasing, and the dollar is losing value against other major currencies.

We have a faith-based economy: we have faith in the soundness of the dollar, in the valuation of the stock market (which is still way above historical long-term price/earnings ratios), and in the wisdom of the Greenspan Fed. But if history is any lesson, fiat currencies, optimistic markets, and central banks have often seriously disappointed their faithful. The prevailing attitude is still one of American exceptionalism. If any other nation were pursuing such reckless fiscal and monetary policies, capital would already be fleeing. Old habits die hard.

When it comes to Republicans and bigger government, Bush is not an exception. The Republican Party, throughout its history, has frequently been a staunch supporter of larger, more powerful central government with imperial ambitions. Lincoln’s central platform was Henry Clay’s American system of high tariffs, corporate subsidies, and economic nationalism. McKinley helped launch our global empire with the Spanish-American War. Teddy Roosevelt “liberated” the now infamous Guantanamo Bay from the Cubans, and brutally suppressed a Phillipine insurgency, while expanding federal powers at home. The story continues up to the present day.

Don’t take this as an endorsement for the Democrats. They’re just as bad. Woodrow Wilson still serves as inspiration for American imperialists of all stripes. The alleged budget “surplus” we enjoyed under Clinton was clever accounting -- it conveniently ignored the entire Social Security shortfall.

The fact is, the two major parties have one big thing in common: they consistently enlarge the power and scope of the federal government. There is almost no debate in the mainstream media about the proper role for government. Government involvement is taken as given, but top-down solutions to complex problems are not credible. Washington cannot manage a national school system, or national healthcare system, any better than Soviet Moscow could manage a national economy.

To see one detrimental effect of powerful central government, consider the mourning of the blue states after the election. The more powerful the government, the more every election matters, hence the wailing and gnashing of teeth over Bush’s reelection. If Kerry had won, it would be the Red States mourning. At any given time, one half of the country is subjected to a regime that it doesn’t approve of and didn’t vote for. This is pure democracy at its worst. Someone you dislike will always get elected eventually -- your only protection is limits on government power.

The preceding is a utilitarian argument for smaller government. But there is a moral argument, too. When you try to solve a problem politically, you’ve already given up on peaceful, voluntary solutions. To quote George Washington, “Government is not reason, it is not eloquence -- it is force...”. We cannot fix what ails this country at the point of a gun, any more than we can forcefully “democratize” Iraq.

Edward Faulkner graduated with the class of 2003.