Free Market

Why do some economists oppose tax reductions?

A year ago January—what a moment!—the two parties were in a tax cut bidding war. Each side was attempting to gain political advantage by trumping the other guy's proposal. Everything was on the table: capital gains tax cuts, income tax cuts, inheritance tax cuts, and every manner of tax credit.

The rise in oil prices provoked a frenzy of opportunistic posturing by politicians of both parties. Yet neither Clinton nor Dole will acknowledge the real reasons for sustained high prices—taxes and environmental regulations designed to keep prices high—or the reason for the newest price rise itself. Both are complicit in their genesis, and both are conspiring to keep gas prices high and prevent American consumers from getting relief

"Forget the minimum wage," says Nate, a dishwasher and cook's helper at our restaurant. "It's taxes that are killing me." He is a college student by day, washes about 1,000 dishes during the dinner rush, and stuffs and rolls grape leaves until midnight.

Voter opposition to major "free trade" agreements helped propel a surge in protectionist rhetoric this year. Even constituencies when should be naturally free trade—Republican conservatives—have fallen prey to old fallacies.

It wasn't the free market, consumerism, or capitalism that killed the movies. It was antitrust regulation, as enforced by the Federal Trade Commission. This government intervention in the 1940s radically altered the structure of the film industry for the worse. The direct and immediate result was a decline in acting, scripts, scores, content, and the cultural contribution of films. 

 Yet despite aggressive marketing and loads of free PR, neither Honda nor Chevrolet (which sells the Geo line) could give these pint-sized Edsels away. It turn out that the views of the fuel-efficiency killjoys and the general population sharply diverge.

One school of thought—Public Choice—says that statesmen can't exist in a democracy. Politics consists of vote trading, logrolling, rent seeking, and legislated looting. Politicians buy and sell favors, lobbyists act as middlemen, and the public gets fleeced. It can be no other way, say these theorists.

The death of Commerce Secretary Ron Brown in a Balkans plane crash exposed the real reason President Clinton sent American troops to Bosnia: to make the world safe for corporate welfare.

Government bureaucrats look out for their own kind. Entrepreneur John Shanahan, the man behind "Hooked on Phonics," found that out the hard way when he developed a program that taught his son how to read after the California public schools could not.