The income tax has become politically vulnerable. Some politicians have said we should replace it with a national sales tax. Yet, far from reducing the total tax burden, this would merely shift the burden around from individual filers to retailers.
To understand the House Republicans' budget "revolution," pay careful attention to this number: $55 billion. That's the amount federal spending will increase next year. A year later, according to their plan, the budget ticks up another $38.1 billion. It goes up an average of $45 billion every year thereafter.
A poll in March reported that most people would prefer "deficit reduction" to "tax cuts." Polls and the media lie all the time, but this one refutes itself. If people really wanted to be taxed, they would pay up without being threatened by audits, fines, special agents, and jail terms.
Performance budgeting (PB) is the newest strategy to make the public sector work. Yet as with other similar strategies, PB is fundamentally flawed. Without a system of profit and loss, a bureaucracy not only has trouble motivating its employees; it can't determine the value of what they are doing in the first place.
Now that communism has collapsed, the most powerful socialist force in the world is the coalition between George Bush and the national Democratic Party. The Washington establishment has learned absolutely nothing from the collapse of socialism. It still ignores Ludwig von Mises and the Austrian School by responding to its worldwide collapse with—you guessed it—more socialism.
In 1928 Herbert Hoover rode the coattails of Calvin Coolidge into the White House, and everyone thought he would hold the line on taxes, for he talked of "individual freedom" and criticized his opponents as "socialists."
As I see it now, there are really two economies—two distinct systems of producing and exchanging wealth. Or rather, two systems that purport to do these things, though only one of them really produces anything, and the other is organized by a peculiar form of exchange.
The first is what is called the trade economy—the one summed up in the phrase "the free market." The other might be called "the tax economy."
Has it occurred to many citizens that, for the few blessed days of federal shutdown, the world does not come to an end? That the stars remain in their courses, and everyone goes about their daily life as before?
Riots in the streets; protest against a hated government; cops arresting protesters. A familiar story these days. But suddenly we find that the protests are directed, not against a hated Communist tyranny in Eastern Europe, but against Mrs. Thatcher's regime in Britain, a supposed paragon of liberty and the free market.
One of the ironic but unfortunately enduring legacies of eight years of Reaganism has been the resurrection of Keynesianism. From the late 1930s until the early 1970s, Keynesianism rode high in the economics profession and in the corridors of power in Washington, promising that, so long as Keynesian economists continued at the helm, the blessings of modern macroeconomics would surely bring us permanent prosperity without inflation. Then something happened on the way to Eden: the mighty inflationary recession of 1973–74.
