Mike Klein Online

WSJ Economics Writer: U.S. Cannot Borrow Its Way to Prosperity

Stephen Moore remembers asking his son, who’s the best basketball player in the world?  They agreed, it’s LeBron James, who earns about $40 million per year in salaries and endorsements.  Moore posed a question to his son: how long would it take LeBron James to earn $1 trillion?  The answer is a staggering 25,000 seasons.  Not even Michael Jordan played that long!

Moore delivered the economic keynote address at this past weekend’s conference hosted by the Georgia Public Policy Foundation and the Conservative Leadership Policy Institute.  Moore is the Wall Street Journal’s senior economics writer, a member of its editorial board, the author of six books and a former senior economist on the Congressional Joint Economic Committee.

Here’s the point Moore made with his LeBron James example:  We hardly know what $1 trillion means even as we watch the federal government routinely run debt into the several trillions.

“We have spent too much money, we have borrowed too much money, we have printed too much money and we have taken too much power from the states,” Moore said.  “Milton Friedman taught us this 30 or 40 years ago.  There’s no free lunch.  If Washington or the state of Georgia spends a dollar, that dollar has to come from somewhere.”

Last week the National Commission on Fiscal Responsibility and Reform floated a draft report with ideas to reduce the national debt by $4 trillion over 10 years.  Dozens of proposals would significantly change Social Security, other federal entitlements and discretionary spending.

Moore’s remarks in Atlanta on Saturday are timely because of that report, and also because Congress went back to work Monday, ready to argue about what to do with your money.

Tuesday’s agenda will include the Senate debate on funding earmarks.  Thursday’s action will move to the White House where President Barack Obama, Democratic and Republican leaders seem ready to dig in their heels about extension of Bush-era federal income tax cuts.  Congress also needs to fix the alternative minimum tax for 2010 taxpayers before the holiday break.

Stephen Moore

“We had better make sure we extend all the Bush tax rates come next January,” Moore told 250 conference attendees.  “If you want to balance the budget in Washington, if you want to balance the budget here in Atlanta, you want more rich people.”

Here’s why:  Rich people invest; investment triggers growth; growth triggers more employment; employed people purchases products and services and employed people pay taxes, exactly the opposite of unemployed people who require government services paid for by employed people.

Moore believes the nation has arrived at a critical historical point:   “The number one issue is this, what country is going to be the global number one super power?  For our lives, the United States has been a force for good.  We’ve led the world.

“But now for the first time in our lives we have an honest to god rival.  And who is that; China, now becoming one of the most prosperous countries in the world.  China predicts in 18-to-20 years that it will catch the United States,” Moore said.

“China is focused right now like a laser beam on competitors.  They have their eye on the ball.  That’s what we need to do as a nation and that’s what we need to do in Georgia.  Everything you do, make sure you keep in mind, is this going to make Georgia more competitive?

“Step one and I’m deadly serious about this: Abolish the state income tax.  This is not a radical idea. There are nine states in this country that have no state income tax,” Moore said.  “Texas, Florida, Tennessee; these states are able to pay their bills without having an income tax.  It’s so obvious; the states without an income tax are the ones that have driven growth.”

Georgia’s Special Council on Tax Reform is expected to propose some revisions to the state’s 6% individual income tax when it reports to the General Assembly in January.  Sources say it might propose reduced individual income tax rates in a new model that would move taxation away from earned income and toward taxation of services and products purchased.

Moore predicted the Republican majority U.S. House will pass a bill to repeal Obamacare, the Senate will not and health care will become “death by a thousand cuts.”  He predicted the individual mandate will be eliminated.  “What we need to do with health care is, we need to allow states to begin to experiment.  Let people buy insurance from anywhere they want to.”

Moore started his address with this idea: “The election we just saw was not a victory for the Republican Party.  It was a victory for the conservative movement and free market principles.”  He finished with this idea:  “Both parties are still fighting with each other.  It’s like none of them learned the lesson.”

Mike Klein is Editor at the Georgia Public Policy Foundation.

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November 15, 2010 - Posted by | Uncategorized | , , , , , , ,

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