America's newest syndicated columnist is the ubiquitous Lee Iacocca, chairman of Chrysler Corporation. Though short on academic sophistication, Iacocca does possess the virtue of plain speaking.
In a recent column, Iacocca lays it right on the line. By spending $200 billion more than they take in each year, our President and Congress have doubled the national debt in just four years—from $1 trillion to $2 trillion. Interest alone is now eating up $150 billion a year.
It's got to stop, Iacocca sensibly proclaims, just as a family must take the credit card away from the spendthrift who doesn't know when to stop. And because stopping the binge will be painful, Iacocca calls for "sacrifice." Better hold onto your wallets, folks!
To balance the budget, Lee wants to close the gap 50 percent by spending cuts (half in defense, half in unspecified domestic programs) and 50 percent by new taxes. And guess which taxes he wants to impose: huge new taxes on gasoline and on imported oil. Yes, indeed, we'd all have to sacrifice—all of us, that is, except Chrysler Corporation, which over-invested in small cars (which aren't selling very well these days because oil prices are so low). Iacocca's "sacrifice" taxes would give Chrysler a large boost in market share compared with Ford and General Motors.
Aside from its blatant self-interest, Iacocca's call for sacrifice misses the target. Federal spending is out of control because specific constituencies are benefitting at the expense of taxpayers in general. Ending budget deficits by cutting spending rather than raising taxes recognizes that it is the guilty parties—these constituencies—that should sacrifice, not ordinary taxpayers.
As a practical matter, the only way major spending cuts could get through Congress is as a package deal that traded off cuts to one interest group for cuts of comparable magnitude to others. For example, $29 billion in farm subsidies and rural-area grants might well be eliminated if $12 billion in urban-area grant programs and $15 billion in middle-class programs (such as college student aid) were eliminated simultaneously. A recent Reason Foundation analysis identified $126 billion in programs that could be cut from the 1986 federal budget in this "reverse log-rolling" fashion.
Compared with balancing the budget via $126-billion tax increases, this sort of "sacrifice" has a lot going for it. To be sure, some among us would be net losers, giving up more in targeted benefits than they would have had to pay in a general tax increase. But that is precisely as it should be. The average taxpayer is not the cause of our $200 billion deficit or $2 trillion national debt. The sacrifices that must be borne should be visited on those who are responsible.