Viewpoint: Outspend the Big Spenders

What's a poor, dumb conservative Republican to do? Or any one with sound notions about government spending? Democrats like to buy votes and elections with ever more extravagant spending programs; and the GOP, when it doesn't join in, is generally able to muster only a comparatively weak, "Us too, but let's spend less."

It appears that Congress is never going to turn off the money spigot, no matter what the ultimate disastrous consequences. The problem seems intractable…yet a solution is at hand.

The key is "micro" supply-side tax cuts. The visionaries responsible for the first, halting supply-side cuts, reducing marginal tax rates, didn't go far enough. What's needed now is "targeted" supply-side cuts. Or, put simply, let the antitaxers…outspend the big spenders.

This apparently perverse prescription relies on an unusual definition of spending. Liberal politicians tend to act like all income earned by individuals is, at base, government property. Any taxes waived below the 100 percent level are labeled "tax expenditures."

"Fine," the anti-spending forces should say. "We don't accept your notion of tax "expenditures," but we'll be glad to match you in spending, dollar for dollar, if you want to talk Big Spending." Then they should abandon themselves to a supply-side, vote-buying orgy of "spending" with tax credits, income exemptions, and across-the-board rate cuts.

Does Congress want to pass a multi-billion-dollar child care bill? But of course! The proposed "Act for Better Child Care," nicknamed ABC (cute, that), would authorize $2.5 billion, for starters, and is projected to cost $12.8 billion over its first five years. That money must be taxed away from the working mothers and fathers and nonparents of America, only to do a U-turn in Washington.

But why make all that money—and the increasing billions to follow—do a reverse march inside the Beltway? Why not dispense with divvying up the spoils in the District of Columbia altogether? Let's loft a supply-side counterproposal: all income earned by those who look after children for mothers who work outside the home—nannies, baby sitters, day care workers, and so forth—should be exempt from federal income tax. And to give relief to hard-pressed parents (the "demand side"), we could offer a 100 percent tax credit on all money they spend on child care.

The cost of such programs? In the case of child care, society would be enriched, as people kept more of their earned wealth and spent it for the benefit of themselves and their children. Not to mention the benefits to be garnered by attracting better people to the child care industry. But perhaps best of all, politically, the "spending" on such programs could be trumpeted far and wide by anti-spending politicians.

We can apply this double whammy of pinpoint supply-side income exemptions and demand-side 100 percent tax credits to any proposed spending program. How about catastrophic health insurance, a current favorite among reelection-conscious pols? Congress just passed a five-year, $35-billion program that entails catastrophic increases in Medicare premiums.

Instead of giant premium escalations—a type of tax borne by the elderly—why not apply a targeted supply-side remedy: exempt from taxation all money spent on catastrophic health care. If Congress should deem further relief necessary, then income earned by providing the care could also be exempt.

The "costs" of such "spending" would probably be in the billions…and yet societal wealth would be enhanced rather than drained. Anti-spending politicians could boast about their socially conscious "spending" initiatives, and the only groups to lose would be those that habitually subsist on government tax revenues.

The possibilities are endless. Military and defense policy? If staffing is the problem, exempt income earned by servicemen and women. If bursts of productivity or creativity are desired, exempt income earned by defense contractors in specified fields. Trade deficit? Exempt from taxation money earned in the export industries. The collapse of American education? That's easy: exempt the incomes of teachers, and stand back.

It looks like the Republicans might be catching on to this idea. George Bush's response to the Democrats' multibillion-dollar gusher for child care was a shrewd counterproposal for a $1,000 tax credit eventually intended to benefit all families with a parent working outside the home. This countermove may generate lots of votes from people who count, but it doesn't go far enough. If Republicans in Congress are really serious about beating the entrenched Democrats at their own game, they must look at all spending areas with an eye to affording the American people more tax relief…and more, and more.

Contributing Editor Timothy Condon is an attorney in Tampa.