It’s an economic law that goes well beyond economics: the easier something is, the more of it will happen.
That goes for a product – you’ll sell more at a lower price, and less at a higher price. It goes for behavior, too: lower the fine for speeding to a buck, and watch average speeds hit eighty.
Supply and demand. A simple idea.
The conservative’s favorite example is: lower taxes make economic activity cheaper, thus more common. That means more growth, more jobs, more money.
And more taxes paid. Higher government revenues, because of lower taxes. Looks like a paradox, but it isn’t.
Herman Cain laid this all out for us in his column this week:
…for the first five months of fiscal year 2006 are up 10.3 percent from the same period a year ago. The 2006 revenue growth adds to a 15 percent tax revenue increase from 2004 to 2005. This good fortune for U.S. Treasury coffers is attributed to the steady and growing economy, which is largely a product of the 2003 cuts in income, dividend and capital gains tax rates.Read the whole thing. To conservatives, this is common sense, not to mention historical fact.
But there’s another perspective. It still relies on supply and demand, but through a glass, darkly. Government largesse, making life easier and cheaper. Government spending, services, programs, improving our standard of living and thus making Wisconsin – and Baraboo – a better “buy.”
The argument appears again – just as benevolently, and just as wrong – in the debate over school funding. More funding, proponents say, means a stronger economy.
Here’s an excerpt from a pro-referendum letter in today’s Baraboo News Republic (not online), making that very argument:
The quality of life in the community is a part of the sales pitch, and the quality of the local school system is paramount if the employee has children. If the local school system is sub-par or in decline (or if it’s perceived to be in decline), that will affect a company’s ability to attract good employees. In our case, if those good employees choose to accept employment opportunities elsewhere, Baraboo area businesses may have to settle for less qualified individuals. This, in turn, may have a negative effect on the success and profitability of those businesses in years to come. Less profitable businesses contribute to a community in decline, or at the very least, a community that is not as strong as it could be.To a point, this is true. The Laffer Curve, a mathematical model, shows taxation is good for an economy…to a point. Some government – police protection, infrastructure – is necessary for a stable community, which is necessary for a healthy economy.
But only to a point. When taxes get too high, they drag the economy down. There’s such a thing as too much of a good thing – food makes you strong and healthy, until you start eating too much of it. Government gives us a safer and more efficient community, until it gets too big.
Then it becomes the Borg.
It doesn’t work, for the same reason socialized medicine doesn’t work. Yes, government programs make my life cheaper – thus, I want to consume – “buy” – more of it. But it doesn’t make our community’s life cheaper – somebody is paying for it.
Government can’t spend a dollar without first taking that dollar from someone. Every dollar (or dollar and a half – gotta feed that bureaucracy!) the government takes means that much less circling through the economy with free-market efficiency.
More dollars free-wheeling through the free-market economy – that’s what makes tax cuts work.
The opposite is also true. Wisconsin’s taxes and regulation are chasing money and people out of the state – those with greater net worth, greater earning ability, are moving elsewhere.
The fact that Wisconsin has great schools isn’t keeping them, because it isn’t keeping – or attracting – the businesses. Neither is Wisconsin’s work ethic, our nice friendly people, our beautiful landscapes, or our standard of living.
Being a high-service, high-spending, high-taxing state isn’t working.
Reducing the size and power of Wisconsin’s government – less regulation, less bureaucracy, fewer tax dollars – will improve the bottom line for business, which will mean more business, more employees, and more paychecks.
Which, in turn, will mean more revenues for the government. Including the schools.
We can’t start by wanting more government. We can only start by wanting less.
