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PROSPERITY: Economic Policy | February 6, 1989


An Unpublished Letter to Los Angeles Times

In his editorial, "In Hearing Deficit Alarms, We Turn a Deaf Ear to Some Positive Points", Charles Wolf Jr. is hearing a Siren's song for our economy, and humanity.

First, he asserts that "what matters is the consolidated budgets of the states as well as the federal government." However, the federal government is funded mostly by progressive income taxes; but state governments, by regressive sales taxes. It is as unwise as it is unfair to effectively shift the burden of taxation from upper-income savers to middle- and lower-income consumers: Every dollar a business loses to sales tax is one more dollar it must borrow and repay with interest to savings institutions.

Next, Mr. Wolf commends how "the federal budget deficit exercises a braking effect on...pressures...for government spending to rise." However, government cut-backs have helped keep millions of our fellow citizens -- including one of every five children -- in poverty; and malnutrition, homelessness, illness, ignorance, and un- or (increasingly) under-employment are both inhumane and unproductive. Not only have "a thousand points of light" -- volunteerism -- proved woefully inadequate; but also, most upper-income individuals contribute a lower share of their income to charity than most middle- and lower-income individuals do: Regressive revenue sources are indeed unwise and unfair.

Mr. Wolf does admit that "it is not inappropriate to finance genuine and productive public infrastructure by government borrowing." However, our government has been giving a bigger slice of the pie to military rather than domestic priorities; but the economy-stimulating "multiplier effect" of social programs is larger than that of defense programs. Which in the long-run makes our nation more formidable: Computers for "Star Wars" or computers for school kids?

Mr. Wolf does say that we should try "to convey...the image of a responsible government that lives within its means." How nice it would be if we were to live up to that "image".

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