The classic “guns or butter” dilemma concerning use of federal tax revenues (and borrowed money) suggests a choice between spending on national defense or welfare. I first heard it from Lyndon Baines Johnson who used the phrase to argue in 1967 that we could afford to launch a “war on poverty” and establish a “great society” even while funding the Vietnam War. Both wars were lost, and the “great society,” as he envisioned it, never materialized. And there is, of course, a third category of spending that was not even mentioned: essential government services.
Federal spending during the Lyndon Johnson years averaged a bit less than 20% of GDP. For the first two full years of the Obama administration, it has averaged just over 26% of GDP. Are we better off as a result of the 40 years of expanded entitlements and welfare spending? I don’t think so.
Here is the problem. Because government spending buys votes, the appetite for such spending is insatiable. Unfortunately, a majority of senators and representatives apparently feel a duty to get re-elected by “bringing home the bacon” in the form of federal dollars for their own states and districts. Two examples of frivolous federal spending stand out in current news.
In today’s The State Newspaper, there is a report of a woman in Lexington County who, because she lives in a “rural” area, got assistance from the USDA (“A” stands for agriculture) to buy a new home with 100% financing. (This woman is not a farmer, but probably buys some agricultural products from time to time.) She also just barely made the April 2010 deadline to qualify for an $8,000 federal tax credit which she did not need in order to buy the home but which was used to install new hardwood floors.
And, yesterday, in the WSJ, there was a report that the IRS has determined that taking care of stray animals is a tax deductible expense and that a woman who is doing so can accept tax deductible donations to cover her expenses. The woman who won the ruling is quoted as saying, “I was stunned. It feels great to have established this precedent.”
I am pleased that the Lexington County woman has a new home with new hardwood floors, and I firmly believe that stray animals should be treated humanely. But have we really reached the point that we think it is reasonable to tax individuals, or borrow money from China, to pay for the flooring and veterinary bills of other individuals? At a time that we are borrowing to fund a third of federal spending, do we really want to allocate scarce federal resources to oak boards and cat food?
Unfortunately, I have no doubt how the owner of the new home with new floors and stray cat lovers are going to vote. “Progressive” strategy has been to get us all on welfare, to secure our votes, and that is a war that is about to be won.
It is clearly time to make some responsible adult choices and eliminate all those tax deductions, exemptions, exclusions, and credits, while lowering marginal rates, in order to get the economy going, expand employment opportunities, increase total tax revenues, and begin re-instilling some sense of personal responsibility in ourselves.
Afterthought: I am not a total Grinch. I had the privilege, as a Home Works of America volunteer, of spending 3+ days last week in the home of a disabled grandmother and her preschool grandchild, totally roach infested, with no stove, no heating or cooling, most of the electrical circuits dead, no washing machine, clothes dryer not functioning, toilet not functioning properly, carpets with years of dirt accumulation, three TV’s and several video games, and hardly a book in sight except a dusty old Bible and a phone book. Extensive assistance of such folks who really cannot help themselves is where scarce federal “butter” dollars should be going, if family, neighbors, and faith groups have not stepped in, rather than to new hardwood floors and cat food. The $8000 federal tax credit for first home purchases would be two years income for this household. As I have written before, we have plenty of resources to help the truly needy, without borrowing, if we didn’t insist on trying to help everyone.