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What The Media Tell Americans About Free Enterprise

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Monday, July 17, 2000

Volume 8, Number 14

How to Spend the Surplus

"Americaís piggy bank is full to overflowing," CBSís John Roberts enthused on the June 26 Evening News as he reported on new projections of $1.9 trillion in federal budget surpluses over the next decade. "Thatís over $1 trillion more than what was forecast just four months ago," David Gregory reported on the same eveningís NBC Nightly News.

All three broadcast evening news programs correctly reported that the enhanced surplus estimates had provoked political maneuverings in Washington, but correspondents failed to distinguish between the "costs" of spending the yet-to-be-received money on additional government programs or returning the excess dollars to taxpayers.

"This may be Washington," offered ABCís John Cochran on World News Tonight, "but it took only a New York minute for politicians to start arguing about what to do with that huge new surplus."

"Today, the President dipped into the surplus to offer Republicans a deal: Heíll sign their bill to eliminate the marriage tax penalty if they pass his prescription drug plan for Medicare. The cost: $500 billion," reported CBSís Roberts.

"The presidential candidates are also likely to seize on the administrationís rosy outlook," added NBCís Gregory. "Texas Governor George W. Bush has said he would use the surplus for a large tax cut and the partial privatization of Social Security. And Vice President Gore has called for new spending on schools, health care and the environment."

"No question, all that money is burning a hole in the pockets of politicians," Roberts concluded.

By equating spending programs and tax cuts, reporters contribute to the misperception that tax cuts "cost" money. The free market loses every dollar that is collected by the government, so programs like the proposed prescription drug coverage really do "cost" money. But tax cuts restore those dollars to the private economy, where the taxpayers who earned them in the first place can save, invest or spend them as they please.

No correspondent reminded viewers that higher tax rates were put in place by liberals seven years ago to thwart then-runaway budget deficits. Explaining his program to the public in February, 1993, President Clinton argued that tax increases were needed "because the deficit has increased so much beyond my earlier estimates and beyond even the worst official government estimates from last year."

"We just have to face the fact that to make the changes our country needs, more Americans must contribute today so that all Americans can do better tomorrow," Clinton told the country. The top tax on income rose from 31% to 39.6%, and a 4.3 cent per gallon surcharge was placed on gasoline sales as part of the campaign against deficits.

Mostly due to the growing economy, those federal budget deficits are now history, but the higher tax rates remain, diverting billions of dollars from the private sector to a federal treasury thatís no longer in the red. Indeed, properly understood "these are Ďtax overpayments,í not budget surpluses," argued Club for Growth President and economist Stephen Moore in a recent National Review article

"The primary explanation for massive forthcoming surpluses is that we are still collecting revenues from the Cold War," wrote Moore. "This is the first post-war period in U.S. history that has not brought with it a substantial reduction in tax bills. The average effective tax burden ó combined federal income and payroll taxes as a share of wages and salaries ó has risen from 23 percent to 28 percent in the past six years."

"Although taxation is legitimate," similarly argued William Kucewicz, the editor of GeoInvestor.com in a July 10 op-ed that appeared in The Wall Street Journal, "running a government surplus isnít. It represents a taking by the state, because it exceeds the governmentís contract with the community... Excess taxation isnít what the people bargained for."

By excluding this perspective from their June 26 coverage of the federal budget surpluses, the broadcast networks implicitly promoted the notion that those trillions of dollars are somehow government property. Viewers should have been reminded of the "shared sacrifice" rhetoric of the early 1990s that justified higher federal tax rates, rather than being given the impression that cutting their taxes will somehow "cost" them money.

ó Rich Noyes


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