More Revenue = More Spending

In the fall of 2008 during the discussion to implement the $700 billion bank bailout, even free-market types assured us the move would be OK because, as happened in Hong Kong, the money would be paid back to the taxpayers.

They were only half right. The money is being paid back, but not to the American taxpayers. Faster-than-expected repayments by banks is giving the government an estimated $200 billion windfall. Instead of using it to reduce our gi-normous deficit, the Obama administration wants to spend it on a “jobs program.”

So the next time there’s a government bailout, assume that it will result in permanent government spending – even on programs unrelated to the original bailout purpose.

Another lesson learned: Whenever the government gets extra revenue, it most likely will spend it rather than reduce the deficit with it. That means raising taxes will result in more government spending.

Another case in point was the SCHIP program during the late 1990s. Extra tax revenue and a smaller deficit prompted the Clinton administration to start a new entitlement program, rather than pay down the debt or cut taxes.

People who think they’re being fiscally responsible, like New York Times economics columnist David Leonhardt, want to raise taxes in order to pay for our unprecedented government spending. But that’s fiscally irresponsible, because once the government gets its hands on any extra tax revenue, it will spend even more.

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