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Commentary and opinion on current civic, political, and religious events and issues.

Past Issue
26 February 2001

Northern City Journal
(ISSN 1528-9575)
Vol. 2, No. 9

Minneapolis, Minnesota

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Biggest Peacetime Tax Increase Is Coming

The federal government, which already spends over 20 percent of GDP, is looking at a surplus as high as $7 trillion and -- absent a tax cut -- the biggest peacetime tax increase in American history.

by Jerome F. Winzig

The current discussion about the burgeoning federal surplus is biased in favor of those who advocate bigger government. Few point out that if our tax rates remain the same we face the biggest peacetime tax increase in American history. Today, the federal government's share of gross domestic product is 20.5 percent. That's almost twice the long-run average and represents the highest level since World War II ended 56 years ago. In spite of that sky-high level, Larry Hunter of Empower America estimates that in ten years the federal government's share will grow to 22.6 percent if current tax rates not cut.

The amount of money already being spent by the federal government is already staggering. In the next five years, according to the Cato Institute, the federal government will spend more money -- adjusted for inflation -- than it did to fight the Revolutionary War, the Civil War, and World Wars I and II combined. Stated another way, the federal government will spend more in the next five years than it did in the 160 years from 1800 to 1960. The federal budget that President Bush will submit this week is nearly $2 trillion, four times larger than President Jimmy Carter's last budget, taking an average $7,000 from every single American.

Where does all this money go? $58 million goes to Florida citrus growers. Vermont sheep herders get $20 million in wool and mohair subsidies. Ernest and Julio Gallo, Pillsbury, and others receive $90 million in advertising subsidies. The 35 largest sugar cane plantations each qualify for at least $1 million in subsidies. More than $100 billion is spent on domestic programs that have been identified as candidates for elimination by the Congressional Budget Office, the U.S. General Accounting Office, the Grace Commission, and President Bill Clinton.

Military spending is only 17 percent of the federal budget, percentage-wise the smallest in American history. But that $290 billion budget is as large as the military spending of the next seven nations and is the largest peacetime military budget in American history. 110,000 American soldiers are still stationed in Europe, 37,000 in Japan, and 37,000 in Korea. The Pentagon budget also includes an estimated $5 billion in non-defense pork barrel spending, including $9 million for the World Cup soccer tournament and $10 million for U.S.-Japan management training.

The federal government is the wealthiest entity on earth. Even before President Clinton increased its land holdings by millions of acres, it was the largest landowner in the free world, holding almost one-third of all the land in the United States. Yet the Department of the Interior spends $289 million annually on land acquisition programs.

In spite of these levels of spending, the Millionaire Subsidy Elimination Act proposed by George Mason University economist Walter Williams and the Cato Institute's fiscal policies director Stephen Moore is going nowhere. This act would prohibit any individual, business, or other entity with a net income of more than $1 million a year from receiving any federal loans, grants, or subsidies.

In spite of these levels of spending, they are destined to increase significantly. The Congressional Budget Office conservatively estimates a $5.6 trillion surplus over the next ten years. Other estimates are as high as $7 trillion. That's $25,000 for every single American! Yet President Bush's proposed $1.6 trillion tax cut, which would cut less than four cents out of every tax dollar collected and would keep 70 to 80 percent of the surplus in Washington, is labeled "gigantic."

Clearly, when a 25 percent phased-in slowdown of a large and growing surplus is labeled "gigantic" while the truly gargantuan size of the federal government is ignored, our language has been turned upside down.

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