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More About: TAXES: Local

Freedom and Economic Growth

Money is wealth, minimum wage laws increase wages thereby creating economic growth, war brings economic prosperity because it creates jobs, buy American because it creates jobs thereby creates economic expansion, increased tariffs protect American jobs thereby fostering economic growth, and the balance of trade deficit hurts the domestic economy are all prevalent economic myths. 



However, the one that is usually fostered anytime a new economic endeavor is put forward is that the project in question will increase tax revenue or it will increase the tax base resulting in an economic boom.  Currently, this economic myth is being promulgated in regard to the Union Pacific bringing its railroad track through Yuma.  It is also heard in connection with the possible construction of the new event stadium also planned for Yuma.  It is practically always heard whenever a new sports complex is to be built in any community.  As a matter of fact whenever any business decides to locate anywhere, the idea that increased tax revenues is somehow good for a community is frequently bantered around. 



The truth is tax revenues equal government expenditures.  One cannot have tax revenues without government expenditures because the expenditure of the tax revenue is the purpose of raising the revenue in the first place and for sure one cannot have government expenditures without tax revenues. 



Even though the federal government has the exclusive monopoly of the use of the Federal Reserve System so that it can literally spend any amount of money on any project it chooses, the resulting inflation just devalues the currency and makes economic growth impossible.  History books are strewn with this type of “economic growth.” 



Increased tax revenues and an increased tax base mean government growth.  Government growth means less individual liberty.  Less individual liberty means less economic expansion.  The reason less economic expansion results from less individual liberty is because increased tax revenue, therefore increased government expenditures, translates into economic growth for only the select few that benefit from those expenditures and revenues at the expense of those who must pay for those revenues and expenditures.  In other words government only redistributes the economic wealth that is created. 



In real life economic growth only takes place when individuals save a portion of the wealth they create in order for capital to be created.  As a result more wealth is produced exponentially resulting in a greater number of individuals being able to share in the expanded economic pie through the resulting decreased prices of the newly created wealth. 


Government cannot and does not create economic growth.  Bigger government for sure does not create more economic growth.  The more taxes government extorts from the individual the less the individual has to create the wealth he desires for himself and others. 



Economic growth is a very personal concept.  Each individual has a different idea of what constitutes economic growth.  For any government official to decide the extent of economic growth, or even its definition, is ludicrous.  No individual, not even a government official, is that omniscient to know the desires of every individual in society.  Books are also strewn with the history of all of the failed planned economies. 



Yet, the desire to plan for others never seems to rest.  Government planners can only know what economic growth means for themselves.  Of course those who benefit from the planners’ decisions have similar ideas of what constitutes economic growth, but those who do not benefit obviously have a different definition. 



Increased tax revenues are not beneficial because they thwart the opportunity of some to achieve their view of economic expansion.  Increased tax revenues mean less freedom for the individual to decide what economic growth ought to take place and how best to achieve it. 



Freedom does not guarantee economic growth for the individual, but it does guarantee the opportunity to seek it.  The economic boom of America during the 19th and 20th centuries is proof that more and larger government meaning more and larger tax revenues and expenditures is not the cause of economic growth.  Government spending during the depression of the 1930’s did not solve the economic crisis of the day, it only exacerbated it. 



The ever expanding economic pie takes place today in spite of all of the government that exists.    However, the current negative savings rate existing in the American economy assures the curtailment of any economic growth.  Even the largest economy on earth reaches a point beyond which it too succumbs to increased tax revenues and expenditures.


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