The American Spectator

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The Reagan tax cuts were the primary reason that the high-tech boom of the 1980s and 1990s occurred in the U.S. and not in Japan or in Europe. The U.S. became an entrepreneurial haven compared to most other countries in the world. And once that boom started, even the tax hikes of 1991 and 1993 could do little to stop it.

The increase in the defense budget from 3.0 percent of GDP in the late 1990s to 4.0 percent in the 2004 Bush Administration Budget proposal will eventually return another "peace dividend" to the U.S. economy in the form of greater security against terrorist threats. The Bush tax cuts have reduced the amount of money involuntarily taken from taxpayers and will result in a more efficient allocation of resources. This will boost economic growth for years to come.

WHILE DEFICITS ARE CLEARLY back for the time being and the just-released Bush budget forecasts a peak deficit of just 4.5 percent of GDP in 2004, this deficit is small compared to the past. Between 1982 and 1986, the federal budget was in deficit by an average of 5.0 percent of GDP. The economy continued to grow, with low inflation and falling interest rates, throughout the 1980s, and there is no reason to believe that deficits in the 2000s will result in any different outcome.

Some may say that it is different this time because baby-boomers are starting to retire and Social Security and Medicare are about to hit the wall. This analysis is misguided. These programs are financially flawed and will eat our economy alive unless they are fundamentally restructured. If not, then government spending will soar and truly crowd out the private sector. No amount of government surplus will pay for these programs.

p>I doubt this is the last time I will have to explain these realities about budget deficits, but I hope I have set the record straight this time. Reagan taught us right -- deficits don't matter, spending does. br> /p>

topics:
Taxes, Trade, Bill Clinton, Business, Federal Budget, Social Security, Law, Communism, Medicare