As all Aggies are looking for a job upon graduation, the current state of the economy should be distressing. Although President George W. Bush’s new Economic Growth Package, a tax relief proposal, would certainly help turn things around, much more should be done to help ensure that Aggies, along with the rest of the country, enjoy a robust economy in the future. Bold steps must be taken to improve long-term growth potential, particularly since the ongoing war on terror and the cleanup following an Iraqi conflict will require funding far into the future. Specifically, Congress should stop supporting inefficient programs with harmful subsidies.
The plan, unveiled by the White House in January and not yet approved, seeks to implement another huge round of tax cuts. Although this new proposal is not as large as the measure from 2001, the 10-year, $670 billion plan is much more ambitious than any the Democrats have countered with. Bush’s economic team realizes the economy needs a shot in the arm, and says their plan would provide short-term relief and permanently increase growth potential, according to the Department of the Treasury’s Web site.
With war against Iraq likely to begin late this week, something must be done to help the struggling economy recover, as the deployment of almost 250,000 troops and the use of resources in a war against Iraq will not help alleviate projected deficit problems.
While Bush’s tax relief plan is a step in the right direction, it only scratches the surface. Much more could be done to free up the U.S. economy, an economy that continues to suffer because of decades-old protectionism and preferential treatment.
One does not have to look very hard to find examples of the federal government lending a helping hand to some preferred industries or companies. According to Citizens Against Government Waste, a respected, non-partisan watchdog group, Congress spends $87 million a year on corporate subsidies.This money goes to organizations such as the Export-Import Bank, which gave Enron $132 million in 2000, or the Advanced Technology Program, which subsidizes research and development. We all know what happened to Enron, and experience has shown that the free market provides plenty of incentives for companies to develop new technologies. If society needs something new or improved, people will find a way to develop it, because they stand to benefit economically. There is no need for taxpayers to help them do it, especially when such a policy creates distorted market advantages for the company with the best lobbyists in Washington.
Perhaps even more remarkable is Congress’ support of farm subsidies. CAGW reported last year that the federal government was still in the business of buying powdered milk and stashing it in caves under Kansas City. Why? Because some politicians, particularly Senators Jim Jeffords-I and Patrick Leahy-D of Vermont, find it beneficial to keep dairy prices needlessly high for their farming constituents. The result is that every American consumer pays extra for milk and Uncle Sam spends $20 million annually maintaining his dairy cave. Talk about economic distortion.
It is not as if nobody in Washington realizes the truth about farm subsidies and their harmful effects on the economy. As Philip Brasher of The Associated Press has reported, the Bush administration released a report in 2001 acknowledging that subsidies lead to excess production, increased land rents and disproportionately benefit big farms.
Unfortunately, the political benefits of supporting subsidies were apparently persuasive enough to keep the Bush administration from heeding its own advice. In May, according to CNN.com, Bush signed a new, 10-year farm bill into law. The Associated Press reported that the law, praised by various agricultural groups, increased spending by 70 percent and added new sectors to the gift list, including wool, lentils and honey. Maybe the government can stack it all up next to the powdered milk.
If there is anything the world has learned during the last century or so, it is that centralized economic control does not work. Socialist governments have clearly demonstrated that attempting to control the behavior of producers and consumers is futile, resulting in economic disaster and undue human suffering.
As the famous economist Adam Smith said in his Theory of Moral Sentiments, “In the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislator might choose to impress upon it.” Smith believed in free markets, and the modern world is proving him right. From the emergence of the revolutionary European Union, to NAFTA, to similar agreements all across the globe, governments are finally allowing the “invisible hand” envisioned by Smith to allocate resources according to natural market forces. If an industry or company cannot support itself, it is obviously inefficient and unnecessary.
Although the United States can rightly boast one of the freest economies in the world, removal of these harmful government subsidies would finally allow the economy to come even closer to realizing its true potential, providing more job opportunities for Aggies and others. Though some Americans do not approve of Bush’s war stance, they all should applaud him for his tax plan. The current ailing economy demands it.