Letter to the Editor
Des Moines Register
January 21, 2004
During the State of the Union speech, President Bush stated that the economic growth the nation has experienced in recent months is a direct result of the tax cuts he advocated and Congress approved. To a large extent, that is true. The tax rebates stimulated increased consumer spending and caused economic activity. Any reasonable observer also would have to acknowledge that increased federal government spending, both domestic and military, also contributed significantly. Finally, the low-interest policy promoted aggressively by the Federal Reserve played an important part. If you wanted to create a perfect storm of economic activity, that was the way to do it. These three stimulants are classic Keynesian economic tools.
The important question that is yet to be played out is: “At what price?” America now faces stupendous deficits we count in the trillions. Those debts will have to be paid off. To pay them off, future spending will have to be curtailed, and there will be pressure on interest rates to rise. This, too, is Economics 101.
In short, we will do well for a while, then the piper will have to be paid.
Families that go on a credit card spending spree typically find themselves in similar fixes. It is great while the spending goes on. Later, when the bills have to be paid, life is less pleasant. Some families end up bankrupt. Some nations do also.
America is far away from facing bankruptcy, but caution is called for. The current policy of combining tax cutting with promiscuous spending cannot continue. The politicians who led us on this joy ride probably won’t be around when the tide turns. But our children will, and they will grumble at those who supported or permitted this fiscal folly.
Arthur A. Small, Jr.