Can Lower Taxes Fix The Economy?

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The question of whether the federal government can lower taxes while, at the same time, fix the economy at this critical juncture of our history.

The answer is, in theory, yes, but it will take some drastic and disciplined action.

For starters, Senator John McCain's proposal to freeze spending on non-critical functions of government is the tactic that is needed to begin the healing. A major criticism of the Bush Administration's domestic policy was that, as a conservative, he failed to reel in spending and, in fact, grew government in a manner that contravenes the Republican mantra. Senator McCain's stance on spending, when contrasted with Senator Barack Obama's proposal to introduce over $800 billion in new spending in addition to the money forked out due to the bailout package , shows a major difference between the two candidates.

Further, it highlights a simple yet clear approach to begin the journey of righting the American economic ship. ...

Even more beneficial to the McCain campaign is this: if Senator McCain held to this campaign promise as president, it would be a break from the Bush Legacy and the last 8 years in the White House.

Without the federal government spending more money, the burden of spending in order to spur the American economy forward falls upon American citizens. This task becomes an easy endeavor if the threats of higher taxes on capital gains, small businesses, and private investors are alleviated.

On the surface, this may appear only as a tax policy that champions protection of the very wealthy and corporate fat cats, many of whom may have contributed to the financial mess that we are in currently. However, history shows us that the ability to invest, spend, and make economic decisions in a freer fashion has resulted in a higher quality of life for citizens around the world. This has been true for countries that traditionally held restrictions on the free market – countries such as India, China, and Russia. For the optimal impact on the economy at a time when we need the economy to churn again, we need as much private cash flow to circulate through business channels to stimulate growth, consumer spending, and in turn, job creation. This can come about when tax burdens are not an issue.

For example, here in North Carolina, there is a movement to lower the corporate tax so that businesses that are enamored with the universities, diversity, talent base, and topography of North Carolina – yet move their businesses to South Carolina, Tennessee, and Virginia due to their tax rates – consider North Carolina more seriously when deciding to bring their organizations (and subsequent jobs) to the Southeast. This thinking led to the growth of Wachovia and Bank of America in the Queen City (versus having these banks stationed in the traditional financial capital of New York City) over the past 15 years, a phenomenon that improved the quality of life for North Carolinians in the Piedmont, including African-Americans.

This is where the betterment for us as Black people comes into play.

If history – including recent history across the globe – shows us that lower taxes and less government involvement provides the incentive needed to create more opportunities and, thus, a higher quality of life for citizens, it behooves us as African-Americans to understand, support, and participate in this principle. We can no longer sit on the sidelines and call this "white man's business" when, in fact, the global economy is now moving along this modus operandi.

This involvement must include the Black middle class, especially when it is at a point of time where its size and influence are challenged. Though the reinvestment of Black capital into the market (think of "market" as in running businesses, consumer spending, college education, etc., instead of "stock market", per se), we create additional opportunities to gain equal economic footing within a 21st century America that looks primarily to economic strength as the determining factor for status versus definitions of race and ethnicity. Lower taxes – and thus more discretionary income as a result – afford Black America a chance to invest in ventures such as Black businesses, property in historically-African-American neighborhoods, and struggling Historically Black Colleges and Universities. The vitality of such entities is where the empowerment of the Black community lies, particularly since these institutions are often more willing and better equipped to provide opportunities for younger African-Americans that are talented but underexposed as they attempt to compete globally.

History shows us that free market principles and subsequent policies lead to a higher quality of life for citizens. It also shows that more government, more control, and more taxes often lead to a dampening of the quality of life, usually due to a decrease in quality, efficiency, and opportunity. Again, the previous failures of countries such as India and Russia under economic and political impositions come to mind as examples.

Of course, deregulation to the point of being ruled by impractical (or lenient) policies and greed is not the answer, either. However, the ability for those with money (not just the very rich, but those with the ability to create wealth – including jobs) to have opportunities to invest their money – and create avenues for a higher quality of life for more people as a result– is foundational in our economic turnaround. This can not occur if we are cutting taxes on 95% of all Americans, adding new federal spending by the count of over $800 billion, and increasing the tax burden on those that can directly impact economic movement.

When the Americans government spends, we create more debt. When the American people spend, the wheels of business churn and the heart of our economy pumps. Lower taxes give a better chance of making this happen sooner than later.
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Lenny McAllister is the Political Guru for Fox News - Charlotte and blogs the Republican side of the election for BlackVoices. He is a frequent contributor to The Charlotte Post and The North Carolina Conservative.