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22 Tax Foundation's Tax Review 1 (1961)

handle is hein.tera/tafoutaxt0024 and id is 1 raw text is: TAX FOUNDATION'S JANUARY 1901, Vol. XXII, No. I Tax Policy and the Neo-Federalists )y Hon1. Tnimas B. Curtis U. S. Representative from Missouri W E HAVE the cart before the horse when we contemplate paying for increased Federal expenditures out of anticipated increased revenues derived from an anticipated increase in economic growth. This is the new refinement of the old doctrine of deficit financing now being advanced by the school of neo-Federalists who first advocated deficit financing as sound economics. The argument then was that the deficit created in down-swings of the economy would be recouped during the periods of up- swing. It has become obvious to everyone by now that this recoupment just never comes about and we swing further into debt. Increasing Federal expend- itures on the theory that they will stimulate the economy to grow, which in turn will give us a bigger tax income to pay for these increased costs, is just as unrealistic as the origi- nal proposition of the present- day Federalists has proved itself to be. I doubt if the neo-Federal- ists really believe in this new refinement they are now push- ing. It seems apparent that they really do not care how we pay for the increased part they desire the Federal gov- ernment to play in our economy. They just want the Federal government to play that part. More attention needs to be paid than has been in the past to the dangers of large Federal expenditures. The Federal government has a power, and to that extent does not have a check, which no other political government, state or local and certainly no private economic group or individual has to finance expendi- tures. This power is the power to print money. Federal budg- etary deficits must be paid for if the Federal government is to remain solvent. If sufli- cient moneys are not collected through taxes the Federal government must sell bonds to make up the difference. Federal bonds under our cen- tral banking system are easily translated into money and if the other economic factors are of a certain nature, the print- ing and marketing of addi- tional Federal bonds to pay for deficit financing creates inflation. Copyright 1961 by Tax Foundation, Inc., 30 Rockefeller Plaza, New York 20, N. Y. Material ma)y be re-used with proper credit. 1 This Issue In Brief WhenI we contemplate paying for inl- cr'ea!sed Feleral spending 111 of antici- ate t(increlsed revenues derived front an unticipuited increase in econoilic growiith, says itep. Curtis in this Review. we air'e pit- ling the curt before tile lorse. He teri s this the lew refinement of tile old doctrine of deficit filnncing now being aidv11nced by the neo-Federalist school. Ie nleo-Felderalhists, he says, really do nlot cure how we pay for Ite increased )art they desire the Federal government to play in our econoimy. They just want tile! Federal government to play that part. Pinpointing some of the neo-Federalist targets its tax loopholes, dividend tax credits and tile depreciation allowanice, Mr. Curtis presents his Coluiller-arguilents to neo-Federalist theories oi these subjects.

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