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Tax and Spend is an economic-political term for raising the tax burden in an economy so that more can be spent on state-provided services (public services). It is most often used by political opponents to describe the economic approach of socialist-leaning systems of government.

Contents

History

It appears the formulation first appeared in print in a 1938 New York Times report written by Arthur Krock, quoting President Franklin D. Roosevelt's trusted advisor Harry Hopkins, the Administrator of the Works Progress Administration (WPA), a key agency of Roosevelt's New Deal program:

"[Hopkins] met a criticism of this sinister combination by saying: ‘We will spend and spend, and tax and tax, and elect and elect.’”[1]

(According to Krock, the "sinister combination" was Roosevelt, Hopkins, United States Postmaster General James Farley, and New Jersey Democratic political boss Frank Hague.)

Two weeks later, Hopkins and Krock argued the point in duelling letters to the editor of The New York Times. First Hopkins flatly denied he had ever laid out the "tax, spend, elect" formulation, but Krock asserted that "I used and printed the quotation after careful verification because, while it fitting completely into Mr. Hopkins's political philosophy as I have understood it, I wanted to be certain of the language." Krock also revealed that he had spoken with witnesses who claimed to have heard Hopkins make the comment at the Empire Race Track in Yonkers, New York, including a "reputable citizen" who was "in lighter hours, a playmate of Mr. Hopkins."[2] The phrase endured.

Other uses

The term is also an allusion to the Taxing and Spending Clause of the US Constitution. This power gives Congress the power to impose taxes to finance government debt and the power to spend for the General Welfare, within strictly-defined limits.

Alternatives

The opposite approach is low tax and low spend; reducing government spending to lower the tax burden. There are other options that exist: high taxes and low spending leads to a budget surplus, while low taxes and high spending leads to a budget deficit. In the case of a budget deficit, the deficit can be paid for either by deficit financing, such as raising bonds to pay for higher government services, a strategy which puts the government into debt, or, in a fiat money system, by printing money to cover the deficit, called "monetizing the debt".

Some argue that the formulation should be reversed, instead being "spend and tax". One such argument comes from Chartalism, which argues that in a fiat money system, fiat money must first be printed and spent by the state before it can be collected in taxation.

References

  1. ^ Krock, Arthur. "Win Back 10 States; Republicans Take Ohio, Wisconsin, Kansas and Massachusetts". New York Times. November 9, 1938, p. 4. Retrieved on May 19, 2009.
  2. ^ "Letters to The Times". New York Times. November 24, 1938, p. 26. Retrieved on May 19, 2009.
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