Kudlow: Stop the TARP

Larry Kudlow again offers words of wisdom to the government: let's stop with the spending and talk about promoting incentives to work, invest and grow.

The new congressional Keynesians believe government can spend us into prosperity. They’re wrong. Everything we have learned in the last four decades tells us that governments don’t create permanent new jobs or capital investment. In fact, the more we spend, the more we’ll have to raise tax rates. And that depresses growth. Europe went down this road and failed. So did Latin America and parts of Asia before they wised up.

And for some reason no one in Washington is talking about cutting tax rates, which would strengthen incentives to work, invest, and take new business risks. We should be making it pay more after tax for entrepreneurial activity of all kinds. How about this: Let’s get back on the path of free-market capitalism.

Even at the G-20 meeting in Washington this past weekend, all one heard was “global fiscal stimulus” — or more spending on a worldwide scale to fight recession. It won’t work. It never has. Hundreds of academic studies over the past 25 years show clearly that countries that spend more, grow less; but that nations that tax less, grow more.

At this point, I couldn't agree more. The financial markets have stabilized but all the talk about spending is making people realize that taxes are going to skyrocket to pay for it.