Raise Taxes to Fight the Deficit? You’re Kidding, Right?


Now that President Obama has submitted his proposed FY2012 budget to Congress, the real games, smoke-and-mirrors exercises and idiotic rhetoric will fill the corridors of power in D.C. with more hot air than a dozen coal burning power plants.

At least coal burning power plants provide the country with something it can actually use.  From Congress and the President?  Not so much.

The ever increasing national debt requires, as an antidote, an ever decreasing annual deficit, until we actually show a surplus on our national balance sheet.  Only then is it even theoretically possible to reduce the total national debt.

Let’s assume that we can actually reduce spending by $250 billion annually.  Given the President’s very optimistic budget, we would still be in a deficit position.  Assume it could be cut $500 billion.  Same result, just a smaller deficit number, but there would still be no surplus to eat away, however minimally, our debt. We would have to cut the President’s budget by something on the order of 50% to achieve a surplus position to enable any reduction at all in the national debt.

Liberal-Progressive-Democrats quite rightly (in this case anyway) assert that this level of spending reduction would be disastrous. 

They, of course, recommend ever increasing levels of taxation as an alternative. 

Non-progressives (that is Republicans, conservatives, libertarians, blue dog Democrats, and anyone that God provided with the intelligence of the average garden slug) know that increasing taxation to such a level would be equally devastating. The non-Progressive position is supported by thousands of (well, OK, perhaps that’s an exaggeration, but there are at least a couple of dozen) economic analyses indicating that raising taxes to the degree that L-P-Ds would prefer would depress economic activity and thereby fail to achieve the revenue goals that are always projected. 

My own objection to increased taxation is based on a lifelong study of the results of human behavior.  Or perhaps the behavior of politicians, not humans, would be more accurate.

Given the generation of a new revenue stream, either with increases in income tax rates, increases of gasoline taxes, liquor and cigarette taxes, soda taxes, fees on the use of email, penalties for exhaling CO2 or whatever other sources can be imagined by Congress and the IRS, can anyone seriously imagine that any and all money collected from such taxes would only be used to reduce the annual deficit and the national debt?  Anyone? Anyone?

Given new money flowing into government coffers, politicians will always find a reason to spend it for the sole purpose of buying votes to keep them in office.  Their entire philosophy of monetary and fiscal policy can be summed up in one sentence:

Elected officials in governments tax their citizens to provide them with money to spend on things that will help them keep getting elected.

President Reagan put forth the idea of “starving the beast.” Sadly, it is the best of a terrible set of alternatives.  Spending must be reduced.  Reduced spending must be guaranteed for a long enough period of time to convince businesses that the government has finally awakened to the idea that the nation is in real danger and that our elected officials are starting to act responsibly.  Then, and only then, will economic activity have any chance of picking up to the point that businesses large and small start hiring, start expanding their activities, and start generating profits which will fund continued growth.  Then, and only then, will the real unemployment and under-employment statistics begin to decline. 

Reducing unemployment will reduce the drain on government resources in terms of unemployment compensation, Medicare and Medicaid (once employer sponsored health insurance covers those who were recently unemployed), and ease some portion of the stresses on the Social Security Trust Fund which would result from increased levels of employment and the resulting increases in payroll taxes.

The simple fact is that neither tax increases or spending cuts alone, or even some ivory tower designed combination of the two, will solve the fiscal mess we are in.  We cannot trust our elected representatives to behave responsibly, since, in the final analysis, they feel no responsibility to anything, other than their own sense of electoral entitlement. The only path out of this morass is to enable Americans to do what Americans do best – ignore Washington, and build the country back up to its position as the pre-eminent economic power on the planet.  Barack Obama seems incapable of absorbing such a simple idea.  Harry Reid and Nancy Pelosi are laboring under similar burdens.  The newly elected Republican House majority is making noises that sound like the idea is beginning to percolate in their political minds, but only time will tell if it really has taken hold. If it hasn’t taken hold, we must work even harder to make the 2010 mid-term election become merely a fond memory – for Democrats, Progressives and “moderate” Republicans.

Comments are not only welcome, but necessary.  After all, you can’t have a conversation or debate if there’s only one person speaking.  If you would prefer to share your opinions with me privately, my email address is:  james.v.yardley@gmail.com

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About Jim Yardley

Retired after 30 years as a financial controller for a variety of manufacturing firms, a two-tour Vietnam veteran, and independent voter.
Gallery | This entry was posted in Elections, Government Spending, Political Doubletalk, Tea_Parties. Bookmark the permalink.

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