Thursday, August 23, 2012
If Congress fails to act- and they probably will not- taxes are set to increase sharply beginning January 1, 2013, when the current tax rates are set to expire. If- and when- that happens, the effect on our economy will be brutal. According to a report released this week by the Congressional Budget Office (CBO), the tax increase on January 1 will be the largest in the history of our nation, and the effect of this increase will be to not only negate any growth, but to actually SHRINK our economy. The CBO estimates that our economy will shrink by .5 percent. That doesn't sound like much, but the CBO says that a contraction of this level will cost our economy another 1.2 million jobs and spike the nominal unemployment rate to 9.1%. The additional lost jobs will be in addition to the 12.8 million jobs that have been lost since Obama became President. The CBO report emphasizes the importance of Congress taking action to prevent our economy from falling deeper into this economic funk we have endured for the past three and a half years. More importantly, it is time for Congress to set aside their partisan bickering and begin to work for the good of our country. If they fail to do so, you and I will pay a high price for their continued ineptitude.
I live in a two story house. One of them is, "It's all your fault" and the other is "Because I said so."
Remember during his Presidential campaign when then candidate Obama said that if he was elected President that anyone making less than $250,000 "will not see their taxes go up one dime." You know what? He was exactly right. Instead, if you make less than $250,000, you are going to see your taxes go up a whole lot of dimes. The Obama administration is already hinting at what is to come if he is re-elected. On ABC's "This Week" news show, Treasury Secretary Tim Geithner said, "We have to bring these deficits down very dramatically. And it is going to require some hard choices." Liberal mouthpiece The New York Times, ran an article this past weekend with the headline "The Rich Can't Pay For Everything". The article quoted Leonard Burman, who runs the Brookings Tax Policy Center and was an official in the Clinton Treasury Department, who said, "This idea that everything new the government provides out to be paid for by the top 5%, that's a basically unstable way of governing." Why the change of pace? Even raising taxes on January 1 will not provide enough revenue to keep pace with the out of control government spending. Raising taxes on the wealthy will not even come close to closing the spending gap. So where will the money come from? You guessed it. The middle class. Why? Because that is where the money is. The tax increase will not be an income tax, though. That is so politically unpopular as to be career suicide for a politician. No, what is being readied is a European style value added tax. This tax is easier to hide and therefore easier to implement and to raise at some point in the future. The VAT that is being considered by the administration is 10% on all goods and services as proposed by Ezekiel Emmanuel, a senior White House aide. If this tax is implemented, that money is coming out of your pocket, because the price of all goods and services will be taxed at every level of production or delivery. The fact is that many in our government want a European style welfare and entitlement state, and you can't have that without European style taxes. Pay attention to this, as Washington is going to try to slide this massive tax increase in under the radar.
The world would be a much better place if instead of a dog eat dog reality it was a man eat chocolate cake life.
Watch the discussion about taxes closely. To cure our financial woes, we must raise revenue, and a lot of focus in Washington is on how to raise revenue (read: taxes). But there are two components to curing our financial troubles, and the one that is getting short shrift is cutting expenditures. Admittedly, this is problematic, because so much of our spending is tied to social programs such as Medicare, Medicaid, and Social Security. For many, these programs are considered to be untouchable. There are promises that have been made to current and future recipients, and those promises should be kept. However, doing nothing to change the way these programs are run dooms them to failure. If we were honest and accounted for the present and future liabilities the way businesses have to account for their liabilities, we would see that they are insolvent. Continuing with a "business as usual" approach is foolish and just deepens the financial hole that each of these programs faces. Rather than demagogue proposed solutions, no matter how radical, we should have an honest discussion about how to make them solvent and viable. If we do nothing, we will see these programs fail in our lifetime. It is time for us a citizens and taxpayers to engage in this process and demand that Washington put all options on the table to cut spending and make these programs fiscally sound.
Maybe the government should change its motto to, "Hi, I'm the federal government. If you think our problems are bad, you should see our solutions."
And that, my friends, is my view.