Saturday, February 25, 2012
The Insanity of Raising Taxes Before Spending Is Cut
You see it arise when Republicans start arguing over contraception (because they don't want to talk about reforming/reducing 55%+ of the budget that is in Social Security, Medicare/Medicaid)
You also see it arise when Democrats start waving the bloody shirt of 'raise taxes only on the rich!' (because they don't want to talk about reforming/reducing 55%+ of the budget that is in Social Security, Medicare/Medicaid)
You see, the most important thing for EITHER political party is to never talk about how to restrain the growth of any entitlement program. Ever. Mainly because every incumbent, even Tea Party incumbents, want to get re-elected and they understand the incredible power the AARP and the high number of seniors who vote every election.
Close to 50 million people age 55 and over voted in the 2008 elections versus 32 million Americans aged 18-34 in the same elections. 50 beats 32 in anything.
Both parties want to return to Washington DC as the majority party each election. But since neither side talks about reforming any entitlement program during the campaign to build a mandate to do so, neither will ever take any action on the 3 largest components of our deficit/debt problems today: Social Security, Medicare and Medicaid.
You want 'proof': There have now been 20 Republican debates for the primaries so far. How much of those approximately 40 hours of televised debate broadcasts have been devoted to a sober, deep drill down examination of the upwards cost pressures in health care in general and in Medicare and Medicaid in particular?
About 30 seconds or so. Out of close to 2400 minutes or 144,000 seconds of the televised debates. 0.000208333333 or about .02% of the debates so far have been dedicated to the 3 federal programs that are chewing up over 50% of the federal budget or over $1.8 trillion this year. Of your hard-earned taxpayer money, or whatever the Chinese are still crazy enough to keep lending us.
Those are the primary components of the federal budget and the health care inflation in Medicare/Medicaid and in the VA and the military budget is the culprit in these exploding federal deficits for years to come.
Not talking about our biggest problems today is akin to Abraham Lincoln and Stephen Douglas completely ignoring the problem of the 'peculiar institution' called slavery during their great debates in 1858 in Illinois for the US Senate seat and talking about the weather and whether or not it was going to affect the winter wheat harvest that year or something more innocuous than that.
Social Security is technically drawing down the (fictitious) 'SS Trust Fund Surplus' as we speak today! We were not 'supposed' to be drawing down any of that surplus for at least another 10-15 years! Were we?
The SS Trust Fund 'Surplus' only exists in the imaginations of federal bureaucrats who thought it up 28 years ago in 1983 when Congress passed the last 'Save Social Security Act' after the Alan Greenspan Commission came up with accelerated payroll tax hikes and dramatically higher payroll taxes on self-employed people.
And yet, despite all of this 'silence' about addressing the fundamentals of our spending close to $3.6 trillion this year from Washington, there are still those, including President Barack Obama as the Drum Major-in-Chief beating the drums for 'higher taxes on the rich....so they can pay 'their fair share!'
Let us ask you the following questions:
1) Suppose you had an investment in a company that was poorly-run and bleeding cash every month through mismanagement and malfeasance from current execs. Would you pour any more of your hard-earned money into this company BEFORE they could prove to you that they had taken care of the wasteful spending under their control?
2) Suppose your child wanted an increase in his/her allowance even though they did no chores around the house, were making D's and F's in school and generally treated you, the parents, as the hired help to boss around every day. Would you raise the allowance to $1000/week 'just because they told you they needed the money?'
3) Suppose your federal government had done a terrible, awful job of managing the money you have been sending to them for the past decade; have never addressed any of the real problems in the biggest entitlement programs the world has ever known; spent money on wars overseas without budgeting for them or raising taxes to pay for them from the current generation; and generally made a mess of US federal finances by never even trying to balance the budget through spending restraint first.
Should you or would you just willingly send more of your money to Washington to 535 elected officials who apparently have zero capacity to: read, write, add, subtract, balance or compromise...in that order?
Heck, no! That would be the pure-T definition of insanity to the nth degree. Only truly stupid people throw good money after bad....and we see evidence of it every single day.
Now we are 'on-record' as saying that we would take a $1/head tax hike on everyone in return for a $10 trillion spending reduction package over 10 years. We understand that there are a majority of Democrat US Senators under the spell of Nevada Senator Harry Reid who apparently are so spellbound by his charisma and leadership that they just do everything he says and tells them to do.
He tells them to stand firm on 'raising taxes on the rich!' and waves the bloody shirt just like David Axelrod tells President Obama to do about every 3 weeks. Count 'em and see if that is not the interval of these 'soak the rich' speeches.
But if we could get $10 trillion in spending reductions in return for a measly $1/head tax hike, we would do it in a split second simply because it would be in the best interests of this nation to take bold action to reduce these deficits today so we don't become like Greece tomorrow.
It would be in the grand American spirit of 'compromise' which is as deeply embedded in the US Constitution as the DNA in your own body identifies you as the son or daughter of two parents.
We understand that there are some people on Planet Earth, such as the majority of Democrats who control the US Senate under the spell of Senator Harry Reid, who just do not want to cut spending anywhere, anytime or any place (They have not even passed a budget for the past 1000 days or close to 3 years running for Goodness Sakes!!). Since we have a civil government that demands compromise, people who want smaller government spending have to work with people who want to raise taxes to get something we want done for the good of the nation: lower debt.
It would still be throwing $1 in tax hikes in the gutter because there would be trillions more in spending that can and should be reformed or eliminated. But we would get $10 trillion in spending reductions which means $10 trillion in lower deficits and $10 trillion in less debt incurred to pass on to our children and grandchildren to pay.
Raising taxes to pay for an ever-expanding, not optimally managed federal government without dramatic spending cuts or reforms is simply 'insane'.
Cut the spending first. And then let's see if any taxes are needed to to plug the deficit gap.
Our guess is that they will not be needed. From the rich or anyone else.