Tuesday, September 20, 2011

The Right Question: Do We Choose Higher Taxes or Reduced Entitlement Benefits?

When asked the proper questions, people tend to exercise their common sense. At least that's the case with respect to choices that don't cost us anything.

But what if the real hard questions were asked? Then what would we choose to do?

Voters Want State Government Reform reports on the results of a survey dealing with state budgets and public employee spending. In essence, the strong point of view expressed by voters is to cut state spending and reduce public employee benefits before raising taxes. The article says the following:

"Americans believe that bold action to restrict spending is necessary to stabilize the finances of state government.

Last month, in a wide-ranging national survey of 1,000 randomly selected, registered voters, and in 10 polls in individual states each with 400 respondents, my polling company found that voters strongly favor measures to pare the compensation of current and future public employees. They strongly oppose higher taxes.

Specifically, over three-quarters (78%) say their state faced a budget crisis this year, and 68% say that the crisis was resolved with spending cuts. Overwhelmingly they blame politicians for creating and exacerbating the problems: 48% say "elected state officials made careless and self-serving decisions," while only 6% say "state governments did not tax enough."

The top priorities for resolving current fiscal issues are to cut government spending (47%) and to ask for greater sacrifice from current public employees, by having them contribute more towards their benefits (31%). By almost two-to-one, they think that current public employees should have to contribute more toward their pension benefits because of budget problems.

A majority (51%) say they would not be willing to cut "social service programs provided by your state" to maintain the compensation of public employees; and 60% say that "education and health care" should not be cut so that "the salaries and benefits of public employees could be paid at current levels."

That's fine as far as it goes, but what about federal entitlement promises with respect to OUR OWN social security, medicare and medicaid underfunded benefits, along with public education spending? Other than defense, those four areas are where the real future spending and tax issues lie.

Taxes Emerging as Defining Issue for 2012 argues that higher taxes versus reduced entitlements will be the defining issue in the next presidential election. I agree.

In other words, we have some hard choices to make. Specifically, what we will elect to do about our future entitlement benefits and our current and future taxes? Will we choose to begin paying higher taxes for what we promise ourselves in the future with respect to benefits, or will we promise ourselves less?

The clear view of those surveyed in the "Voters Want State Government Reform" editorial was that we prefer public employees' compensation to be reduced rather than for our own taxes to be raised.

But that's not the real question that needs asking and answering. In other words, our fiscal and budgetary issues relate to the four biggies of social security, medicare, medicaid (the biggest component of which is for nursing home care) and K-12 public education spending.

Hence, here's the real question. Should we raise taxes ON OURSELVES or reduce benefits FOR OURSELVES?

And whatever option we choose, how much of a tax increase, benefit reduction, or both, will be required to put our current overwhelming financial, deficit and debt problems behind us?

President Obama wants to tax what he calls the millionaires and billionaires more. He doesn't propose increasing taxes for the other 98% of earners for one simple math reason; he wants the 98% to vote for him and his political party. But other than perhaps promoting class warfare, that won't begin to address our severe fiscal and financial problems.

In other words, the president's political strategy, while perhaps a winning one with respect to getting votes, won't seriously address, let alone solve, our nation's spending, revenues, deficits and cumulative debt dilemma.

Unfortunately, the Republicans probably won't give us a clear choice either. They want our votes, too.

For the real long term solution, we will simply have to choose between substantially higher taxes for everybody and reduced government provided benefit promises for everybody.

Maybe someday the proper question will be asked of voters. Then we will be forced to choose.

To repeat, the question to be asked will be this; Do we choose for ourselves and our descendants higher tax rates and bigger government or reduced entitlements and more self reliance?

Until we're asked or forced to choose, we'll simply waste more precious time and not address the fundamental issues facing our nation and its long term financial health, national security and ongoing viability.

Politics sucks. So does populism. So does needlessly and willfully avoiding the real issues.

We need some truth telling leadership.

Thanks. Bob.

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