The fiscal cliff discussions taking place now are a political sideshow. Avoiding the so-called cliff won't fix anything that needs fixing, assuming we're interested in getting our economy and nation back on the right financial and economic track.
We need genuine long term fiscal reform. And while taxing the rich more won't fix our problems, raising taxes on them would at least remove that phony issue from center stage. By doing to the rich as President Obama has proposed, we will have eliminated less than 10% of the budget deficit.
But by so doing, we then can ask our government knows best gang what they intend to do about the all too real other 90% or more of the problem. In other words, we'll still have a deficit of $1 trillion, even after raising taxes on the fat cats as initially proposed by President Obama and subsequently approved by a majority of the voters. So be it.
Entitlements such as Medicare, Medicaid, ObamaCare, Social Security, government "investments," and other government spending -- er -- "investments" would be good places to begin the legitimate public discussion. Only after exhausting those possibilities for true fiscal reform should we entertain higher tax rates on We the People as a whole. And higher tax rates on individuals and companies will only cause the economy to grow more slowly, which is exactly what we don't need to fix our fiscal problems.
Accordingly, let's just tax the targeted millionaires and billionaires more (as defined by the government knows best gang) and leave the rest of Americans alone. And by the way, we need no new stimulus or government "investment" initiatives either. Besides, that's just another name for higher government spending, and that we have plenty of already.
In that vein, here's what happens as a result of government stimulus spending efforts --- government spending grows to a new and permanently higher level.
The Hard Fiscal Facts has the details:
"While the rest of America was holding an election last week, the gnomes at the Congressional Budget Office released the final budget totals for fiscal 2012. They're worth reporting because they illuminate the real fiscal choices that confront the country, as opposed to the posturing you'll be hearing over the next few weeks.
The nearby table lays out the ugly details. The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history. As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.
Tax revenue kept climbing, up 6.4% for the year overall, and at $2.45
trillion it is now close to the historic high it reached in fiscal 2007 before
the recession hit. Mr. Obama won't want you to know this, but this revenue
increase is occurring under the Bush tax rates that he so desperately wants to
raise in the name of getting what he says is merely "a little more in taxes."
Individual income tax payments are now up $233 billion over the last two years,
or 26%.
This healthy revenue increase comes despite measly economic growth of between 1% and 2%. Imagine the gusher of revenue the feds could get if government got out of the way and let the economy grow faster.
Now let's look at outlays, which declined a bit in 2012. That small miracle was achieved thanks to a 4% fall in defense spending, a 24% fall in jobless benefits, and an 8.9% decline in Medicaid spending.
Note, however, that federal spending remains at a new plateau of about $3.54 trillion, or some $800 billion more than the last pre-recession year of 2007. One way to think about this is that most of the $830 billion stimulus of 2009 has now become part of the federal budget baseline. The "emergency" spending of the stimulus has now become permanent, as we predicted it would.
The reality is that the fastest way to raise revenue is with faster economic growth. To the extent that raising tax rates will reduce the rate of growth, it will slow the flow of tax revenue and increase the deficit.
Even if Mr. Obama were to bludgeon Republicans into giving him all of the tax-rate increases he wants, the Joint Tax Committee estimates this would yield only $82 billion a year in extra revenue.
But if growth is slower as a result of the higher tax rates, then the revenue will be lower too. So after Mr. Obama has humiliated House Republicans and punished the affluent for the sheer joy of it, he would still have a deficit of $1 trillion."
SUMMING UP
While raising taxes on the "rich" won't solve our fiscal problems, it will at least remove that phony issue from the much needed public discussion on true and long term fiscal reform.
Thus, let's get it done and out of the way. Then we can face facts and deal with the harsh reality that we're still about $1 trillion away from balancing the budget. And balancing the budget is the only way to stop the nation's debt from continuing to spiral out of control.
To seriously make an effort to balance the budget, sustained and solid economic growth is the answer to our fiscal issues and the only realistic one.
Combined with lower government spending, reforming the outmoded tax code and minimizing tax loopholes, crony capitalism initiatives and other misguided government "investment" programs better left to the private sector, we can repair the damage that's been done. But only if we also take the necessary steps to reform entitlements such as, Medicare, Medicaid, ObamaCare and Social Security.
There's lots for our "public servants" to do, so let's help them get on with it and take the tax the rich issue off the table and out of the way.
Let's hope our politicians 'get' all this and 'just do it' so we can take the necessary steps to get our economy moving forward again.
Thanks. Bob.
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