CRISES OF THE PRESIDENT'S OWN MAKING
The President undoubtedly knows that if he offers a budget to Congress that includes cuts sufficient to eliminate the national debt over the next decade, he would necessarily become the villain of his own party (having to bleed many a pet agency and program). No leading Democrat wants to reduce government spending by more than a few hundred billion dollars per year, when the nation needs in excess of a trillion dollars in cuts just to eliminate the annual deficits (without doing a thing to reduce the existing $16.4 trillion debt). No leading Democrat is willing to take any action that alters the reality that spending overall is, and on entitlements in particular are, unsustainable, bringing the nation and the economy down with each passing day.
The President is able to avoid accountability for his failure to lead because he rests atop a near majority of the electorate that benefits from entitlement spending and is unwilling to accept any degree of sacrifice associated with an immediate change to Social Security, Medicaid, and Medicare. He therefore does nothing substantive to change the status quo and will likely do nothing substantive to achieve fiscal stability for the remainder of his term.
Nevertheless, a true love of country compels any responsible person to recognize that substantial cuts in government spending are required and that the precarious state of the domestic economy makes any additional “revenue enhancements” to be ones likely to yield unemployment and more economic stagnation but no revenue capable of altering the nation’s dire financial circumstances. Consequently, the only way out of the mess we are in is to cut spending, roll back regulation, and reduce taxes on those with the capital necessary to grow the economy. An intelligent approach lies in doing everything possible to grow the private sector but that is an unacceptable alternative for those wedded to existing entitlements and to political power over market forces.
The tax increases already slated are said to be modest because they affect only the top one or two percent of taxpayers. That opinion misleads, however, because the top one or two percent are those in this economy with the capital accumulation needed to employ, expand, and innovate. In short, by diminishing the wealth of the rich in the midst of a recession, the Obama Administration has shot itself in the foot because the increased taxes will do nothing to reduce meaningfully annual deficits and the national debt but will exacerbate the entitlement crisis by expanding the ranks of the unemployed and diminishing the ability of the economy to expand.
Amazingly, the President and House Minority leader Pelosi are calling for more “revenue enhancements,” as if capturing any amount more, say an additional $100 billion annually, will do anything material to off-set a deficit exceeding $1 trillion and a debt exceeding $16.4 trillion. They lust for the additional revenues not to pay down the national debt but to increase spending on pet projects, such as new government works programs.
Likewise the “fairness” argument is a gross red herring. Increasing taxes on the wealthy is said to be fair because they have more to give than the Middle Class. There are, of course, far fewer wealthy and yet everything in this fragile economy depends on their wealth. The real issue is whether government is more apt than the wealthy to put their income to the best and highest use, which is quite resoundingly not the case. The best and highest use in this economy involves spending that creates jobs and investment that creates sustainable economies. The gross inefficiencies and political control over wealth exercised by the federal government amply proves that every dollar taken by government results in a net loss because it goes for an action having no necessary relationship to the forces of supply and demand while every dollar retained by the private sector goes for an action that supports sustainable market growth.
Stimulus spending has proven an utter failure. Liberal economists argue that despite its enormity, the stimulus spending over the last six years was not enough. Double the debt and we will finally see the economy move out of recession, argue folks like Paul Krugman. The problem with this thinking, among other things, is its utter disregard for recent history. One would expect $5 trillion to have catapulted the economy out of recession, but it did not.
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It did not precisely because each dollar was spent based on political preference rather than in response to market forces. Stimulus spending, the payment of sums to politically favored individuals, does nothing to alter the underlying dynamics of an overtaxed and overregulated economy. Businesses fail to grow not because public employees lack adequate pay or because the public sector is not large enough, businesses fail to grow because they are selling less but are paying more. It is not just the typical American worker whose salary has declined over the last decade, many businesses suffer from inadequate sales and increasing costs. At a time when they could best use tax deductions and regulatory relief, they are experiencing the opposite at the federal, state, and local levels.