Tuesday, July 5, 2011

Behind The Debt Ceiling Debate

This NJ Star-Ledger editorial appeared in May 2011. It discusses the political impasse regarding the raising the debt ceiling to accommodate the insane Federal spending binge. Since that impasse is still with us, I thought I’d publish a bit of activism I engaged in back then.

Basically, the editors chastise the Republicans for refusing to “compromise” by accepting tax increases in exchange for spending cuts. The S/L writes:

House Speaker John Boehner … issued an ultimatum. His party will agree to raise the debt limit only if Democrats yield to the Republican solution on the debt — $2 trillion in spending cuts and no tax increases.

A $2 trillion spending cut over the next decade is reasonable if it is done in a way that protects the most vulnerable, as the president’s bipartisan commission attempted to do.

But the Republican budget plan fails that test. While protecting tax cuts for the wealthy, it imposes two-thirds of its spending cuts on programs that serve families of limited means. Medicaid, food stamps and college scholarships would face deep cuts, to name a few.

The bigger problem with Boehner’s ultimatum is that he pretends we can solve the debt problem without raising taxes.

The federal government today is taking in revenue equal to about 15 percent of the GDP. It hasn’t been that low since the 1950s, before programs like Medicaid and Medicare existed. To keep revenue that low as Baby Boomers retire is simply not realistic.

This is classic. Raise taxes now, and we promise to cut spending, but not on the really important programs (which is just about anything the statist Left wants). The Republicans, in my mind, have already compromised too much by failing to demand tax cuts along with those spending cuts. But my comments concerned other aspects of this. As usual, I used my screen name Zemack. First, I answered this:

Eatontownbob May 12, 2011 at 8:02AM

Cut the $4 billion in subsidies (our money) for the top 4 oil companys which combined made $18 BILLION in first Quarter profits. With oil trading for aprox $100 a barrel, I don't think they need tax breaks to be encouraged to explore/drill.

Zemack May 12, 2011 at 12:08PM

A tax break is not a subsidy. It's a taxpayer (individual or corporate) keeping more of what he earned. There is no government money - i.e., other taxpayers' money - involved.

Aside from that fact, eatontownbob is on to something. Our income taxes - both corporate and personal - are corrupt, special interest-driven monstrosities that empower politicians to manipulate the private economy and dole out political favors. I would agree with eatontownbob if he endorsed the general idea to eliminate all tax breaks, including the massive renewable energy subsidies. That industry is a gigantic corporate welfare scheme that should be freed to compete and sink or swim on it own economic merits.

Then, how about lowering both taxes to a single flat rate with no deductions except for personal exemptions for each individual? It would be economically stimulative (promote production, trade, profits, and jobs), more justly progressive, much fairer politically, and thus more moral than what we have now.

Here is another comment and the exchange that followed:

Zemack May 12, 2011 at 1:14PM

The Star-Ledger is being incredibly disingenuous here. It states that “The federal government today is taking in revenue equal to about 15 percent of the GDP. It hasn’t been that low since the 1950s”.

But revenue receipts are not the true measure of the governments tax take: Spending is. And today, federal spending as a percentage of GDP is at about 25%. That means 25% of America’s wealth is being consumed by the federal budget alone, the highest since WW II.

The Editors fail to mention inflation – the artificial expansion of the money supply via the government printing press to finance the deficit. Inflation is a tax that confiscates your purchasing power, while leaving you with increasingly devalued dollars manifested in rising prices.

The real problem is not the deficits, but rather the government’s consumption of the nation’s wealth. The only way to address that problem is through spending cuts, which means the privatization and gradual elimination of the immoral wealth redistribution programs that constitute the bulk of federal spending.

The editors call for compromise as the ultimate solution to the latest crisis, and berate the Tea Party for refusing. But more and more people are on to the sinister game that has been going on for more than a century in America. The current state of affairs has been built on such compromises as the Coburn/Durbin deal the editors trumpet. The spending cuts are non-existent, because the programs that feed the growth of spending are not being phased out and eliminated. The tax hikes are real, however, and will only serve to feed the cancerous growth of socialism in America.

Conservatives and the GOP have historically caved time and time again, always falling victim to the god of compromise. But any compromise between Left and Right always benefits the Left. And yes, compromise sometimes is a moral failing. And yes, it is “time to settle long-standing grievances”: to attack the fundamental causes of the crisis. If not now, then when? Putting that day of reckoning off time and again is irresponsible, irrational, and immature. Real adults think long-term and don’t continually punt the problem down the road, as the editors would have us do once again.

BigMarbles May 12, 2011 at 2:56PM

zemock- Your numbers are bad.

The Congressional Budget Office last Thursday released its latest projection of the 2011 deficit - an astonishing $1.5 trillion. The spending that goes along with the deficit has been the focus of news and commentary around the country. The other culprit hiding behind the deficit is of course Federal Government Revenue levels. Revenues are projected to be some where around 15% of GDP an all time low over the last 60 years. The average revenue level as a percent of GDP for the last 30 years is 18%.

Yes, some of the revenue short falls are due to the recession, but much of it is related to the extension of the Bush tax cuts.

Why is it you eightballs who constantly attack the SL are ALWAYS proven wrong? And the SL is ALWAYS RIGHT???

Some people do get my point, though.

Deceiverbo May 13, 2011 at 8:36PM

Lost Marbles, it appears you have a serious comprehension problem. The poster wasn't denying the 15% figure, he was pointing out the flip side of the coin (spending) which people like you and the liars at the SL try to hide.

I tried one more time with BigMarbles.

Zemack May 12, 2011 at 7:50PM

If government is spending 25% of the nation’s income (GDP), and only 15% is supplied by direct taxation, where does the balance come from? Borrowing - which means pulling investment capital and savings out of the economy. But to the extent that the state can't sell its bonds in the open market, as is mainly the case now, it grabs your wealth indirectly through inflation.

One way or another, the government is taxing the economy to the exact tune that it is spending. The combination of direct taxation, borrowing, and inflation (ex. - Bernanke’s “quantitative easing”) adds up to a commutative tax take of 25%. There is no way around these numbers. Reality is the final arbiter. I stand by my numbers. The wealth consumed by government spending doesn’t come out of thin air, or grow on trees, or miraculously appear from government printing presses.

Governments nationalize their monetary systems under central banks so they can grab a much bigger share of their nation’s wealth than people would tolerate through direct, easily perceivable taxation. That so many people never catch on to the monumental crime of inflation is a testament to the ability of governments to hide the truth by distorting the teaching of basic economics in their government-run schools.

BigMarbles May 13, 2011 at 12:14PM

zemac- Geeeez...............Who should i believe..........who's numbers are correct??....................
The Congressional Budget Office...............................or ZEMAC??.............................................
CBO or Zemock?????...................this is a tough one..................................................................
I gotta tell ya, zemock,..........................I GOTTA DO WITH THE CBO!!!!!

Sigh! I really didn’t think this guy that can’t spell would understand. But I made my point.

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