Despite the fantasy-land message the Tea Party folks like to spout at anyone who will listen to them, tax cuts do not reduce budget deficits. On the contrary, reducing income while the bills are still coming in is a formula for financial disaster, often leading to bankruptcy. That’s exactly where the USA is heading.
Regardless of your political leanings, it is an undeniable historical fact that then-president Bill Clinton reached compromises with the republican congress in the mid-1990′s to balance the federal budget that resulted in budget surpluses for each of the last four years of his presidency. By the time GW Bush took over the presidency from Bill Clinton in 2001, the budget surpluses for next ten years were estimated to be US$5.6 trillion (with a “t”).
Today, the budget deficit is approximately US$1 trillion a year. That’s a huge change in eight short years.
What changed to cause this financial disaster?
GW Bush’s very first budget proposal returned the USA to deficit spending, and it just got worse from there. The 9-11 attacks had a effect on federal spending that was universally accepted as necessary. But far beyond necessary public safety expenditures, Bush and republicans who controlled congress until January 2007 spent the taxpayers money as if they were drunken sailors. This was coupled with a huge tax cut for the rich early in Bush’s rule, which dramatically reduced tax revenues while spending was going up. The republicans, who claim to live by “spend less, then tax less”, violated that very same manta by spending more and still taxing less (if you were very rich). Thus, the bills were not getting paid.
Bush’s tax cuts, which were a version of former president Ronald Reagan’s voodoo “trickle-down” economics, were supposed to stimulate the economy, which actually didn’t need stimulating, anyway, despite the dot.com failures of the late 1990′s. Instead, by December 2007, the USA was in a worsening recession, the effects of which are still hurting the middle class today.
President Obama inherited this mess, and the democrats who now controlled congress should have taken advantage of their control to push through important spending cuts even as health care was being debated. The congressional republicans could also have joined in to find compromises. Instead the republicans, particularly in the US senate, adapted a single strategy: Oppose EVERYTHING the democrats propose. Stop at NOTHING to have NOTHING pass. Make the democrats look totally ineffective, and piss everyone off everywhere. People will get so disgusted that they will vote the democrats out of congress in 2010. The republicans can then resume their self-appointed, self-adjudged, righteous place as the party in power.
And for what? To spend more and tax less?
Let’s face it. Even president Obama’s proposed three-year freeze on all discretionary government spending is but a tiny drop in the into the deficit-reduction bucket. The Tea Party’s dreams of curtailing or even ending entitlements such as social security and medicare are unrealistic and won’t ever happen until we run completely out of money…then EVERYTHING stops. The annual interest alone on the national debt is projected to be US$516 billion by 2014, which is more than the total projected domestic spending budget for that year. After that, it’s only a matter of time before the USA goes bankrupt and the American dollar becomes totally worthless.
There is only one possible path to national financial solvency: EVERYONE has got to “Bite the bullet“.
Both liberal democrats and conservative republicans have got to abandon their singular goals in favor of crafting joint legislation that will both effectively reduce spending AND pay the bills. Liberals have got to embrace a reduction in spending. Republicans have got to embrace higher (and fairer) taxes to pay the bills, especially those of the past eight years.
According to the latest polls, two-thirds of Americans are so frustrated with congressional gridlock that they say they will vote the incumbents out of office. The National Republican Committee (NRC) likes this because there are more democrats in congress than republicans. But isn’t the main reason for going to congress to do the public’s business, as opposed to making the other party look bad??
Thus, it’s a really tough sell. The ultra-conservatives like the Tea Party and the ultra-right fringe will NEVER agree to tax increases, not matter what. These are the same tunnel-visioned folks who will never accept any abortion even if it’s to save the mother’s life. Even conservative talk show host Bill O’Reilly recognizes that some of these folks are “out there”.
The prognosis is not too encouraging. The best case scenario is that it will take some very courageous people on both sides years to fix this.
So you just might want to start looking at properties in Canada or Europe, and/or turn your assets into gold or some other inflation-proof commodity.
Oh yeah…and you might want to learn Chinese, since China now owns a huge portion of our national debt.
After all…you’ve heard of foreclosure and repossession, right?
deficits don’t matter” – Dick Cheney