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| The False Left/Right Paradigm |
All over the Internet, Republican pundits are declaring that extending the Bush tax cuts will save the economy and Democrat pundits are declaring that ending the Bush tax cuts will save the economy. Well, you know what? Nothing will save the U.S. economy. The U.S. government is going to continue to drown in a sea of debt no matter what happens with these tax cuts. State and local governments are also going to continue to drown in a sea of debt. Thousands of factories and millions of jobs are going to continue to be shipped overseas every single year. America is going to continue to transfer tens of billions of dollars of its national wealth to foreign nations every single month. Nothing that the Republicans and Democrats are debating right now is going to do a thing to alter the fundamental problems that the U.S. economy is facing.
Not that I personally do not like tax cuts. I would like my own personal income taxes to be cut down to zero percent please. I will take as many tax cuts as I can personally get.
And it is absolutely undeniable that the federal government is already handed way, way, way more money than it ever should need. Starving the federal monster of cash is a good thing. We need a much, much, much smaller federal government. But the odds of us ever returning to the kind of limited central government envisioned by our Founding Fathers is somewhere between slim and none and slim just left the building.
So aren't less taxes always good? Well, not necessarily. You see, the federal government is planning to spend much more money in the years ahead. When you combine significant tax cuts with huge increases in spending you get lots more debt.
Extending the Bush tax cuts (and throwing in a few extra ones) will help the U.S. economy in the short-term, but without accompanying brutal spending cuts it will make our long-term debt problems even worse.
But most of our politicians don't think about the long-term. Most of them just want the economy to turn around in the short-term so that they can get re-elected.
For example, Barack Obama is not completely stupid. He realizes that these tax cuts are probably his best shot at a short-term economic boost. If the economy starts to get back to "normal", it may be just enough to get him another term in office.
And self-preservation is what most U.S. politicians are most interested in.
Meanwhile, we are heading for a national debt nightmare that threatens to destroy our financial system and plunge us into national bankruptcy.
But if our politicians did attempt to make the brutal spending cuts that would be necessary to balance the budget, most Americans would start screaming bloody murder. The truth is that the American people have become dependent on the government and they like getting their checks, their handouts and their government contracts.
Okay, so what will this deal that Obama has made with the Republicans actually do?
Well, it will extend most of the Bush tax cuts for two years (right up through the 2012 presidential election). The following are some of the details....
*All income levels will continue to be taxed at the lower rates instituted by the original Bush tax cuts. That means that the highest rate will remain at 35 percent.
*Barack Obama claims that extending these tax cuts will save the average American family approximately $3,000 next year.
*The 15 percent rate on capital gains and dividends will be continued.
*As part of the package, Republicans have agreed to a 13 month extension of long-term unemployment benefits.
*One new tax cut included in the deal is a reduction of the Social Security payroll tax by two percentage points for one year. So for a year U.S. workers will be paying just 4.2 percent instead of 6.2 percent. Barack Obama believes that Americans will save $120 billion next year from this tax cut alone. For the average American family, it will mean that they will have approximately an extra $1000 in their wallets.
*The existing $1,000 child tax credit will be extended for the next two years.
*Another tax cut that is new would allow U.S. businesses to immediately expense all business investments in 2011. The Obama administration is claiming that this tax cut would be the biggest "temporary investment incentive" in American history.
*A compromise was reached on the estate tax. There will be an estate tax exemption of 5 million dollars per person and the maximum rate will be 35 percent.
So how much will all of this cost?
Well, all over the Internet the Democrats and the Republicans are arguing over figures.
One figure that is being thrown around quite a bit is $900 billion over two years.
But what is another $900 billion when we are already caught in a death spiral of government debt?
The IMF was already projecting that federal government debt was going to exceed 100 percent of GDP by 2015.
So how soon will we get there now?
Today, our national debt is more than 13 times larger than it was just 30 years ago....
So can't we just "grow" our way out of this debt?
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