Thursday, July 14, 2011
Debt, Debt, and More Debt
As we approach the August 2 deadline for raising the debt ceiling, the news is full of predictions of the credit rating for the country going into a slide and downgraded. They are predicting doom and gloom. I almost expect locusts next.
How did we get here? Are the Democrats to blame? Are the Republicans to blame? The answer is an emphatic yes! They are both responsible. The Democrats want to raise taxes. This never works. The Republicans want to cut spending. This is never followed through on.
There is an old saying in business. "Spend money to make money." It's true to a point. If you want your business to grow, you have to put in some funds to help it grow. But, if you're looking to increase sales, you don't buy new shoes. If you're looking to increase the quality of a hammer, you don't buy balsa wood to make it sturdy.
Politicians have been charged with being good stewards of the money they receive because they receive that money from the taxpayer. They are taking our money to keep this country alive so that we can continue to enjoy the freedoms we've earned throughout our history.
What they have done is wasted our money for decades. These past two years under Obama they've spent more than all previous presidents combined. But we can't just blame Obama. He's only the latest and biggest spender we've had. We can blame George W. Bush, Bill Clinton, George H.W. Bush, Ronald Reagan, Jimmy Carter, Gerald Ford and we can blame each Congress we've had.
They've borrowed money from social security. Social Security was already a system doomed to failure. They sped the failure up with their borrowing of that money. The war on poverty was only supposed to cost us $9 million dollars. As little as ten years ago, we were spending $650 Billion dollars on over 80 welfare programs. So here we are 40 years after the start of the war on poverty and poverty is worse.
Whenever we get into a recession, where is the first place that the big spenders look to get money to save the government from their overspending? Notice I said "THEIR" overspending. They come to the people. In the early 90's we had a recession. Remember Bush the Elders "no new taxes" pledge? It started the recession. Then we had Bill Clinton getting on TV one month after being elected and saying he tried as hard as he could and he just can't justify giving the middle class a tax break as he'd promised. Al Gore cast the tie breaking vote in the Senate and we had more new taxes. The economy flattened out again. The growth dropped from 4.1% in the final quarter of 1992 and languished at 2.6% growth for the next two years.
We never see them cutting their pay or even freezing their pay. It's a small thing because if they cut their pay, or even didn't take pay for a year, it's not even a drop in the bucket. But to increase their pay as they have over the years along with the gold plated benefits they get, is just completely wrong however you look at it.
How many times have we heard of the waste, fraud and abuse of the welfare system and they tell us they just "can't" prevent all of it. So they admit that their war on poverty won't work but they continue to throw billions of dollars down the drain each year.
President Kennedy knew what worked and President Reagan proved Kennedy right. Lower taxes create more revenue to the government. People work harder to earn more if they don't have to pay higher tax rates. They get to keep more of their money. However, they are still paying more even though the rates have come down. Because they are earning more!
Reagan lowered the tax rates, dropping the highest rate down from 70% to 28% and the country flourished! Unfortunately, the politicians saw this money pouring into the coffers from this added economic activity and instead of being wise, they created more programs to spend money on that has been nothing more than added waste.
Bush lowered tax rates twice. In 2001 and 2003. Revenue to the federal government set new records. They were getting more and more money in via taxes, and the country again flourished. The unemployment rate was at or below 5% for the first seven years of Bush's Presidency. But the politicians spent it. Oh yeah, they paid down the debt a couple of times. But only small amounts and not consistently. Instead they created more programs to spend money that don't give a return for the buck.
Now we have Obama. He's spent money hand over fist and finally after two years admitted that shovel ready didn't really mean shovel ready. Now he wants to come to the American people and tell them to pay more to the government to pay for the governments wasted expenditures. But it's the people that are suffering, not the government. The government screws up the economy and the people are the ones suffering. And he wants the people to pay more to get the economy moving, which has FAIILED EACH TIME IT'S BEEN TRIED.
His latest threat is that if he and Congress don't get a deal so that they can raise the debt ceiling, he may not be able to pay seniors their due. It's an empty threat. If he follows through on it and does withhold checks to seniors, what will happen? He'll lose votes. One thing a politician doesn't want to lose is votes.
Congress is no better. The Republicans are saying cut spending and no increase in taxes. That's all well and good and that's what I hope happens. But, it's not binding beyond a year. They are all talking about ten year plans. They have no control over nine of those years. They can pass legislation to cut spending for the next ten years, but the next Congress can come in and change all of that.
Let's assume for a moment that they come to a deal and they do agree to cut spending for the next ten years. That cannot be the end of it. Revenue to the government if falling. They need to increase the revenue. But not with more taxes! They need to revamp the tax code. They need to lower taxes! If they were smart, they'd go to a flat tax or fair tax. Everyone pays the same rate. If you make $1 million dollars per year, you pay 10% in taxes. If you make $10,000 per year, you pay 10% in taxes. Everyone keeps 90% of their pay. With that 90%, they will go and start businesses and hire people. They will spend their money to get the goods and services that they need and even things they don't need but want. They will invest. This will generate more income for those they buy from and because there are more businesses and more people working and more money in the economy, the tax revenues will go up for the government. This HAS WORKED EACH TIME IT'S BEEN TRIED!
As people see more opportunity, less will be living on welfare because they can have more by working. Charitable giving will increase, as it has each time more money is left in the people's hands because the American people are a generous people for those less fortunate. But when they give willingly, they give more. When it's confiscated and redistributed, they find ways to avoid paying added amounts.
If they can't reach a deal, so be it. We'll see where Obama decides to cut back. Maybe his buddies at GE will not get a zero tax burden after a $5 Billion profitable year.
I have said that the fault of this lies with both Republican and Democrat. It is Congress and the Presidents that have failed. I realize that there are more than 80 new Congressmen that weren't in office 40 years ago. But they hold the title of their predecessors and are responsible today for solving the problem and they each get the blame for those that held their seats in the past. They have the opportunity to solve the problem or they can continue the problem or they can make it worse. THIS becomes the responsibility of the American people. Not paying more taxes to pay for Presidents and Congresses that have been incompetent. Our responsibility lies with making sure that we put people in Congress and the White House that will be good stewards of the people's money and if we put a bad one in, it's our responsibility to get him/her out of office quickly and put someone in that will be good stewards of the financial well being of this country.
You're welcome to comment.
Posted by Brett at Thursday, July 14, 2011