Sunday, April 17, 2011
Obamanomics and the Pea
The raising of taxes will only go towards paying down the old debt, while the new debt climbs to new heights. By Obama saying he will tax the rich is sort of like the game of "thimblerig" keeping your eye on the pea, while the shells are being shuffled around. In Taxing the rich there is no pea under the shell, it only creates the illusion that something is being done.
Failure to raise our debt ceiling only means the Treasury cannot borrow more money; it isn’t the end of the world. By forcing government to limit spending it will increase its proceeds.
Defaulting on our creditors and refusal to pay interest on our debt is not caused by a failure to raise the debt ceiling. The federal government collects over $2 trillion in annual tax revenue, which is much much higher than what we pay in interest.
What politicians are saying is they would rather default on our creditors than cut their precious spending and upset special interest groups. They are saying that votes are more important than the “full faith and credit of the United States”.
It is nothing more than a threat to avoid making the hard decision; the reality is no one wants to do anything about it. To do otherwise, would mean losing those votes.
Like you or I, we must live within our means or suffer the consequences. Government is no different and the $2 trillion it collects in taxes is no small chicken feed.
Even if the Bush tax cuts for the wealthy were allowed to expire, the federal government would have only raked in an extra $40 billion this year, quite a ways off from eradicating the $1.6 trillion dollar budget deficit the Obama administration will rack up this year.
By Obama extending the Bush tax cuts for two years the federal government will take in roughly $81.5 billion less from those making over $250k, but $463 billion less from those making less than $250k.
Even if Obama not extended the Bush tax cuts and taxed the rich, his deficit for this year would have still been over $1.3 trillion. The taxing the rich cry is a diversion and another intrusion on class warfare.
Bottom line is the federal government has a spending problem . . . not a revenue problem. This year alone spending is over double what was spent in any year prior to 2005 and the national debt has increased 300% since 2007. By not controlling spending taxes will only continue to climb higher. Once all the rich are taxed where do we go to pay down the next deficit?
If we do not face the problem head on, sooner or later the problem will come to us. To paraphrase an old saying . . . “ If we do not change direction, we may end up where we are heading.”