Congress, Deficit

Sorry folks, the Bush tax cuts need to be eliminated – for everyone

It is mind numbing to watch the Republicans and Democrats argue over who should continue to receive the Bush tax cuts. The Republicans believe that everyone should continue to pay less than their share to a bankrupt Uncle Sam.

Democrats feel that only those making under $250,000 should benefit. They state that the tax cuts should only go to working Americans, apparently in their mind those out there who make more than $250,000 are not working for it.

It is disappointing (but not surprising) that neither party points out that the country can not afford these tax cuts. We are going broke people and the politicos in Washington are ignoring that at the peril of all of us. The fact that the tax cuts were put in place by Bush should be a tip-off that they were fiscally irresponsible in the first place.

After all, this is a man who once stated, “You cut taxes and the tax revenues increase.” By that skewed logic I guess the tax rate should be reduced to zero and the money will start gushing into Treasury’s coffers. I wish reduced rates did lead to increased revenues. But you can’t argue with simple math. Having less of something really does lead to having less of it.

Trust me, I’m an MBA

Remember when Bush was touted as the first MBA president? And a Harvard MBA no less. Initially I thought this meant that he understood finance and economics. Sadly I was wrong. I remember watching his speech at the Republican convention in 2000. He talked about the surpluses that had been run up in the latter years of the Clinton administration. Bush stated,” Americans have overpaid and now they are due a refund.” That’s when it first hit me that Bush just didn’t get it. (His fuzzy math comments came later.)

Just like Bush didn’t know the difference between Shiites, Sunnis and Kurds, he also had no idea that there was a difference between the annual deficit and the long-term debt. Sure there were surpluses during the late 1990s. But those surpluses were being used to pay down the long-term national debt. That’s a good thing.

Instead Bush and his Republican cohorts in Congress went on a reckless spending spree that they combined with a tax cut. How has that turned out for us? Remember when they said that tax cuts would starve the beast of government so spending would have to go down? Well guess what, it just resulted in larger deficits. It is a truism in Washington that spending never goes down, no matter which party is in charge.

Red ink as far as the eye can see

Now we have had two years of Obama and a Democratic congress. I understand the need for stimulus but trillion dollar deficits!?! That is fiscally insane. What is even more insane is how the concept of annual deficits that now measure over a trillion dollars isn’t even cause for alarm.

So back to reality. It doesn’t matter which party is in charge. They each spend money they don’t have. At this rate the future of this country is bleak indeed; so to argue which group should get the benefit of continuing tax cuts that were ill-conceived from the get go is absurd. This country needs to get its fiscal house in order. Now. The longer we wait the worse it will be. For everyone.

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About Michael

This blog has a mix of some of my main interests in life: travel, politics, food and generally being a curmudgeon. Enjoy.

Discussion

16 thoughts on “Sorry folks, the Bush tax cuts need to be eliminated – for everyone

  1. I actually never even thought of just letting ALL the tax cuts expire. Like many of us, I let myself get caught up in the either/or rhetoric – so shame on me. But great point, a fine point. Let them all expire.

    Posted by Moe | December 1, 2010, 10:17 pm
  2. I think you’re right, too. And I imagine a lot of people agree with this – even people who are considered left of center. There must be quite a few other ways to bring jobs back to this country without ruining it.

    Posted by Snoring Dog Studio | December 2, 2010, 7:47 am
  3. I like the way you’re looking at this. I have believed for a long time that a root cause of our fiscal crisis and underlying economic instability is undertaxation. Low taxes are great — if they lead to low spending. They are disastrous when they lead to massive deficits and mountains of debt. So I, too, favor letting these tax cuts expire. I don’t get why everyone is so worked up over a rise in the top rate from 36% to 39% anyway. *sheesh*.

    On the other hand, I do think that the severity of the recession, and the tough road ahead for the economy to rebuild the jobs base, does call for a note of caution.

    What disturbs me is the political conflation of two issues which are utterly unlike: short-term economic crisis management versus long-term economic well-being and fiscal restraint. I agree with the idea of short-term spending and deficits to combat the recession. I believe that deficits would be higher today if not for the stimulus — which improved the economy, thereby reducing government safety net and poverty-related expenditures and increased government receipts. But we cannot live that way all the time. We must address the structural deficits, but only when we are safely clear of this recession. For me, that would mean a short-term extension (one year?) and then let them all expire.

    Why is it so hard for our politicians to understand that, on any road, sometimes we need to steer left and sometimes we need to steer right?

    Posted by The Center Square | December 2, 2010, 4:37 pm
  4. Thanks for saying that! It’s inconceivable to me that that wasn’t seriously considered by anyone, it should have at least been a starting negotiation position. Now the debt commission wants to lower the tax rate more. 50 years ago the rich were paying 81%. You can only cut costs so much before you ruin the infrastructure and abandon the needy.

    Posted by Betsy Ross | December 2, 2010, 6:35 pm
  5. In theory, everybody wants the government to be more fiscally responsible. In reality, no one wants to give up what they have in order for that to happen. Elimination of all tax cuts won’t solve the problem, but it will be a step in the right direction.

    Posted by lifeintheboomerlane | December 3, 2010, 8:32 pm
  6. …mmm, expire, sounds like a kind of death to me…

    Interesting and well thought math, and so much more accurate than Bush’s idea that taxpayers were due a refund.

    But, and this is one of the things I am always trying to understand – who benefits more from government overspending, modest income earners, or big business income earners?

    I always seem to answer this question with – It’s Business that derives the largest benefit from government overspending – so it follows to me at least, that those who benefit the most should pay a commensurate tax…

    Letting the Bush Era tax cuts expire for all could be a start, but a total reevaluation of how we think government should spend money, and a total revision of the tax codes, so that those sectors of the economy that derive the greatest benefit from government spending would pay a tax that supports that spending, would be an even better idea…

    …yeah, like that’s going to happen…

    Posted by philosopoet | December 4, 2010, 10:47 am
    • I’m not sure who benefits most from government spending. I guess I’ve never looked at it that way but I will in the future. Off the top of my head I would say defense contractors as an entity get a large share of federal dollars. Also, Social Security and Medicare recipients since they are such a large part of the federal budget. Increasingly China will be a large benficiary of government spending as covering our debt service becomes our largest single line item.

      Posted by Thomas | December 12, 2010, 1:07 pm
      • The data is empirically irrefutable that the highest income cohort has seen an appreciable growth in its economic prosperity, while everyone else has essentially been treading water. Here is a good presentation of the data: http://www.economicmobility.org/assets/pdfs/EMP%20American%20Dream%20Report.pdf.

        That is the result of all economic factors, not just tax policy. It isn’t necessarily appropriate that tax policy single-handedly offset the cumulative effects of everything that happens in our economy. But I do ask myself why the middle class continues to support reduced regressivity in federal tax policy, when it has borne no fruit for them in decades. I see John Boehner tearing up this morning on the news, that he worries about kids today having the chance to live the American Dream. I applaud his sentiments, but wonder why he fervently supports a tax structure that impedes it.

        Posted by The Center Square | December 13, 2010, 2:45 pm
  7. One way to bring jobs back would be to build up the manufacturing base. It is so hard to find something made in America any more. Thanks for your comment.

    Posted by Nona | December 22, 2010, 1:40 pm
    • @ Nona: I think the only way to reliably build up the manufacturing base is to make it advantageous for Americans (and others) to buy American products. It does little to no good to simply help American companies make stuff. They have to have customers.

      Americans can manufacture all the high def TVs, to use an example, they want to. But unless they can beat the $800 deal Costco offers on a China-made 46″ HD TV, then consumers will reject the American-made option.

      The government has no policy options to fix this. Unless we want to embrace low pay or high consumer prices, we need to grow our jobs base in new directions — information, services, technology, innovation.

      Posted by The Center Square | December 26, 2010, 10:03 am
  8. I think you’re right, too. And I imagine a lot of people agree with this – even people who are considered left of center. There must be quite a few other ways to bring jobs back to this country without ruining it.

    Posted by Luann | December 23, 2010, 7:23 pm
  9. Can anyone explain to me why, when we speak of cutting the deficit, no one ever suggests, or even mentions, the 750+ military bases The U.S. has around the world?
    Why does the U.S. spend as much on it’s military as the next 10 countries (China, Russia, India, Pakistan, etc) COMBINED?
    Every year we send 3 billion dollars to Israel, plus billion$ in weaponry and support, Not to mention the billions that are sent to tens of other countries for drug wars, training, and other miscellaneous.
    The wars in Iraq and Afghanistan costing about $900 billion of US taxpayers’ funds spent or approved for spending through November 2010.

    Lost & Unaccounted for in Iraq – $9 billion of US taxpayers’ money and $549.7 milion in spare parts shipped in 2004 to US contractors. Also, per ABC News, 190,000 guns, including 110,000 AK-47 rifles.

    Missing – $1 billion in tractor trailers, tank recovery vehicles, machine guns, rocket-propelled grenades and other equipment and services provided to the Iraqi security forces. (Per CBS News on Dec 6, 2007.)

    Mismanaged & Wasted in Iraq – $10 billion, per Feb 2007 Congressional hearings

    Halliburton Overcharges Classified by the Pentagon as Unreasonable and Unsupported – $1.4 billion

    Amount paid to KBR, a former Halliburton division, to supply U.S. military in Iraq with food, fuel, housing and other items – $20 billion

    Portion of the $20 billion paid to KBR that Pentagon auditors deem “questionable or supportable” – $3.2 billion

    U.S. 2009 Monthly Spending in Iraq – $7.3 billion as of Oct 2009

    U.S. 2008 Monthly Spending in Iraq – $12 billion

    U.S. Spending per Second – $5,000 in 2008 (per Senate Majority Leader Harry Reid on May 5, 2008)

    Cost of deploying one U.S. soldier for one year in Iraq – $390,000 (Congressional Research Service)

    Is it just me or have we absolutely lost our minds?

    Posted by ochipwa | January 14, 2011, 3:51 pm
    • No it’s not just you. The defense budget seems to be one of the untouchables in terms of cutting spending. However I feel that cutting defense dollars would actually make us stronger as the military would be forced to act more efficiently. Thanks for the post.

      Posted by Thomas | January 14, 2011, 5:27 pm

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