Great Letter To The Editor

[Guest]

Here's a letter to the editor of USA TODAY that is spot-on as far as I'm concerned. The link is http://www.usatoday.com/news/opinion/letters/2010-04-16-letters16_ST_N.htm but I've also cut and pasted it below...

Who created politicians who created debt? Voters did.

"The USA TODAY cover story "A soaring debt, and painful choices" was very informative and well-written (News, Tuesday). Politicians are monstrous liars. Worse yet are the voters who create them. We vote for people who promise to lower taxes and increase social services. We re-elect them if they succeed in accomplishing those two tasks, and then we ignore the debt they create.

We sweep the debt under the rug as if our unrealistic expectations had nothing to do with it. So, here we are, voters and politicians skipping and holding hands while staring into one another's eyes, not noticing the cliff we're about to fall off. We might be too obsessed with each other to be stopped.

Even on the way down, we're unlikely to vote for someone who is fiscally responsible. When we hit bottom, we'll simply vote for the next liar who tells us what we want to hear, assuming we survive the fall.

Roger Sargent; Albion, PA"

I might add to the writer's thought that we skip along with the politicians who are looking for only one thing--election or re-election--reciting the phrases and metaphors that are created by their campaign staff and fed to us repeatedly with advertising paid for by special interests and in soundbites from the Capitol steps. They range from "Change We Can Believe In" to mindless statements from Joe The Plumber to those short, planned to be memorable but completely vacuous soundbites from our Congressional "leaders".

It won't make any difference who wins the elections in the fall or in 2012. Unless the people who vote--US!--make an effort to understand the issues and decide if anyone really has good ideas on how to fix the troubles that confront us. I mean specific, well-thought out and understandable ideas not just half-baked ideas, like "less government will fix everything" or "more federal programs, departments and regulations are needed", then we're all going to deserve what we get. That'll be many more years of what we've had for the last decade or so.

In the end--think Greece.

[Guest]

So how is the VAT working for Greece? VAT rate of 21%, but its debt as a share of GDP is 113%? I know this will be "half-baked" by your standards, but you can't have a welfare state and refuse to pay for it. Our problem is a spending problem, not a revenue problem.

[Guest]

I find it rather revealing (actually not) that you would use Joe the Plumber for your example. It still stings you liberals that Obama revealed his real intentions to Joe, huh?
As for the VAT. I just had my first real experience with it yesterday. I had already booked my flight and my lodging for a trip to Charleston SC. for later this month when I figured I better rent a vehicle too. I was about to click on the pay button when I seen a huge jump in the cost. After I caught my breath, my significant other pointed out to me that I was on a European web site. OMG People, we do not want a VAT in America. I personally think it will be a deterrent from spending hard earned money and therefore stall any resemblance to a economic recovery.

[Guest]

...Our problem is a spending problem, not a revenue problem.

Unfortunately, if you'll do the arithmetic, it's both. Our fiscal problem cannot be solved by either spending cuts or increased taxes by themselves.

Our country is headed to where Greece is now. No amount of increased taxes can solve the problem without deep spending cuts as well.

Greece is still at the stage where they're refusing to accept the lifestyle changes required by spending cuts. As I write this, they're running all over the world trying to borrow money to finance their spending from sources who won't demand such cuts. They aren't being successful. The IMF is standing as the lender of last resort, and they will require dramatic cuts in government services and spending in exchange for their loans. Then Greece will be faced with accepting the IMF loans with conditions or the equivalent of a national bankruptcy. Their alternative is for them to default on their sovereign debt. That could easily cause the the entire European Union to slip back into a deep fiscal crisis because all the EU is tied to the value of the Euro. It ain't a pretty picture.

[Guest]

...OMG People, we do not want a VAT in America. I personally think it will be a deterrent from spending hard earned money and therefore stall any resemblance to a economic recovery.

There you go again, Donna, saying what we DON'T want. OK, I'll accept that. I don't want a VAT either.

But what I have done that you consistently refuse to do, is address the question of what do we do to reverse the growth in deficit spending and begin to pay down the national debt? I shouldn't be too critical of just you--I'm not aware of even one of our elected representatives in Washington who have come up with any ideas either. I think they all know the answers, but they're damn well not going to say them out loud because they'll lose the next election for sure if they suggest either deep spending cuts or increased taxes. Suggesting both would be the "third rail", as they say.

I have said that it will take both deep spending cuts as well as increased taxes to begin to solve the deficit/debt problem. You have said, "no, no, no, we don't want any more taxes". But you haven't suggested anything besides what we shouldn't do. Doing nothing, just saying "no" doesn't even begin to solve the problem.

What is the answer, Donna? What's your plan if it doesn't include any new taxes? Show us all the numbers. I know you'll come up with some other neat-sounding saying, you betcha' you will, but it won't address the problem. I know it won't because it can't.

I'll be waiting for your answer with some numbers attached.

By the way, Donna, in case you haven't noticed--you haven't, I know, based in your quote above--the U.S. is well along into a pretty nice economic recovery. Far better off than almost any other country in the world. I wonder how that happened?

[Guest]

Every politician knows what to do but none of them will do it because we as a society use tax to change the way people behave. We finance things like stadiums with sin tax and raise the sin tax so people don't sin anymore and wonder why revenue is falling.
Every time we cut taxes like income and capital gains the revenue to the treasury increases. It works every time. It worked when Kennedy did it in 61, it worked when Regan did it and it worked when Bush/Clinton did it. Then you get congress that sees all the money come into the treasury and they spend spend. Than they think about raising taxes so they can spend some more and the economy goes down the toilet.
To cut the deficit we must cut taxes and cut spending.

[Guest]

Every politician knows what to do but none of them will do it because we as a society use tax to change the way people behave. We finance things like stadiums with sin tax and raise the sin tax so people don't sin anymore and wonder why revenue is falling.
Every time we cut taxes like income and capital gains the revenue to the treasury increases. It works every time. It worked when Kennedy did it in 61, it worked when Regan did it and it worked when Bush/Clinton did it. Then you get congress that sees all the money come into the treasury and they spend spend. Than they think about raising taxes so they can spend some more and the economy goes down the toilet.
To cut the deficit we must cut taxes and cut spending.

Yes, you are right. Even if every working person gave one half of every dollar they earned to the government, they would still find a way to spend it without reducing the national debt.

Reducing the size of government will eventually reduce the debt, but no one wants that because everyone has someone they know who collects a paycheck from the government.

Government agencies need to be scaled down and in most cases eliminated. We have too many people on the wagon and too few pulling and pushing the wagon.

[Guest]

...Every time we cut taxes like income and capital gains the revenue to the treasury increases. It works every time. It worked when Kennedy did it in 61, it worked when Regan did it and it worked when Bush/Clinton did it...

You're absolutely correct up until the last Bush tax cuts late in his second term. By then the economy was already suffering pretty badly. That cut took the form of a rebate and absolutley nothing happened. No bump in spending, demand, employment or economic activity. After about fifty years of America having a zero or even a negative savings rate, Americans had begun to save. After the surprising non-effect of the cut/rebates, the economists determined that all the money was used to either pay off debt or it went into savings. Thus no economic effect from the tax cut.

Obama tried tax cuts to accelerate the economy as part of his stimulus bill. In his case, they gave the cuts as reduced payroll deductions. So far, there's been far less than the expected effect. The desired effect was to be increased spending, demand, employment and an increase in the creation of new jobs. The savings rate has stayed where it was and the economic effect, particularly the creation of new jobs, has been tepid at best. Early returns are suggesting that the recipients of the extra money in paychecks as the result of reduced payroll witholdings again saved almost all of it, or used it to pay down debt. Since then the U.S. savings rate has trended continually upward to it's current level of about 4%. Economists think this may be a fairly permanent structural change.

The economy is recovering pretty impressively, but job growth is proceeding at a much slower pace. The latest step being attempted is a "tax cut" of sorts--substantially increased unemployment benefits. It remains to be seen what the effect of those payments might be. One thing appears certain--there is little more liquidity left in the Treasury to attempt many more variations of the old methods for giving a spurt to the economy.

The increased savings rate doesn't completely negate the old tried and true method of goosing the economy by cutting taxes, but it certainly dilutes the effect. Basically, the experts believe that in order for it to work as well as it has in the past, any tax cut would have to be much greater, knowing that an initial chunk will go to savings before the consumer begins to spend, with the desired effect of increased economic activity. Of course a larger tax cut, or a tax cut of any kind for that matter, would increase an already skyrocketing deficit.

[Guest]

The reason that tax cuts may not work again is very simple.
All the work will be outsourced overseas which means good jobs with good pay will not be here in the USA.

Companies will show a big profit and stock market will rise but the money coming in to Washington in the form of with-holding taxes will not improve substantially.

The only way to improve the federal coffers is to have a flat tax that will bring the work back to the USA workers.

[Guest]

Obama's tax cuts amounted to a payroll gain of approximately $7 a week for a single and about $15 a week for married couples.

I think we need to look at the effect of tax cuts on government spending. Historically, government spends more than it receives in taxes.

It is absolutely wrong to assume that deficits are created entirely by lack of revenue. But it is true that deficits are lessoned or set back because of a lack of revenue or tax monies coming in. The government works on the theory of an acceptable deficit.

For the long term, we need to lower that acceptable deficit with cuts in taxes or the money government has to spend.

Raising taxes can bring down the deficit without affecting the spending. It's like taking a second job to help our your family budget but continuing to keep your expenses the same. It helps with the debt, but doesn't address the problem that got you there in the first place.

The right kind of tax cuts, those that are an incentive to produce and supply side tax cuts, will refrain government spending. These types of tax cuts restrain government spending and increase future income and current wealth. IMHO, tax cuts will help in an all important step of smaller government.