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  • A Real Debate on Spending

    New York Times office in Manhattan

    In a recent editorial somewhat misleadingly entitled “A Real Debate on Taxes,” The New York Times argues in favor of allowing the 2001 and 2003 tax cuts to expire for Americans of all income levels.

    Their argument presents a few fatal flaws. First, a real debate on taxes is also a real debate on the current and projected skyrocketing levels of federal spending. Instead, the Times asserts that “more Americans—and not just the rich—are going to have to pay more taxes” in order to address looming deficits. The Times may prefer that taxes rise broadly, but there’s nothing at all necessary or inevitable about this.

    The Times conveniently ignores the fact that it takes two to make a deficit: some combination of a shortage of revenue and an excess of spending. In fact, growing deficits today are clearly a symptom of out-of-control spending, not reduced revenue. Heritage budget expert Brian Riedl writes, “By 2020, spending is projected to be 6.2 percent of GDP above the historical average, while projected 2020 revenues are 0.2 percent of GDP above the historical average. Thus, the entire expanded budget deficit will be caused by rising spending, rather than by falling revenues—even if the 2001 and 2003 tax cuts are extended.”

    Moreover, the Tax Policy Center’s William Gale explains that the 2001 and 2003 cuts “are not the main cause of the sizable deficit that exists today.” Rather,

    In 2007, well after the tax cuts took effect, the budget deficit stood at 1.2 percent of GDP. By 2009, it had increased to 9.9 percent of the economy. The Bush tax cuts didn’t change between 2007 and 2009, so clearly something else is to blame.

    The main culprit was the recession—and the responses it inspired. As the economy shrank, tax revenue plummeted. The cost of the bank bailouts and stimulus packages further added to the deficit.

    Once the economy recovers, revenue will return to its historical levels. If Congress were to restrain spending—rather than raise it to 25 percent of GDP as per President Obama’s plans—the deficit would fall to manageable levels and the national debt would stabilize. Indeed, in contrast to President Obama’s budget, which would double the national debt by 2020, the cost of continuing current tax policy is relatively small.

    From Washington’s perspective, extending current tax policy may look like a tax “cut,” but to American families paying the same amount in taxes next year as they do today, it is in no way a cut. Rather, allowing the tax cuts to expire will mark a drastic hike in what families pay to the federal government. It’s never a good time to raise taxes, but during a recession is about the worst time possible. Doing so just to permit an explosion in spending makes no sense at all. This is the real debate, but you won’t read about it in The New York Times.

    Posted in Economics [slideshow_deploy]

    6 Responses to A Real Debate on Spending

    1. George Colgrove, VA says:

      "From Washington’s perspective, extending current tax policy may look like a tax “cut,”"

      Washington's perspective would be "What the heck??"

      Out of insecurities of the founders, Washington was asked to be king of this new land prior to the them putting the constitution into effect. You see this kind of idea had never been tried. Washington's reply was a resounding NO! His thoughts were that they would put that document they worked so hard on into effect. He then served as a reluctant, yet effective public servant as president, defending that document.

      Sure, at the time the District followed his lead and deserved to be named after him. Today the federal government with its continual power grabs and ever increasing presence on its subjects individual lives, no longer deserves the honor to be named after our first president. The District is a corrupt and ineffective entity that serves itself. It is the current founder of poverty and oppression on its people since the days of FDR. It destroys wealth and hope. It is time to no longer "hope" for recovery – to get back to the practices prior to 2007, but to argue and fight to return us to prior to FDR.

      The essence of this government goes against even the most liberal founder and is reminiscent of nearly all countries with a strong central government that are failing. To say we "hope" for a recovery to get back to funding this beast is wrong. We need to rid ourselves of the federal government, as it exists today. This is the solution. Put the two best regulators in place – profit and competition. These ties with a highly educated populous will provide the best of what the idealist believe communism could ever deliver. All will be strengthen by self-interest, not in the darker interpretation, but in what we all need to do with self-preservation to live, to love, and to laugh. We have a divine given right to life, liberty and the pursuit of happiness. This cannot be brought to us by government – nor is it a public right. It is a divine right for which we all have been given the inner gifts to find each of our individual paths to reach that place. Paying a tax so a fed can do it for us imprisons us to a single definition of what that pursuit is. Misery is the only outcome of that which can be seen in the peoples of communist countries. For each of us to take that pursuit, we need governments to stand aside. This was the vision of the founders and it should be ours today.

      If this government in total or in part were asked to be king, it would not even wait for the question to be completed. It would interrupt with an astounding "Yes!" Then push everyone away to take control. It kind of has already done this. This government does not know restraint as shown by Washington. What Washington did as a mortal, only Jesus of Nazareth was able to do with Satan. When I think of a single person being able to resist absolute power for his people to thrive as individuals it sends shivers up my spine every time I think about it.

      The District should revert to a day where it dealt with only national defense and diplomacy with a small contingent of feds that deal with interstate standards (and I mean small – less than a thousand feds at the most.) Without counting the military, the federal government should not need even a 100,000 feds to do these few task that are "inherently governmental" and as restricted by the Constitution. If we can get it back to that, only then will it have the right to be called Washington.

      The debate of government or the preservation of a resemblance of what it is, is over. Government has failed since FDR – every day we see the proof. It is now time to start preparing for the new (yet old) way of doing things without a strong central government, with all domestic duties being done within the confines of the states. Where the future of each of us is determined by the extents of our desires and hopes, and not some bureaucrat in some far off city.

    2. Bobbie says:

      Wow George, that is beautiful! And the greatest Man who lived, breathed and led those that followed, by His wisdom, gave the realization to all mankind their human qualities, and natural abilities to live free, to do for oneself. no infringement on your neighbor otherwise known as tax payer. and in doing so, providing for own, in peace, with love and respect of each fellow man(kind), together. In other words all mankind can get along if we use our freedom of choice to do so.

      A Man who's teachings led all mankind to depend on oneself and love ones, charities that honor His Way. This Man is against thievery of other peoples ownership. Especially freedom for the benefit of government ruler-ship. Freedom and what it takes to be, is the teachings of Jesus Christ. Freedom and it's removal, are the actions of Barrack Obama.

      Jesus Christ, a Man who is not white and not born in America! You'd think Obama would love Him like the rest of His followers and Obama would lead the country (in a relative way) by following the example of Jesus Christ.

    3. Bobbie says:

      correction please! And the greatest Man who lives, breaths and leads those that follow and by His wisdom, gives the realization to all mankind the human qualities, and natural abilities to live free! Thank you…

    4. Bill, Kansas City, M says:

      Time for term limits for Congress, and time vote out all of the b*****ds.

    5. KLIMAX Baltimore, Ma says:

      Nobama can not be allowed to pass along to us the responsibility to pay for his and the Democrats spending spree !! The stimulus was a few Billion shy of a Trillion dollar flop even though they are trying to say now that up to 3 Million jobs were created, but if you think about it NObama allows 75,000 work age legal immigrants into OUR country every month plus if you add the 75,000 plus number of illegal aliens per month both of which have been adding up since 1/1/2009 so this number of extra people have offset any gains NObama and his puppets have made in the job creation area !!!

      Back to taxes: If the tax reductions from the Bush days are allowed to expire it will be as if NObama raised taxes across the board !! It will hurt everyone including the people who are in the multi Million dollar salary range !! If the Democrats allow this to happen on their watch the American People will not forget for decades to come and they (Democrats) will pay the price even if it is done after the November elections !!!

    6. Drew Page, IL says:

      Apparently the editorial staff at the N.Y. Times sees no relationship in cause and effect, and seemingly attaches no significance to the wisdom that "an ounce of prevention is worth more than a pound of cure".

      With this philosophy, I would think that they might want to increase their falling revenues by taking advertisements to sell cigarettes. They could also take ads for cancer treatment centers, as one has nothing to do with the other.

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