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  • Tax Increases Won't Solve Washington's Spending Problem

    “We make some tough spending cuts on things that we don’t need; and then we ask the wealthiest Americans to pay a slightly higher tax rate. And that’s a principle I won’t compromise on.”

    At yesterday’s fiscal cliff campaign stop in Redford, Michigan, President Obama delivered these remarks and hammered away at his “balanced” plan to avert the fiscal cliff. Balance, as defined in the President’s plan, consists of $4 in tax increases up front for every $1 in loosely defined spending cuts promised down the road. The balance scale at the White House, it seems, needs to be recalibrated.

    Obama’s plan misses a crucial point: Washington does not have a problem of too little revenue. Its problem is too much spending. Though revenue has decreased during the recession, the nonpartisan Congressional Budget Office projects that revenues will return to their normal historical level once the economy fully recovers. Spending, however, is out of control. Instead of debating any variety of tax increases—hiking rates or limiting deductions—Congress and the President should be reducing spending. They can start with entitlement program reforms.

    Raising taxes on more affluent Americans and businesses, as Obama’s plan would do, would not generate enough revenue to close our massive deficits. Doing so would require mathematically impossible tax rates. Any such attempt would also seriously hurt the economy and jeopardize job creation.

    What if you stretched Obama’s version of balance a bit further, though, and let all current tax policy expire? Such massive tax increases—ignoring the certain economic damage that would occurwould STILL not balance the budget. Entitlement program spending would continue to rise dramatically, soaking up all available revenue and driving deficits deeper. (continues below chart)

    Not even Obama is proposing this idea outright, but by virtue of Obama’s insistence on tax increases and unblushing silence on entitlement program reforms, he is leading the nation down this path.

    A responsible solution exists to avoid the fiscal cliff without harming the economy. Bipartisan entitlement program reforms also exist that can begin to solve the country’s real fiscal crisis. President Obama insists on taxing his way to prosperity, dealing a blow to capital, investments, and small businesses. The only trouble is that he’s forgetting—or ignoring—that spending is the problem.

    Posted in Economics [slideshow_deploy]

    7 Responses to Tax Increases Won't Solve Washington's Spending Problem

    1. <img src="http://www.politicsdebunked.com/_/rsrc/1354397046465/politics-debunked/cboPerCapitaFacebook.png&quot; alt="poster">
      In case the image didn't post:
      Government spending will grow unless politicians get incentive to change. Pay bonuses for spending cuts, only collected if reelected.
      The Federal government spent 3.7 times as much per person in 2011 as it did 50 years ago in 1961 when Democratic hero JFK was in office (adjusted for inflation). If Kennedy were around to propose his level of spending today he'd be denounced by the mainstream media as a radical extremist.
      Our government was designed around "checks and balances" that work to control many things, but not apparently not spending. Politicians get elected by promising to spend on programs. There is no reason to expect the results to change unless we change the incentives. "Pay for performance" works in the private sector, its time to consider applying proven techniques to politicians and government employees, e.g. a bonus for spending cuts. In the case of elected officials perhaps they'd be collected only if reelected to confirm voter approval. Even if you disagree with that approach, consider learning more about the problem here: http://www.politicsdebunked.com/article-list/fede

    2. Bobbie says:

      Can someone please have the President explain his "principle" he's not going to compromise? As it stands to be understood he's principled in discrimination and resentment building by taking more from the wealthy for those he wants seen as lesser so he can control and provide. No one should be forced government dependency because of the costs of government reach beyond the peoples' constitution. That's where the democratic governance led by the president is forcing us without principle!

      Tax increases won't solve Washington's spending problem where discipline and America's principles would've naturally avoided it. Stand true to America!!! Don't compromise her principles! Let the democrats have their mfg crisis and eat it too! Democrats derelict governing without a budget and their lack of restraint to hold the line caused this filth! Make them face it on their own!!!!! Make Yeah or Nay=Present!!!! Don't let him take Americas republic!!!!! What's not giving them their way they can just pull the middle class out to exploit threats of increasing their taxes?Their refusal to reason showing such severe desperation is concerning. How about having some principle that stands without increasing taxes and works by motivating people not to be seen as the President's lesser?

    3. Bullswin says:

      Why does the Heritage and other rely on the 18% of GDP measure? Seems far to high as a goal especially if we want the states to be more proactive running government. They will need room for funding which means lower fed taxes and higher state taxes unless we want the Feds to continue to collect and distribute tax revenue.

    4. Stirling says:

      If they expire, it happens to "everyone." If the GOP caves (to Obama) it's the 2%. We have never been a country that lowers ourselves to a European Model of punish one group over everyone before 2008 on policies, and never should because it sets the wrong president. (Slipery slope) . The fiscal cliff for the administration is not about anything but changing the dynamic of tax policy going forward, and to make class warfare acceptable to the public for the countries financial problems caused by government, which is why the numbers don't add up.

    5. DCINSANITY says:

      Why is the spending problem obvious to everyone except elected Democrats guess they need more money to buy their next election- and cannot risk taking away what they gave for the last vote.

      Term limits would help solve this as would an amendment to balance the budget… fair and balanced- how about sustainable and logical.

    6. Harold Caton says:

      over spending , they cannt even understand that is something even a dummy could understand
      we got a slow learner in charge i do not trust him any more god help us for 4 more yrs

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