Divide Among Voters

February 23, 2009, President Obama:

 

“And that's why today I am pledging to cut the deficit we inherited by half at the end of my first term in office. This will not be easy. It will require us to make difficult decisions and face challenges that we have long neglected. But I refuse to leave our children with a debt that they cannot repay, and that means taking responsibility right now in this administration for getting our spending under control."  

One sign of the divide in the country might be some that a majority of voters think he meant it and has been trying hard to do it. His years in office have gone the opposite direction because of Bush or Republicans or ... something else. They will give him much credit for trying. Another group suspects (thinks it knows) that he never meant it to begin with.  

In a similar sense of the divide among voters, George Will suggested: The sequester has forced liberals to clarify their conviction that whatever the government’s size is at any moment, it is the bare minimum necessary to forestall intolerable suffering. To add to this, the conservative will say that the present level of government is part of the problem and it needs actual reduction.

At this point, just wondering if that is the case.

Honesty on Tax Increases

I appreciate a February 2013 editorial in the New York Times about raising taxes. They emphasize the need to raise taxes because of fairness, but ... Well, here is how they say it:

 

new taxes on high-income Americans are a matter of necessity and fairness; they are also a necessary precondition to what in time will have to be tax increases on the middle class. …As the economy strengthens and the population ages, more taxes will be needed from further down the income scale… But there will never be a consensus for more taxes from the middle class without imposing higher taxes on wealthy Americans, who have enjoyed low taxes for a long time.

 

Frankly, I appreciate the honesty. The reality is that there is not enough money there, even if you confiscated it, to eliminate the deficit. Further, If you confiscated the money, it would be there only for one year. They would find ways to avoid going over the amount that would be confiscated.

 

One of the stated concerns of the United Methodist Social Principles (163) is sound fiscal policy. Although the principles go a quite different direction than what I am suggesting, John Kennedy admitted the difficulty in believing in the positive effect of low taxes. It does not seem fiscally responsble, but he points out why it is. "It's a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise revenues in the long run is to cut the rates now." Those are the words of President John F. Kennedy in 1962. He went on to say, "The purpose of cutting taxes now is not to incur a budget deficit but to achieve the more prosperous, expanding economy which can bring a budget surplus." What's more, in Kennedy's annual message to Congress, in 1963, he said, "In today's economy, fiscal prudence and responsibility call for tax reduction, even if it temporarily enlarges the federal deficit. ... Reducing taxes is the best way open to us to increase revenues."

 

I recognize that the rates were quite different in the day of Kennedy, but the change he brought was in the right direction. Part of the point is that higher tax rates leads to more energy put into hiding income. What I think is a more important point is that the present tax rates, which leads to many people giving over 50% of their income to various levels of government, is simply unfair. People have a right to what they have earned.

 

Sequester 2013 By Numbers

The United Methodist Church, Paragraph 163, says that "we recognize the responsibility of governments to develop and implement sound fiscal and monetary policies." I imagine most of us agree with that statement. The current debate regarding sequester deserves some attention from us as citizens. It is a rather borning numbers game. I will keep it brief.

The sequester was the result of an actual law - the Budget Control Act of 2011, now known as Public Law 112-25. A bill becomes law (in most cases, including this one) when it is passed by the House and Senate then signed by the President of the United States. It does not matter whose idea it was first. As law, it is the idea of Senate, House, and President.

According to Larry Kudlow, the $85 billion "spending cut" is actually budget authority, not budget outlays. According to the CBO, budget outlays will come down by $44 billion, or one quarter of 1 percent of GDP (GDP is $15.8 trillion). What’s more, that $44 billion outlay reduction is only 1.25 percent of the $3.6 trillion government budget. Further, these "cuts" come off a rising budget baseline in most cases. So the sequester would slow the growth of spending. They’re not real cuts in the level of spending.

From Dick Morris: Concerning sequester and the military, Defense spending, as a percent of federal revenue, has been relatively constant, however. It peaked at 29 percent during the Reagan Cold War era and then dropped to 23 percent as George H.W. Bush wound down spending. In 2000, after the Clinton years, it absorbed 18 percent of the budget, swelling to 20 percent under George W. Bush and returning to 19 percent in 2012. The additional $40 billion in sequester cuts will drop its share to 18 percent -- hardly cause for alarm.

Jonah Goldberg says that if the sequester goes into effect, the federal budget for this year will still be larger than last year's ($3.553 trillion in 2013 vs. $3.538 trillion in 2012). With the sequester in effect, federal non-defense spending will still be 10 percent higher than it was in 2008.

The point is simple. The sequester does not come close to the type of setting of spending priorities that the politicians need to make. It does not mean the sky will fall if it goes into effect. Such language assumes that the level of spending the federal government has now is efficient and well spent. Saying that makes most of us realize how silly the entire discussion actually is. In fact, what needs to happen are real cuts in budget outlays, and they need to occur sooner rather than later. That would appear to be "sound fiscal" policy.