The government is not $16 trillion dollars in debt because it has failed to raise enough revenue. The total amount of money the US government takes in each year has increased nearly 20% since Obama took office in 2009. I know many households that would love to have seen their annual income increase by 20% over the last four years. The problem is that government spending continues to skyrocket. For the government to balance the budget at current revenue levels, they would have to cut spending back to....wait for it.....2002 levels! Wasn't the government already spending plenty in 2002!
2. Tax increases tend to lead to more spending, not lower deficits.
The income tax originally only taxed the wealthiest one half of one percent. There was a time in our history when federal government spending only consumed a few percentage points of our total economic output. As tax revenues have grown over the past century and the federal government has gotten their hands on more of our money, they have increased spending as well. Politicians tend to do more and promise more as long as they can keep getting away with it. If history is any guide, we know the government tends to look at additional revenue as an excuse to spend more, not pay down their existing bills. And once a new government program is in place, it rarely goes away.
3. Increasing tax rates is not the same thing as increasing tax revenue.
Obama keeps making comment after comment implying that if we could just raise rates on the wealthy then we would be able to fix the government’s fiscal disaster. While this may sound like music to the ears of the class-warfare zealots, it is no more than a rhetorical distraction. Since World War II, regardless of tax rates, the US government has confiscated roughly the same percentage of GDP in the form of tax revenues. When tax rates are high, the government takes about 17.7% of GDP. When tax rates are low, the government takes about 17.7% of GDP. However, raising tax rates, as Obama proposes to do, tends to do a couple of things. Patterns of behavior do not remain constant before and after tax rate increases. Human beings respond to incentives. Just think, would you have the same incentive to work if 90% of your income was taken from you as opposed to only 10%? Higher tax rates discourage saving and investing. They discourage production. They divert scarce resources away from productive activities and drive people to spend more time and effort looking for tax shelters and loop holes. In short, tax rate increases discourage the very types of behaviors that grow an economy. If the government raises rates, they may very well actually take in less revenue than they otherwise would have in a period of higher GDP growth absent of the tax rate increases. Besides, even if they took 100% of the earnings from everyone making over $250,000 then they would have enough money to fund the US government until about Easter. It's a spending problem folks.
4. Any “tax cuts” that come out of the fiscal cliff negotiations are smoke and mirrors.
The government is not Santa Claus. You and I have to pay for everything the government does, whether we like it or not. People pay for all of Uncle Sam’s welfare, warfare, and out of control spending through either taxation, government debt (future taxation), or inflation (hidden taxation). Inflation is the cruelest tax of all. It hurts the people that can least afford it, such as the poor and elderly on fixed income. Inflation is a deceptive way for the government to slowly transfer wealth from the population to the political class. That wealth transfer is very real. The Federal Reserve is responsible for monetizing U.S. government debt. This tricks people into thinking politicians are Santa Claus when in reality they are systematically stealing from the poor and middle class. So long as the government continues to spend, the people will continue to pay (whether they realize it or not).
5. The fiscal cliff negotiations are not about fixing the problem. It is about avoiding the blame.
The Republicans and Democrats both want you to think the fiscal disaster facing the U.S. is the other party’s fault. In fact, they are both right. The current situation is the result of decades of bi-partisan malfeasance. The best either party can hope for right now is for you to believe them when they point the finger across the aisle and say, “It’s their fault.” Don’t pay attention to these tired political games. Both parties are to blame.
6. Washington D.C. cannot and will not fix the problem because Washington D.C. is the problem.
I wish people would just stop and consider why we are in this mess in the first place. The fiscal cliff is the result of Congressional legislation and “bi-partisan summits” and “super-committees”. The fiscal cliff is a product of Washington D.C. The politicians created all of these programs they can’t pay for. Neither side has any intention of actually cutting spending. The most “draconian” cuts are merely reductions to the rate of future spending increases. The current unfunded obligations promised by the U.S. government over the next 70 years far exceeds the total economic output on planet Earth, yet the politicians continue to turn a blind eye to the reality of the fiscal abyss. Arguments over a billion here or a billion there don't make any material difference. The solution will not come from Washington D.C. The solution will have to come from the states and from the people. Our government spends too much because it does too much. It is time that we fundamentally rethink the role of government.
7. The current debate is not Republicans vs Democrats….It’s political parasites vs. peaceful and productive human beings.
The term “political parasite” may sound harsh, but it is more than appropriate. Government does not have any resources of its own. It produces nothing. All that it has and all that it distributes it must first take. Washington D.C. is fat and happy. The D.C. area is one of the richest in the country and has grown considerably ever since the onset of the Great Recession. While the rest of the country has struggled to make ends meet, the political class has continued living well. The corporate stooges in Congress and the White House exchange political favor for campaign funding. The banksters, the cronies, and the military industrial complex continue to grow. Debates like the current one regarding the fiscal cliff are designed to get the people fighting with one another over the scraps rather than realizing the presences of a massive red & blue colored tick sucking dry our wealth and resources.
8. The status quo will be extended.
There will be a compromise pushed through at that last minute. It is likely we will see some tax increases and and possible decreases in the rate of future spending increases (not any real spending cuts). Chances are good we will see some kind of bridge deal this month and then more of a grand bargain in 2013. The politicians will celebrate it as a bi-partisan solution. It will not be a solution. Nothing changes.
9. This isn’t a new problem. The politicians have had years to address the problem. Waiting to the last minute is a deliberate, conscious choice.
Why do they always let it come down to the last minute? Answer: So they generate panic and then ram through their terrible plan as time expires. This is exactly what always happens with these political negotiations. This time will be no different. They have known about the fiscal cliff for over a year. Why wait until December?
10. The bottom line is that the “fiscal cliff” doesn't matter nearly as much as the fiscal abyss.
The US government passed the point of no return a long time ago. It is fiscally insolvent. There is no possible way it will be able to honor the promises it has made. It will default. The only question remains whether the default will be honest - meaning they come clean now, level with the people, and begin to restructure. Or, the more likely scenario - they default in a dishonest manner by destroying the currency and making life very difficult for the massive of people now dependent on government for their livelihood.
Isn't it sickening to think that a few hundred incompetent, power-lusting buffoons so strongly control the fates of hundreds of millions of people. Who thought that would be a good idea?