About 40% of the US federal budget is currently borrowed.
That’s crazy, right? We actually had a surplus under Bill Clinton. We didn’t
borrow anything for the last four years of Bill Clinton’s administration. We
need to get back to that. Well, there’s 3 ways to close that deficit.
1.
Spending Cuts
2.
Raise Revenue
3.
Economic Growth
SPENDING CUTS
Let’s first look at cutting spending. A lot of people feel
like President Obama has exponentially increased federal spending when in fact
under President Obama spending has risen at the lowest rate since the 1950s.
So far under Obama spending has risen by 1.4%. This is
significantly lowers then any president since Dwight Eisenhower and in
comparison to Bush’s 2nd term of 8.1% is much lower. But this
doesn’t happen in a vacuum. The Federal budget is not like a family budget.
Some targeted spending leads to more economic growth and some just becomes
wasteful and adds to our deficit. In contrast
to a family budget sometimes you have to spend money to make money. So, the
spending cuts should not all be considered a zero sum game. In some cases when
we make cuts to the federal budget we end up losing more economic growth then
the cuts are worth. In turn we can actually make the budget deficit bigger by
cutting spending to things that will create economic growth and tax revenues.
Of course Democrats as well as Republicans want a balanced
budget but cuts alone will not do it. And if we cut investments in our society
that actually have an economic benefit to our country then we actually make the
deficit larger. We do need to make targeted cuts but we also need targeted
deficit spending so we can continue to invest in our society help our economy
grow.
RAISING REVENUES
This means raising taxes. Of course no one wants to pay
higher taxes but paying taxes does give us many benefits. In a time of
recession we don’t want to raise taxes on the poor and middle classes who are
struggling just to pay their bills. These people spend a majority of their
paychecks every time the get one and that money directly stimulates the economy
very quickly where the richer you are the more likely that your money will move
much slower though the economy in effect not creating jobs fast enough. In a
recession richer people are more hesitant to invest or spend so just as a
practical issue it does not help to give them tax breaks.
As I’ve said before WE BORROW 40% OF OUR FEDERAL BUDGET. It
should seem obvious that along with spending cuts we need to raise some taxes.
All we are talking about is raising taxes back to 39% from 35% on the top wage
earners. This will help put us on a path to close the gap and balance our
budget. The top wage earners in our country have done much better than the rest
of us over the past decade or two do in part to a tax code that has given them
too many breaks. It is not unreasonable to raise their rate to 39% when
historically the rate has been well over 50% for the past 100 years and hit a
high of 92% under Republican president Dwight Eisenhower. Those numbers seem
unfair and the Democrats are not proposing anything near that. Raising the top tax bracket to 39% seems fair
as well as something that we need to do to start to address our budget deficit.
The other thing we need to address are the loop holes and
capital gains tax rates that many of the richest Americans and biggest
corporations can use to avoid paying their fair share of taxes. Last year the
largest corporations in America averaged paying 9% taxes to the government when
the tax rates for corporations vary from 15% to 35%. I assume they pay the 9%
tax rate in a legal way though using corporate loop holes but this is not fair
and not beneficial to our country. Then when you look at a capital gains tax
that is set of a flat rate of 15% no matter how much money you are making I
think that number needs to be changed for the top earners. I do believe that 15% is a good number to
encourage investments but when someone is making millions of dollars on capital
gains and with loop holes is able to pay less than the average hard working
American, I believe that to be unfair. We should have a progressive tax rate on
capital gains so that once you are making a large amount of money from
investments then you should pay taxes equivalent to what you would pay if you
had earned that money working hard for a living.
ECONOMIC GROWTH
The last 9 or 10 months of the Bush administration and the
first 9 or 10 months of the Obama administration we were hemorrhaging jobs. We
were losing between 300,000 and 800,000 every month. At that time it was almost
universally agreed upon by both the Democrats and the Republicans that in order
to stop the job losses and to encourage economic growth we needed a big
stimulus and also needed to bail out some of our major industries. This is
something no one wanted to do but we saw that it was needed and came together
to prevent a depression. Now that the stimulus and bail outs have worked to
save us from a depression we have cut spending so much that growth has
flatland. Of course unemployment has been going down slowly and since the
beginning of 2010 we have added private sector jobs to the economy every month
but it’s been a slow recovery. But we were in a deep hole and we are coming
out.
Obama seems to be a very compromising president and has not
raised taxes or increased spending when these things seem to be needed if we
what to grow our way out of this economic turndown. We can all see schools with
less teachers, cities with less policemen, and a general cut back on all of the
services that our government provides us. When we cut those jobs then it
creates a multiplier effect where more people are no longer working in the
public sector and are now competing for jobs in the private sector. This
creates higher unemployment and is a downward spiral of less and less economic
activity.
Now there is also a multiplier effect going the other way
when we invest in our society. Obama did use some of the stimulus money to try
and save public sector jobs which allows for more people to be put to work and
those people spend money which in turn creates economic activity creating jobs
in the public sector. Although some of this has been done I believe that we
have not seen fast enough growth because stimulus spending has been slowed down
to a trickle.
We need to spend more money on bridges and roads, research,
education, and all kinds of government projects in order to get the economy
moving in the short term and in the long term. Some of these projects are more productive
than others but when something like a “bridge to nowhere” seems to be an
obvious mistake, that doesn’t mean we should cut back on building and repairing
all bridges. We just need to decide which projects will give us the most bang
for our buck and invest as wisely as we can. Public works programs can create
economic activity that actually creates revenue for our country that ends up
being larger than the amount the projects cost. We need to have a debate on
what programs are investments that create growth and what projects cost more
money than what they are worth. But we need to invest in our society if we want
to come out of this economic downturn quicker.
So, in closing. Yea, let’s make some targeted cuts. Let’s
raise some revenues on people who can afford it so we can start to close our
budget deficit. And let’s invest in our own country to promote growth which
also raises revenues so we can be a more prosperous country.
