Headed Toward the 11th Hour Compromise
As the year draws to an end, America faces yet another congressionally-manufactured crisis which will likely end in yet another 11th hour compromise, resulting in more government growth touted as "saving" the economy. While cutting taxes is always a good idea, setting up a ticking time bomb with a sunset provision, as the Bush tax cuts did, is terrible policy. Congress should have just cut taxes. But instead, we have a crisis that is sure not to go to waste.
The hysteria surrounding the January 1 deadline for the Budget Control Act's spending cuts and expiration of the Bush tax cuts seems all too familiar. Even the language is predictably hysterical: if government reduces planned spending increases by even a tiny amount, the economy will go over a "fiscal cliff." This is nonsense.
This rhetoric is based on the belief that government spending sustains the economy, when in fact the opposite is true. Every dollar the government spends is a dollar taken from consumers, businessmen, or investors. Reducing spending can only help the economy by putting money back in the hands of ordinary Americans. Politicians who claim to support the free market and the lower- and middle-class should take this to heart.
The reality is, however, that neither Republicans nor Democrats are serious about cutting spending. Even though US military spending is exponentially larger than any other country and is notorious for its inefficiency and cost overruns, Republicans cannot seem to stomach even one penny of cuts to the Pentagon's budget. This is unfortunate because this is the easiest, most obvious place to start getting spending under control. The military-industrial complex and unconstitutional overseas military interventions should be the first place we look for budget cuts.
Similarly, Democrats are digging in their heels on not cutting any welfare or entitlement spending and instead propose to fix the deficit by raising taxes on the rich, even though the US Government already has a progressive tax code and the rich already pay more than their fair share. Furthermore, these higher taxes would fall on small business owners, investors and entrepreneurs − in other words, the source of economic growth and new jobs!
The truth is that there is no excuse for government spending being as high as it is, nor for taxes being as high as they are. Even the God of the Old Testament only asked for ten percent as a tithe and offering, and Americans revolted against the King of England for taxes that amounted to less than five percent. Yet so many people today complain about "loopholes" for the rich that lower their actual tax rate to "only" 13 percent in some instances. Even that is a criminal amount to pay for a wasteful, abusive, unconstitutional government.
We are indeed headed to a fiscal cliff and have been long before this latest hysteria cropped up. But it is not cuts to spending or reduced government "revenue" that will send us over the cliff, it is continued government spending that will. Until the federal government limits itself to its constitutionally-mandated role, spending and taxation will remain out of control.
Look for a "bipartisan" compromise in late December, with Republicans giving in to tax increases and settling for phony spending cuts that actually grow government, and Democrats caving on defense cuts in exchange for tax increases. This is how the government has always grown: Both sides will sacrifice their pro-liberty, small government stances in certain areas in order to grow the government where they prefer.
Liberty always loses in the 11th hour.
Posted by Nustart on 12/04/12 05:49 PM
Ron's arguments seem so self-evident. For the life of me I can't understand how the vast majority of Americans, both Democrats and Republicans, can be so thick-headed. Will they ever wake up? I'm really losing any hope they will.
Posted by email@example.com on 12/04/12 03:04 PM
The U.S. went Over the Clift long ago when President Nixon in 1971 took the dollar off the gold standard.Amerians have been "Out to Sea" ever since paddling in different directions simultaneously.
Posted by bionic mosquito on 12/04/12 11:04 AM
'Look for a "bipartisan" compromise in late December, with Republicans giving in to tax increases and settling for phony spending cuts that actually grow government, and Democrats caving on defense cuts in exchange for tax increases.'
Congress will do this as long as it remains painless to do so. The government can borrow at almost zero interest; much of the interest expense is returned to the government in any case, because the Fed holds a growing percentage of debt outstanding and returns this to the Treasury. Finally, this game can continue as long as government calculated CPI remains relatively benign.
The result is and will be a crowding-out of investment by the private sector. This is where the pain will come - in the decreasing productivity of the private economy. This will result in a continued and increasing decline in the standard of living of the middle-class.
In the meantime, look at the crowding out of the United States, one more example that the milk-cow middle-class of the US has been tapped out:
Click to view link
From the article:
It is symptomatic of the national condition of the United States that the worst humiliation ever suffered by it as a nation, and by a US president personally, passed almost without comment last week. I refer to the November 20 announcement at a summit meeting in Phnom Penh that 15 Asian nations, comprising half the world's population, would form a Regional Comprehensive Economic Partnership excluding the United States.
President Barack Obama attended the summit to sell a US-based Trans-Pacific Partnership excluding China. He didn't. The American led-partnership became a party to which no-one came.
Instead, the Association of Southeast Asian Nations, plus China, India, Japan, South Korea, Australia and New Zealand, will form a club and leave out the United States.
Posted by dave jr on 12/04/12 08:10 AM
This fiscal cliff, maybe fiat cliff, is one we continually fail to step over. Government wants us to step back for our safety, waaay back, its too ominous for us little people.