Tuesday, October 5, 2010

We Can’t Afford The Tax Cuts. Really?



Read this. I’ll wait.

No, I know you probably won’t read it.

How much do the Bush tax cuts “cost” us?

Now, thinking like a government official, this means that extending the tax cuts would “cost” the government $3.7 trillion over ten years. This sounds like a lot of money, but let’s put it in perspective and look at how much the federal government will be spending over the course of the next ten years.

Federal spending for the next ten years is currently projected at almost $42 trillion dollars. Interest payments on the debt add another $4.5 trillion. Extending the tax cuts to all but the $250,000 and up group would create a shortfall in receipts of $3 trillion. Extending the tax cuts to everyone creates an additional shortfall of $700 billion.

The President says that this $700 billion would “drastically expand the deficit”. Really? How so? It’s less than a sixth of just the interest payments on the debt! And it’s not as if you’re projecting the deficits to shrink, which would increase the impact of the $700 billion. No. You’re projecting them to stay at around this $1 trillion per year level.

Mr. President. The problem isn’t that we’re not taxing enough. It’s that we’re spending too much.

See, here’s the problem in a nutshell. The government isn’t like the private sector.

In the private sector, if funds are tight, we trim the fat. We find less expensive ways to do things. We hold off on new purchases, etc. In short, we cut our budgets.

In government, particularly at the federal level, they never make cuts. Everything just grows. There’s never any incentive to make things more efficient. In fact, the opposite is true. The incentive is to spend every single penny in your budget, to make sure no one thinks that you don’t need it all.

Now, I’m not one of those budget hawks that says we need to make cuts everywhere except defense.

No, we need to make cuts everywhere.

Yes, we have the best military in the world, and yes, I want to maintain that. But, it suffers from the same inefficiencies as the rest of the federal government. We spend more on our military than the rest of the world combined. I think it’s easy to argue that we’re not getting our money’s worth.

I’m not talking about cutting personnel or eliminating bases or aircraft carriers. I’m talking about doing the same things we do in the private sector. Find inefficiencies and find ways to eliminate them.

Surprisingly, I’m also not talking about drastic cuts.

Look at this chart.

Freezing spending results in a balanced budget by 2016. Allowing 2% annual growth in the federal budget still results in a balanced budget by 2020. Obviously we can’t freeze spending forever. Inflation will happen, and COLA isn’t an entirely evil thing. But we’re spending far too much now. Freezing will allow what will amount to gradual spending cuts. And government workers are overpaid, anyway, with better benefits and don’t lose their jobs during a recession.

For the video that goes with the chart, click here. It’s worth a watch.

Of course, our current President and our current Congress will never agree to such a plan. The Congress we can do something about in 28 days. And brinkmanship may be the only option with the current President. Pass a frozen budget and force him to veto it.

Then he can get on TV and explain to everyone why he shut down the government. Yes, I know Republicans tried this with Clinton, but they played it wrong and he’s a master of politics. President Barack Obama (D-USA) is a master at being a crybaby. I’m pretty sure the Republicans come out the winner in a stalemate such as this. If it can’t be done, we’ll have to reign in as much as we can and plan to fix it in 2013.

But the first part starts in 28 days. Beware the flood, Democrats. It’s coming for you. And it’s getting bigger and bigger.

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