Thursday, April 28, 2011

We’re all in this together

by Gordon Cooper

From Broader View Weekly, April 28, 2011

It is a curious thing to behold when one follows the current debate being waged in Washington over the 2012 budget and the need to address the ballooning U.S. debt and our ever-increasing deficit spending. It is no surprise that we have differing views about how we should meet this challenge. After all, our system of two-party representative government assures that we will have disparate views on economic policies and almost every other topic. It is also no surprise that neither side will admit or disclose weaknesses or fallacies within their respective position.

The most curious aspect about the debate centers around certain words and ideologies that have been co-opted and/or misappropriated.

For example, if you listen carefully or read carefully, you will notice certain words are almost always grouped together. Take the words “fair share” and “wealthy” – it seems the common misconception being presented here is that the wealthy take a disproportionate amount of government services and return a less than equitable amount back into the treasury. This is the policy being promoted in the current presidential campaign by Barack Obama. He suggests that if we confiscated just a bit more from the top earners in our nation, we could bring down the debt and lower the deficit.

The idea of increasing taxes will not fulfill the purpose of lowering the deficit – even if we could take 100% of all earnings from the top 1% of earners, we would only garner the cost of last year’s health care legislation cost ($968 Billion). Despite what Keith says to the contrary in his article, the figures used represented the net worth of the top 1% and are legitimate. Therefore we must look elsewhere if we really want to stimulate the economy and lower our deficit – and the debt and deficit is a serious inhibitory influence upon our economy, as well as a threat to the future security of our nation’s sovereignty.

At the risk of losing some readers who find statistics and studies to be too much like going to class, I feel I must spend some time explaining why tax cuts will do more to enhance our economic growth and lower our dependence on foreign investors (China) for our operating capital.

There is valid proof that lowering tax rates for all taxpayers does more to stimulate the economy than raising taxes.

First of all, all we have to do is look at the recent news story about how GE (you know, that tiny, multi-national corporation that is run by Obama’s Jobs Czar and buddy, Jeffrey Immelt) paid no corporate taxes this year on its profits of over $14 billion – $5.1 billion from U.S. operations – because they were able to, with the help of over 975 tax experts (cheats) in their tax evasion department, find enough loopholes to squeeze all their profits through the tax code and into the pockets of executives and shareholders. (http://www.nytimes.com/2011/03/25/business/economy/25tax.html?_r=1)

We see here that increasing tax rates serve to stimulate the economy of the lobbyists and tax lawyers while doing very little to stimulate the general economy,
Conversely, there is much evidence that lowering tax rates across the board – while also sewing up those leaky loopholes (hmmm…sounds like that Paul Ryan “Path to Prosperity”, doesn’t it?) does indeed stimulate the national economy and raise the standard of living for the general populace.

For example, an article written by Alan Reynolds on The Concise Encyclopedia of Economics, cites a book, Economic Growth by Robert J. Barro and Xavier Sala-i-Martin (MIT Press) which demonstrates how decreasing the marginal tax rates has stimulated the economies of several nations including Taiwan, Singapore, South Korea, Hong Kong, Botswana, Thailand, Ireland, Malayasia, Portugal, Mauritius, and Indonesia. All these countries either had low marginal tax rates to begin with (Hong Kong) or cut their highest marginal tax rates in half between 1979 and 2002. (http://www.econlib.org/library/Enc/MarginalTaxRates.html)

Now, we have two clear choices before us as this debate goes forward and the 2012 presidential campaign begins in earnest. We can either choose the status quo, represented by President Obama’s rehashing of failed policies (raise taxes and maintain or increase spending levels) or we can “man up”, face the adult facts of life – like the fact that we cannot sustain an economy in which over 41 cents of every government dollar spent goes to entitlement programs such as Medicaid, Medicare and Social Security – and make serious reforms in the system.

In conclusion, listen carefully and skeptically to those who try to separate us into camps according to the Adjusted Gross Income on our 1040’s. In other words, a person’s private property is still private property whether it is measured in hundreds or hundreds of millions. We should realize that we are all Americans and we all benefit from a healthy economy and likewise, we all suffer from a poor economy. History proves that a higher tax rate stifles and inhibits an economy while a lower tax rate puts more capital into the system.

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