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Friday, January 18, 2013

Avoiding the consequences?

I found an excellent analysis of why Congressional Democrats have ceased to call for tax increases on everybody like they used to in previous decades: deficit spending is acceptible now!

It used to be that government didn't have annual trillion dollar deficits and the Democrats wanted taxes to pay for higher spending rather than run a deficit, and even in most of Bush's time up until 2007 (when a bubble burst) the revenue kept pace pretty well with spending on the whole. Compared to now, especially.
However, three things transpired over the past 20 years that completely changed the dynamic. First, deficit spending has grown from just a supplementary to the welfare state to an equal partner along with tax revenue. Hence, liberals no longer need more tax revenue to grow government. They’ll borrow the money. Second, Republicans won the tax debate, imbuing hatred for more taxes in the hearts of the voters. Why should Democrats risk sowing the seeds of disquiet with tax increases, when they can accomplish the same goals with deficit spending? Lastly, thanks to the Reagan and Bush tax cuts, a number of people pay little or no income taxes. Liberals are wise enough not to mess with that, and in fact, seek to grow that demographic.

Taken as a whole, Obama and the Democrats decided to beat us by joining us. Not only have they eschewed their broad tax hiking agenda, they couch their plans in the parlance of tax cutting. Despite their public arguments about the need to raise revenue to deal with the deficits, they know that they can never raise enough revenue from the rich. Yet, they figure they can have their cake and eat it too. That’s why they pushed for tax hikes just on the “super rich.” To that end, they are able to continue their spending binge (through deficit spending) while focusing their tax hikes on such a small percentage of people, most of whom are unknown to the average voter.
 
Depressing. But he's right. Yet the consequences will follow, sure as the sun comes up. We can spend ourselves to death - the bursting of the debt bubble - and the Obama administration is trying its darndest to do just that, regardless of future consequences. Interest rates have been kept very low by the Fed for a very long time, making it easier for Congress to spend than ever, because they have to pay less on the debt now. But when those interest rates rise?

Democrats have two favored options, not that they'll admit it. One, they can preach against the existence of the debt ceiling (kind of like a credit limit) and say there shouldn't be one - whether or not they can possibly pay for this - even whether or not our grandchildren could possibly pay for it. Two, they can print money to devalue the debt they incur and delay the burst of the debt bubble - causing rampant inflation. Our dollars would be worthless and nearly every American would go on the government dole in some form or other except for the preppers.

This is why the conservative battle to explain what we face is so important. This is why spending cuts now are so important. Neither of the Democrats' options bring good to the United States. To think otherwise is wishful thinking at best, just like the "appeasers" in Britain before WWII were so sure that giving in to Hitler over other European take-vers would guarantee Britain wouldn't be attacked. Winston Churchill was right - though much ridiculed and derided for it at the time.

The consequences always catch up with you.

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