28 February 2012

Everything You Need to Know


CFRB compares the candidates’ plans to a “realistic” baseline that assumes the Bush tax cuts are made permanent and the automatic sequesters required by the Budget Control Act of 2011 are waived, among other things. Relative to that extremely pessimistic baseline, Santorum and Gingrich still want huge increases to the national debt; only Paul’s proposals would reduce it. Romney’s proposals would have little impact, but that was before his latest attempt to pander to the base: an across-the-board, 20 percent reduction in income tax rates. [Emphasis added.]
How is this possible, since all of them have promised to cut spending? Huge tax cuts, on top of the Bush tax cuts. Romney, as mentioned above, would reduce all rates by 20 percent, repeal the AMT, and repeal the estate tax. Santorum would cut taxes by $6 trillion over the next decade. Gingrich would cut taxes by $7 trillion. Paul, the responsible one, would only cut taxes by $5 trillion.

Of course, these projections need to be taken with a grain of salt since they are nothing more than an attempt to apply static analysis to a dynamic system.  Nonetheless, it should be quite telling that the two most nominally conservative candidates have the most fiscally irresponsible budgets.  (The penultimate paragraph of this post deals briefly with this subject).  The moderate businessman has an essentially balanced budget, and the libertarian is the only one of the lot that actually attempts to decrease the national debt.

The reason why the “conservative” candidates’ budgets aren’t fiscally responsible is because they simply do not understand the simple reality that government spending is essentially the same as taxation.  Every dollar that government spends must come from taxes.  This can happen directly, indirectly (e.g. inflation), or it can be deferred (e.g. borrowing).  However, at some point, government spending must come from tax revenue of some form.  As such, it is downright irresponsible to cut taxes without also cutting an equal or greater amount of spending.  Therefore, both Gingrich and Santorum are nothing more than political parlor magicians who are using sleight of lower taxes to distract from the insufficient budgetary cuts.  Sadly, there are too many conservatives who will fall for this, and ignore the plain and simple fact that government dollars must first come from citizens’ pockets.

This is not to say that taxes should not be cut.  To the contrary, the relatively high-rate of federal taxes are undoubtedly stifling the economy.  Ultimately, though, these tax rates are nothing other than a reflection of the high rate of government spending.  Thus, it is government spending that is stifling the economy, and therefore the federal budget must be cut if the United States are going to recover.  At this point, it should be clear that there is only one candidate who grasps this underlying reality.  We all know who he is.

2 comments:

  1. true, all. Without a roll back in government power and spending, lower taxes themselves are pointless. Direct taxation will be lower, but inflation sill be higher, thus destroying any saved value. but none of the republicans are proposing reducing government power in any way.

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  2. @Prof. Hale- I think Ron Paul's plan would reduce gov't power, by virtue of eliminating five agencies. (Not that this proposal has a chance of being passed by congress.) Nonetheless, it continues to remain disappointing how unserious US leaders are about fixing the mess they created.

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