Thursday, January 15, 2015

Political Compromise or Financial Demise?

William A. Galston in his opinion article in the Wall Street Journal, “Common Ground for the New Congress”, January 7, 2015, takes the familiar Democratic path, once the Democrats are removed from power, to remind Republicans that they need to be inclusive of and compromising with Democratic positions.  It seems that there was no effort on the left to seek compromise when the tables were turned.  In fact, if the Republicans disagreed with Democrats they were either branded racists or obstructionists.

Galston proposes a compromise solution for congressional Democrats and Republicans where corporate taxes are lowered to encourage corporations to repatriate the $2 trillion of off-shore capital in return for spending part of the money on government infrastructure projects with the balance of the tax windfall spent on other areas.  Great, a compromise that requires government to take more taxes to spend with no regard to the massive waste already in government.  As we observe in Vigilance from findings of the Congressional Budget Office:

[p.115]… “the 2011 federal budget was about $3.6 trillion, but revenue from all taxes the government collects was about $2.3 trillion. Thus, the simple arithmetic yields a $1.3 trillion deficit that the government covers through borrowing. Like a credit card, the federal government is only paying the interest on the debt and not reducing the principal balance.”

Here is a better suggestion, lower taxes – on all – then tackle the half trillion dollars in government waste and fraud from which part of that money can be spent on infrastructure.  This combination does not require confiscating more money from taxpayers (corporate or individual) and will accelerate GDP growth from corporate investments and consumer spending.

As we write in Vigilance: The Price of Liberty, “…politicians enabled with the power to spend, tax, and borrow without limit threaten the republic. Excessive spending requires excessive taxes, but taxes are not politically popular. As such, politicians tax to a certain point, then borrow the balance.
But this shell-game must come to an end when debt accumulates to a point that no amount of taxation will be able to repay or finance the debt. By 2013, the nation has reached such a point, yet continues to accumulate more debt as it increases spending. America is now like the Titanic that has struck the iceberg. We have only a limited time to repair the damage or our empire will sink by the next generation.”

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