Debates in DC resemble the movie “Groundhog Day”. In the movie, Bill Murray is forced to relive the same day over and over again. It feels like yesterday that Capitol Hill was gridlocked in deciding whether to extend the “Bush Tax Cuts” for just the middle class or for everybody. Now, two years later, Congress is back at it again. No progress is made just endless bickering.
While it was nice to keep some more income when the deal was reached, the compromise unfortunately increased spending. But in the long run, the can was just kicked down the road as mountains of money were added to the deficit.
This debate over who should have their taxes cut overlooks the bigger picture, which is our national debt. It stands in the way of actual fiscal reform from happening in Washington, DC. Adding more taxes by way of not extending the “Bush Tax Cuts” will only strangle our fragile economy even more. And cutting taxes without cutting spending, if you think about it, is merely deferring the increase in taxes to some point in the future. It might be good in the short term, but it is disastrous in the long term.
For a practical example, imagine you spend three times the money you actually have coming in (either as a worker or a retiree). When it comes time to pay the monthly bills, you only think about whether to pay with cash or via credit cards; yet you never even consider reducing your expenses. If you think about it, this is the exact dilemma our government is facing.
When our government cuts taxes without cutting spending (or even worse, while growing spending), as has happened many times in recent history, essentially they are subjecting we the taxpayers to an even greater financial obligation in years to come. It’s a political sleight of hand. We’ve fooled ourselves into optimistically thinking somehow it will be easier to deal with an even bigger problem in the future, or selfishly just leave it to future generations.
There are three different ways deficit spending fleeces taxpayers. First, there is the inevitable inflation of the money supply and subsequent devaluation in our currency when the Federal Reserve “loans” the US treasury money. With a weaker dollar, it costs us all more to pay for groceries and gas. Second, since the Fed made a loan to the treasury, taxpayers are on the hook for said loan. Congress might as well have never cut our taxes in the first place. Finally, there is the interest accumulated on the debt. Arguably, “cutting taxes” while spending the same amount of money is actually raising taxes since the taxpayers will have to pay more in the end than if the government hadn’t borrowed the money (and stuck us with the interest) in the first place.
It’s time to dispense with the terrible, selfish marketing gimmick that became popular in recent years, “it’s all about me.” This short-sighted and immediate gratification thinking has led to the gigantic mess America’s in now. Spending increases should be fought tooth and nail, and Democrats need to agree to actual spending cuts next year, not over a ten year period as agreed to by both parties on last year’s so-called “supercommittee”. Otherwise, our children and grandchildren are left holding a hefty bag filled with not only a higher national debt to pay off, but a higher tax burden as well.
Photo credit: JPott (Creative Commons)
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