The November 2012 elections are set to be the most important since November 1980 when American voters turned the tide against progressive socialism for the first time in the post-WWII era. November 2012 in fact will be Armageddon or the End of Days – the Great Battle for the economic future of this nation.
In a fundamental sense, the battle is already framed in terms of the federal debt ceiling debate that is now sputtering into public prominence. For, make no mistake about it, the federal debt crisis will be resolved. The world’s bond markets will see to that. And they do not operate under Congressional or White House rules. The growth in the nation’s debt as a per cent of gross domestic product will be reined in either by massive spending cuts, by massive tax hikes, or by some combination of the two.
Tax hikes or spending cuts – that is the question! The electorate surely will decide, even if by rational ignorance default- voting.
If Obama and the Democrats are returned to office, spending will stabilize at around 25 per cent of gross domestic product, with taxes rising to the same percentage. And the United States will stagnate like Old Europe, its youth massively under-employed, with riots on the Mall contained by water hoses and tear gas, just like in Athens at this time or in Richard Nixon’s America.
If a reformist GOP candidate is voted into the White House, with a Tea Party-constrained GOP majority in Congress, federal taxes and federal spending will meet sometime in 2016 at 20 per cent of gross domestic product. And the constitutional republic will be saved as a free-enterprise capitalist island in an ocean of social market progressivism, much as was the case after 1980.
A democracy secures the government that it truly deserves. So go to it Americans and make your choice. And take the full responsibility for your actions. In so doing, share a passing thought for those of your children and your grandchildren who cannot vote at this time, but whose future you are surely determining.
Tags: capitalism or socialism is the bone of contention, November 2012 will determine the fate of the US, resolution of the debt crisis will determine the future
June 30, 2011 at 5:03 pm |
You say…
“A democracy secures the government that it truly deserves. So go to it Americans and make your choice.”
I certainly hope that we can secure a better government than we deserve, because God knows we need it! In an America with unprecedented access to knowledge and information, it’s sad and more than a little depressing to realize that, as a populace, we generally do not avail ourselves of even the most basic knowledge to make an informed choice. Americans of all walks of life should be conversant on basic economic policy options, choices and potential consequences before they pull the rhetorical lever. But I do fear you are correct – in a population that thinks Sarah Palin is “misunderstood” rather than not very deeply informed, we might just wind up with the government we deserve – and the consequences that go with it.
Respectfully,
One of your former students, Rena (Ray) Fagel (1990)
June 30, 2011 at 5:22 pm |
With all due respect, no economic downturn of any significance has ever been positively resolved by hiking taxes.
June 30, 2011 at 7:29 pm |
Hi BawldGuy. It’s less the downturn that I think a measured tax increase addresses so much as the idea of debt and deficits. If solvency is on the table (and it appears that it is), both revenue and expense should be considered in ameliorating the problem.
Tying it back into job creation and resolution of the downturn, however – I would argue (respectfully as well) that there is zero empirical evidence that keeping taxes low(er) creates jobs apace of new entrants to the workforce. In fact, evidence indicates the contrary. In the entirety of the George W. Bush administration, 3M jobs were created. The Bush tax cuts were enacted in 2001 and 2003 and held force for the vast majority of his two terms in office. Compare that track record to that of Clinton’s. With population growing at a faster pace than that under GWB, Clinton created 23.1M jobs (source: http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/). These increases came in 1993 – so again, they persisted throughout the vast majority of Clinton’s 2 terms in office.
I understand and allow that it’s difficult to compare different time periods, economic environmental factors, and other items. But there’s no teeth to the argument that somehow keeping taxes low across the board will aid in recovery or stimulate growth. That strategy has demonstrably failed, leaving us where we are today. Moreover, failure to consider and address the revenue side of the debt and deficit issue is an untenable – and unworkable – way to try to bring our Federal budget more into line.
June 30, 2011 at 8:22 pm |
Hey Rena — Historically empirical evidence clearly shows cause/effect relationship to cutting relatively high personal/business income/cap gain taxes. When JFK did it in the 60′s it worked to both increase revenue to the Treasury as well as improve the economy. As did Reagan’s tax cuts in the 80′s, as did Clinton’s large cut in cap gains in the 90′s. Bush’s tax cuts also resulted in an increased revenue stream.
When taxes are raised in a down time, ask FDR and our parents/grandparents what happens. Unless the OMB has been cookin’ the books for both sides of the aisle he last half century, cutting taxes when they’re relatively high has never failed to increase revenues or produce jobs.
The alternative is gov’t bailouts and bogus stimuli. How’s that been workin’ for us lately?
July 18, 2011 at 6:51 am
Great to see someone using the historical perspective.
The only thing that I quote from J.M. Keynes is right on this point: “raise taxes during a time of war, lower taxes at other times”.
Most people who claim themselves to be Keynesians actually ignore this particular advice.
My own anecdotal experience is based upon the Australian experience. Right now we are having the same or a similar crisis to that in the USA with the ALP proposing a carbon tax. The electorate is angry.
My main theory is actually based upon the fact that we are facing the 1970s redux, both political and economic, and with all of the economic consequences of the stagflation of the 1970s. In Australia the ALP was in charge from 1972 through to 1975, and it was high government spending which then led to very high interest rates, high inflation, high unemployment and every increasing demands for higher wages.
In 2007 the ALP under Kevin Rudd was elected. He was knifed in the back by Juliar the Marxist Gillard, the usurper. We went to the polls and ended up with a hung parliament. The end result has seen the unleashing of the green monster (otherwise known as the Watermelon Party or the Greens). They have demanded the introduction of this carbon tax. Earlier this year we were forced to have a flood levy. Only those earning over a certain income have to pay for that levy (how nice). The carbon tax package has a lot of stings and the same group of people get no compensation at all. The end result if this is introduced will be even higher utility costs which will translate into much higher prices, which will push up inflation, followed by increases in interest rates (being kept down by the Reserve Bank). The real sting is in the increases to the marginal tax rates.
By increasing marginal tax rates more people are getting hit with higher taxes, which of course leads to less money being available for investment. At the same time the high spending government is hogging the investment dollars.
Higher taxes do not bring back prosperity, but they actually increase poverty for those in the middle classes.