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It's the Spending, Stupid

7/14/2012

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President Obama and his sycophants in Congress are again on their rant about raising the taxes on the millionaires (defined as a family making $250,000 or more) and other people who need to pay their fair share. Here’s something he and the leftstream media are not going to tell you. It doesn’t matter, not one iota, if Obama gets the tax rate increase he wants. It won’t fix the problem. It will be barely noticeable. It will likely do harm.

The President does not come right out and say it, but it is implied that if only we raise taxes on the rich all of our budgetary problems would disappear. Listen to this clip.

http://www.hark.com/clips/hmtzzhwlcw-raise-taxes-on-the-rich

He says if we take money from the rich and give it the poor the economy will be back in balance. The word ‘balance’ is in there for a reason. People hear that and they think “balanced budget”. Then they make the leap from “balance budget’ to “Tax the rich and we balance the budget”. Again, the President doesn’t say this. But, it is clear he wants you to infer this.

So, first let’s shoot that down right now. The Clinton Tax Rate Increases, that President Obama wants Congress to reinstitute on families making above $250,000 and individuals making above $200,000 (millionaires?) are projected to raise annual revenue from as little as 65 billion per year to as much as 400 billion per year. Other sources say revenues will actually go down as those “rich’ people shelter their income more efficiently.

For argument’s sake let’s say that we will be rolling in the dough and bringing in 400 billion more each year. In 2011 the budget deficit, the amount money we need to bring in so we have as much as we spend each year, was 1.6 trillion. That’s trillion with a capital ‘T”. That’s trillion, as in 1000 billion. The 400 billion of additional revenue is a big maybe. The 1.6 trillion shortfall is a carved-in-stone fact. We are talking a pie-in-the sky- best-case scenario of reducing the deficit by 25%.

You say “Great! That’s a good start”. I say “Weren’t you listening?” Maybe we will raise 400 billion. We might get even less money. But, we are definitely planning on spending every dime and then some to create the deficit.

“Yeah, but we can try it and maybe at the same time reduce spending in areas where we can afford it; like Defense. You know we spend more than every other country in that area.”  comes your reply.

We have played this game before. If we cut out every single dollar going to Defense, every single dollar, our deficit drops from 1.6 trillion to 700 billion. So if we tax the rich, cut out all defense (throwing a few million people out of work in the process, and turning our Recession into a full fledged Depression) we are still 300 billion short, IF things play out in the best case scenario. But, we also get invaded by a foreign country (other than Mexico), and must learn to speak Russian, Chinese, or Farsi. 

Total federal spending is about 25% of Gross Domestic Product.  In simpler terms our Gross National Product is how much the country makes as a whole. Our national salary if you will. Never in the history of this country has the Federal government been able to come up with a way to get more that 20% of that ‘salary’ in taxes. Not when the top tax rate was a criminal 90%, not when it was 28.9% under George W Bush. That 20% level is the ceiling. That is all we can collect. Do you see what I am saying? We spend 25%, but we can never collect more than 20% in taxes to pay for it.

That 20% tax ceiling is called the Tax Capacity. Like it or not, it is a reality. The people that pay the most taxes are not dumb. They pay people a lot of their money to legally shelter as much money as they can. When tax rates go up, they put more effort into sheltering their money from taxes. This is not illegal or immoral. I shelter as much of my money from Uncle Sam as I can, too. But, the point is we can only get 20%.

If we can only get 20%, but we are spending 25%, then spending has to go down. That has to happen. Has to happen. Has to happen. You can not keep spending more than you can possibly earn. Clear? Even the stupidest person in the world grasps that.

“OK” you say “But, why can’t we do some of both? Raise tax rates and cut spending?’

‘We’ can. But the Democrats don’t want to. To be blunt, they are lying to you. They want you to think that if we just take more from the rich, then everything will be fine. Take from rich, give to poor (who then vote for them), and things will be both hunky and dory. Things won’t be. See above.

During Reagan’s administration the House Democrats promised that if Reagan would sign a bill raising tax rates into law, they would reduce the rate of spending. Tax rates went up and Tip O’Neill (Democrat Speaker of the House back then) laughed as nothing was done about the spending.

Today the Republicans (who were acting like Democrats with their spending habits), have been pushed kicking and screaming by the Tea Party faction, into drawing a line in the sand. No more tax rate increases, period. Do something about spending first, and then we can talk about raising tax rates. Until then No tax rates increases on anyone. Period. Got it?

Democrats feel they can’t do that. They have built their power base by promising the people that vote for them that they, the Democrat party, will provide utopia for them.

They promise 99 weeks of unemployment. Permanent Social Security Disability payments if you can convince them that you are crazy, unlimited welfare, a record number of people on food stamps, a mobility scooter for everyone with a bad joint, or too fat to walk. They promise expensive subsidies for green energy companies that produce nothing but bankruptcy and lavish retirement benefits for unionized government workers. They promise and they promise, and it must all be paid for somehow.

All of this is expensive and it has to stop. The majority (over two thirds) of federal spending is in so called Entitlement Spending. I’m sorry that President Obama and the rest of the Democratic Party will not be adults and tell you this. But the problem is that we are spending way too much on Social Security, Medicare, Medicaid, and Welfare.

 This is where spending must be reduced. I know that people are dependent on these programs and we can not cut them off with nothing. But, we can not give everything to everyone, no matter how compassionate it is. We start small, exempt current retirees, and those soon to retire. Then we start ratcheting down the promises, and for goodness sakes, we don’t add any more (like Obamacare).

The alternative is what is happening over in Greece. Or closer to home, California. Stockton, California, 300,000 citizens strong declared Chapter 9 bankruptcy on June 29th. It’s largest creditors are Wells Fargo bank, former retired city workers, and the unions. They had promised, in medical and retirement benefits much more than they could pay, and now there is no money. They found out that there is a tax capacity. Taxes are too high? Move to Texas.  Scranton, PA, population 76,000, just reduced the pay of all city workers to minimum wage. They are out of money for the same reasons.

We do no one any favors by pretending that this spending is not a problem. These people in Stockton and Scranton were counting on what was promised them and now the rug is being pulled out. When there in no money, there is no money.

I write this blog because I’m sick of being lied to. I’m sick of having my money taken and given to someone who is sitting on their ass, and I’m sick of the direction Barrack Obama is taking this country. Elections matter. There is one in November. I’m voting for Romney and every other Republican on the ballot. He is going to need all the support we can give him. 

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    Why this Blog?

    I'm 60, conservative and sincerely hope that my blog can make a difference. I think the Democrat Party has been taken over by America haters, career victims, and those who believe that the federal government should be your daddy. I'm looking to give those who vote for the "D" no matter what, something to think about.

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