Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat.

Theodore Roosevelt, The Strenuous Life

The budget fight continues. Here are a few myths and observations:

1. It is the wrong time to fight the deficit and debt. Creation of jobs is what is important.

This is catchy. It is correct, except that we are essentially out of money. Indeed, the U.S. would be brilliant to spend any surplus on re-vitalizing the economy. The problem is that the U.S. already expended the funds and cannot afford to stimulate the economy as much as it should.

2. We should not cut spending for public radio because U.S. spending for the Corporation for Public Broadcasting is trivial compared to the deficit and debt.

Most spending that is wasteful or that should be reviewed for cutting is trivial compared to the enormous debt of the U.S. This argument applied to all expenditures dooms to failure the frugal and diligent who believe spending is too high.

3. We are making cuts to the wrong programs.

The parties need to first agree on the magnitude of the cuts, then they can fight about where the cuts should be taken. There are two issues. There is no reason to disagree on the cuts, but where they should be made is a natural area for controversy.

4. We have a spending problem, not a revenue problem. New taxes are not justified.

The first sentence is true. However, the hole we have dug is too big to fill without new taxes. The only questions should be against whom should they be levied and how much should they be.

5. We have a budget deal that kept the U.S. Government open for business. Isn’t this wonderful?

Right. Congress cut the budget about 1% and spending is more than 40% greater than income. Great work.

6. We need to close tax loopholes for corporations.

This is not so. It is far better to use the Individual Income Tax as a tax for individuals and keep corporations in the U.S. by not taxing them at all.

 

There is no one to bail out the U.S. in case we default or otherwise need financial help. It took years to create the current mess and will take much diligence and pain to reverse the trend. The analogy is to the family that is spending at the rate of 140% of its income; a lot of good expenditures must be cut to make the finances work in the long term.

BBC World News is reporting this situation well, distinguishing between the debt and deficits of the United States and regularly comparing our debt to GDP ratio with that of other nations struggling under mountains of debt. When people know the amount of debt we have per worker the political pressure will increase on our leaders. This debt level makes every major spending decision, such as funding a huge stimulus package or war effort, a Hobson’s choice. We gamble with not addressing a present need or risk economic collapse because of excess spending and debt. This is not a path to a world leadership position and is unacceptable.

 



2 Comments to “U.S. Budget Myths and Specious Arguments”

  1. VI says:

    As I am sure you know, the individual income tax only came into effect in the early 20th century. I would rather repeal that amendment and lure corporations to this country with the extra spending power of consumers than I would by taxing corporations less. Further, this would create a broad class of voters that would perpetuate this policy for decades. I do think the corporate income tax should be lower, but I find the federal individual income tax onerous and somewhat unconstitutional.

  2. admin says:

    The U.S. Supreme Court found the individual income tax unconstitutional prior to the authorizing Constitutional Amendment in 1913. Because the constitution was changed to allow the tax, and that change apparently conformed to the required process, the income tax is constitutional.

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