Third Issue to Solve--Federal Budget Deficits
By Dr. John Bredfeldt Posted in Taxes — Comments (3) / Email this page » / Leave a comment »
Contunued Federal Budget Deficits for the last 75 years--13 years of surplus since 1930 are killing the U. S. Economy and the sactity of the U. S. dollar with foreign investors. Interest costs us over $250 billion a year. A one per cent increase in the interest rate ultimately costs us around $100 billion a year. The cause is simple. The Federal Government spends too much. The spending needs to be cut where we spend the most money annually--for entitlement programs (or as it is called today, money provided to individuals). Taxes should be increased where reasonable. Changing to a new tax system from the current income tax system could also be helpful. Bottom line--significantly decrease spending and judicisiously raise taxes. The responsibility for solving the budget deficits lies solely with the Congress since only they have the constituional responsibility and power to levy taxes and appropriate money for spending. Republican Congressional wanna-be's need to loudly proclaim this policy change to get my vote. I hope all conservatives feel similarly inclined.
Are you ignoring the effects that raising taxes has on economic activity?
What happens when taxes are lowered? {Hint: Think about the tax rate cuts of 2001, 2003 and Reagan.}
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The last time I checked, the US dollar comprised 63 percent or so of foreign exchange reserves held by the world's central banks. This is down from maybe 65 percent at the beginning of the decade.
The point is often made that this deterioration is evidence that the dollar is becoming a less attractive holding, but the trendlines have a very long way to go before they cross. (Euro holdings by central banks amount to only about 25% of reserves.)
You make the point that deficit spending is killing the economy and undermining the dollar. I find little evidence that there is a clear connection. We live in a strict fiat money regime in which our money is also the world's money. Assuming reasonably careful stewardship by the Federal Reserve, this isn't likely to change for several decades at least.
I recognize that I'm making an extremely heterodox point, but a prospective wrecked economy and destabilized dollar are not reasons to avoid deficit spending.
I agree that spending needs to be cut.
What new tax system do you suggest (even though I already know the answer)?
Raising taxes is a non-starter. They can make better use of what they have. I refuse to ever vote for a tax increase until they stop wasting so much.
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