The Debt Ceiling

The Debt Ceiling

What Our Government Gave Us For Christmas This Year

President Barack Obama pauses after signing H.R. 3765 Temporary Payroll Tax Cut Continuation Act of 2011, in the Oval Office, Dec. 23, 2011. (Official White House Photo by Pete Souza)

Christmas was a couple days ago, but have you stopped to ask yourself, «What did my elected politician do for me this year?» or «What gift did I get from my Senator or Congressman this holiday season?»

Maybe those are silly questions, but I need an excuse to finally update this blog, and given that its the end of the year it’s always good to look back and reflect. But I digress.

Back to the question at hand. What did our Congress and President accomplish this year. Well here’s a few things that really stick out to me:

1) Another $1.3 trillion, with a «T», of debt that future generations have to pay off. As a percentage of GDP our national debt increased from 93% at the end of 2010 to about 100% today. This massive jump in our national debt pushes the United States ahead of Ireland, Belgium, and Singapore in terms of total indebtedness. Currently the only significant (non-third world) nations with higher indebtedness are: Japan (220% of GDP), Greece (143%), and Italy (119%). Not great company if you ask me.

2) An even more divided Congress. At the end of 2010, with the rise of the Tea Party and the significant victories of their Republican supporters in the midterms, it seemed that the nation could not be any more divided. Then we hit the debt ceiling in August. Oh boy, what a circus! The result of the debt ceiling debacle has been well documented (here and elsewhere) and has not been good. President Obama has essentially become as ineffective at George W. Bush was in his last year, and the Republicans are viewed as too extreme and very stubborn. Its now generally accepted that nothing significant can be accomplished until after the 2012 elections. In other words, its going to be another year of a «do-nothing» Congress and a spineless President Obama.

The Debt Ceiling

3) Payroll tax cut results in even lower tax rates. While I understand that we’re trying to stimulate the economy, we also have a massive deficit problem. Its very hard to tackle both problems at the same time. Without coming up with any cuts to government expenditures in 2011, Congress thought it would be fine to add another $175 billion to the budget deficit by cutting the Payroll Tax. Whats worse, Congress just extended this tax cut into 2012. With all the promise that the new Tea Party Congressmen brought last year that they would finally be the ones to shrink the deficit, they in fact allowed the budget deficit to get even larger than the year before.

4) The Bush tax cuts keep on keeping on. As I’m sure you’ve heard, President Obama and most Democrats want to let the Bush tax cut expire at the end of 2012. They talk about how it benefits the rich and we could raise $700 billion over the next 10 years by letting the tax cuts expire on those making more than $250,000 per year. Did you know that the Bush tax cuts also helped the poor and middle class? Its true, Bush cut taxes at every level. In fact, if we let all the Bush tax cuts expire it would generate almost $4 trillion in additional revenue over the next 10 years — that’s almost 6 times more revenue. Let’s stop all the talk about how the rich aren’t taxed enough. We already have the most progressive tax system. If you don’t believe me check out this link. Of the 24 largest economies in the world our wealthy pay the highest shares of taxes relative to their share of income (look at the ratio in the third column). The point is this: we have to raise taxes to help close the budget deficit, but if its going to be fair then we have to raise taxes on everyone.

Merry Christmas, Happy Hanukkah, and Happy New Year!

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