Aside from shouting “We’re broke, We’re broke” or “They refuse to be specific on cuts!” I haven’t heard much from the Tea Party’ers and others on the far right wing, at least not much that’s constructive. Since the bargaining is going on right now, I think it’s important to identify exactly what we expect from the “Fiscal cliff” and the following potential tax or government spending reforms in the coming years. How else do we know if we’re on the right track?
For the short term, we can only expect a quick patch to stave off the sequester (that’s the mandatory cutting of spending enacted by congress during the debt ceiling debacle last year). The full sequester is not going to happen, no matter how loud anyone barks about it. If things go really badly then the date may pass, which will only ratchet up the heat to get back to the bargaining table to hammer out a compromise. Most pundits are right, the heat will be mostly on the Republican party and Democrats will warm their feet happily by that fire.
But it’s all of congress that will be under pressure and expectations are high.
First and foremost is the debt. Looking massive at almost 17 trillion dollars, that’s still only a little bit more than the US brings home in a year. How many of us have debts that exceed our yearly income? Own a house? Then you know exactly what I mean. As long as we keep up on the payments we’re good to go. The government is constantly rolling over it’s debt to get a better rates. Rates are really low right now, so we can expect to pay less on that debt than we have in the past. In fact some investors are willing to buy our debt at what amounts to a negative rate. Why would anyone do that? Well, for large amounts of money (think trillions) it’s still the safest investment around. Go figure. Despite what you may have heard, there is no lack of interested parties for US debt. Lowered ratings or not, US debt is still the gold standard.
Debt facts: -http://finance.yahoo.com/news/biggest-holders-of-us-gov-t-debt.html
The biggest owner of US debt is the US, all in dollars. (Remember when congress borrowed from social security and medicare?)
No one in history has ever gotten a bill for their share of the national debt, so don’t fall for that that “Our children will owe...” malarky.
Debt is not a problem until you can’t pay the interest (Hint: We print our own money)
When we talk about the deficit, we’re really talking about Government spending. The difference between what we get in revenue (taxes and other things) and what congress decides to spend. This is where the rubber hits the road. This is what affects all us tax payers, fee payers, people sued by the government and companies who buy leases from the US to hunt for oil and other things.
The main questions here are: where do we spend our money (and are we getting value) and where does the money come from? There is no doubt that spending cuts have to be part of the equation, which will likely include the big three suckers of cash, Defense (yup, said it out loud), Social Security and Medicare. But it will also include a lot of smaller pieces of the deficit puzzle, well-defended charges like oil company and farm subsidies, public services like education grants/subsidies and outmoded government services (we got rid of the department that tests ketchup, right?)
Although, I’m a firm believer that there is almost no comparison between a personal or household budget and a government budget (unless you can print your own money, are self-insuring, can freely borrow from yourself and launch a missile attack on a family across town) however, one thing is usually common. It’s the little things that kill you. The extra dinner out once a month, the cool device you just had to have or the surprise medical expenses are the things that crash finances.
I feel the same is true of the government budget, individually small charges don’t seem like much but when added up they rapidly grow to colossal size. I think Congress knows that as well, it’s not exciting or even headline making, just a lot of work. If they take it on there won’t be much glory and probably a lot of wincing as every Representative’s favorite pork is chewed over. This is what campaign donations are made of, do we really expect Congress to be able to do it effectively?
Maybe what we really need is an independent authority to step in at this point. Someone to be rigorous with the numbers and available to blame when “Uncle Sal’s” oil importing business gets the tax “Shiv.” This is what big businesses do. They bring in the accountants with big glasses and sharp pencils. We could ask the GAO to do that, a holistic review of all expenditures and tax “incentives.”
Deficit facts: - http://zfacts.com/node/450
Most of the current deficit is due directly to the recession (unemployment, lost sales revenue, early retirement and lower taxes)
Some of the deficit is due to military spending, TARP and the Stimulus all of which are decreasing.
The yearly deficit is shrinking. 25% Off a high in 2010.
Which brings us to Taxes. The bulk of the cash for government spending comes from taxes, right? We can sue the pants off BP for the oil spill in the gulf, rack up the bucks from settlements against banks and hedge funds for financial chicanery, but there’s still a big hole to fill in the old wallet. That bill stops here.
I don’t know too many people who think “Rich” people are paying too high a rate, but even raising their rates to 1950’s levels wont fill the hole in completely. Besides the real debate is where do we draw the lines for rate increases? The President wants 250 grand to be the line (bargaining), calmer voices like Nancy Pelosi (if you can believe it) says it should be at around one million. One way or another some group in those heights are going to be paying more, it’s just a matter of who and how much. Most of us will not be affected by that part I’m glad to say.
There is a lot of talk (but not much action) on re-structuring the tax system. Talk about a long and difficult conversation! Whether it’s moving to a Valued Added Tax, or just re-swizzling everyone’s rates. Most people don’t understand the Tax system we have, let alone the personal impact of any sweeping changes. Be suspicious of anyone who says they do. In the coming months (read:years) this will be the game to watch. I fully expect our party to scream blue murder with every potential increase to the wealthy’s and corporate tax burdens. Watch for the hackneyed phrases “Job killing” and “Hurt Small Business.” Most people who have a job haven’t seen a dime trickle down to them since we started cutting the top rates and actual small business owners have already figured out these guys are not talking about them.
Tax facts - http://www.cbpp.org/cms/index.cfm?fa=view&id=3505
In the past, figures include up to 2009, people who made more than $50,000 a year paid 80% of the federal taxes.
Most of the citizens who don’t have to pay income or payroll taxes are low income workers who are elderly, disabled people who are unable to work, the long term unemployed or students.
Not owing taxes is not the same as not paying taxes.