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December 12, 2010 in Business
Caldwell: Deficit discussions are truly farcical
Here’s one bottom line on all the foolishness about perpetuating the worst-conceived tax cuts in U.S. history: the transfer of $500 billion more in American wealth to the Chinese.
Not to pick on the Chinese, much. Their response to the awarding of the Nobel Peace Prize to imprisoned dissident Liu Xiaobo – creation of an alternative Confucius Peace Prize – was a sad farce.
But perhaps no more farcical then watching Friday’s “Today Show” interview of Rep. Michele Bachmann, R-Minn., a tea party superstar.
In response to repeated questions from Meredith Vieira regarding the impact extending the tax cuts will have on the deficit, Bachmann responded, “When people keep their own money, that is considered a deficit to government, but it’s not a deficit to your pocket or mine.”
Perfectly true, and utterly magical.
There may be a consensus that allowing taxes to rise next year would undermine what is already an anemic recovery. Elements to the compromise worked out by President Barack Obama and Senate Minority Leader Mitch McConnell, R-Ky., should foster more hiring, although the 2 million-job projection the president has been talking about sounds awfully optimistic.
But the dynamics that got the federal government to this place are all too familiar, and destructive: The Republicans refuse to raise taxes, the Democrats refuse to cut spending, so they compromise. Both get their way, and the deficit increases still more – but not to your pocket or mine.
The near success of the president’s National Commission on Fiscal Responsibility and Reform underscores how near the nation might be to a better path while our leaders stumble down the same old road.
The panel’s recommendations would cut the federal deficit by $4 trillion through 2020, flatten tax rates, cap or cut almost all spending, and reduce the national debt as a percentage of gross domestic product to 60 percent by 2023 and 40 percent by 2035.
The proposals won 11 of the 14 votes needed to bring the package to a congressional vote. Liberal Sen. Dick Durbin, D-Ill., supported it, as did conservative Sen. Mike Crapo, R-Idaho. Even ultra-conservative Sen. James Inhofe, R-Okla., accepted taxes as a necessary element of more responsible budgeting.
Partially as a response to a preliminary version of the report, Obama is attempting to freeze executive branch salaries. The Senate has not yet voted on the proposal.
He is also reportedly considering income tax revisions along the lines recommended by the commission.
Meanwhile, however, the horse-trading and hypocrisy continues in the Capitol. House Republicans swore off earmarking but elected an egregious practitioner chairman of the Appropriations Committee. And Democratic senators from the “conservative” heartland announced their support for the tax compromise only after they got an extension of the ethanol production credit included.
With control of Congress about to split, the parties are playing for time, and the next opportunity to impose their will. Nothing on the agenda today addresses the nation’s fundamental budget and deficit challenges. Businesses are not getting the certainty leaders say they need to begin investing their record hoards of cash.
A sad farce all around.
Caldwell: West Point trained local bankers to survive 
ZagChuck on December 12 at 2:34 a.m.
Bert,
The creeping incrementalism approach to government has clearly been a failure. We have reduced our freedoms, striped away our liberties, and placed ourselves in a position of financial ruin, all in the name of “providing” for those in need. While one party bears more responsibility than the other, both parties are to blame. It must end.
At every level (city, county state and federal), the government has increased the amount of money it has taken in every year in the last ten years. Clearly the problem we have relates only to spending, and not to the level of taxation. We must reduce the size, scope depth and breadth of government instead of negotiating how much it should grow
There is a simple solution; incentivize congress. We begin by limiting the amount of pay congress gets, in direct relation to the budget. We also limit each of their access to their own election campaign funds in direct relation to the reduction of the deficit.
If they balance it completely, they get 90% of their paycheck. For every 1% reduction in the budget, they get an additional 3% of their paycheck. They may receive up to 120% of their pay, if they reduce the budget by 10%.
If they fail to balance the budget, they get 1% less than 90% for every $5billion in the red.
Furthermore, you apply the same math to their access to campaign funding. If they raise a million dollars, and balance the budget, they can spend $900k of it. If they go over budget with our money by $200 Billion, they only get to spend $600K of their own $1Million campaign funds.
We can apply a baseline amount for them to reach, once they reach their “goal” of a specific budget, say the spending amount of 1998 ( as an example) they get to receive 100% each year they keep it at the same level.
By giving them these “incentives” we provide them with the opportunity to reduce spending amounts to where they need to be, and the desire to be transparent about doing so.
oneanddone on December 12 at 4:46 a.m.
Dumb idea all around, Zag. Many in Washington are already rich, especially the boneheads who have been there FAR too long. I have a better idea. Instead of money, incentivize them with term limits. Change the constitution to make it necessary for certain progress on the debt to be a requirement to run for reelection. Every two years there needs to be a reduction on the debt or those in Congress cannot run in the next election. If you want to stay in Washington you’ll reduce the debt or you’ll be gone. After a 2 year hiatus you can run again but the same rule applies. Something has to be done to change the corruption in our government. Congress has sold us down the river for their own benefit.
mikeln on December 12 at 6:11 a.m.
The government has sold us out to the wealthy, not the poor. They have been giving less and less to the poor over the last ten years yet the deficit has still gone up. This coud only happen if the wealthy are getting the money. With the ability to communicate at the speed of light, how about making these people stay where they are elected, no need for them to go to D.C. Then the people who elect them could see who they are getting together with, and I can tell you, it isn’t the poor. Make them live on what the poorest person in their district has to live on and watch how fast they help everyone, not just the ones who contribute to their re-election. Put them in a sleeping bag outside if need be untill they do somthing about the lack of employment for people in this country, and never pay them more then minimum wage, they were probably already rich and do not need anything more to represent their people.
JBlim on December 12 at 6:59 a.m.
ZagChuck’s pearl of wisdom:
“Clearly the problem we have relates only to spending, and not to the level of taxation. ”
Yep, it’s a pretty sad farce all around. But some actually believe the rhetoric… ZagChuck, . . Ahem.
deacon46 on December 12 at 10:30 a.m.
The Fall of the USA Empire. The few leading the masses but the masses are ignorant of the world and where we are in it. The few are corrupt. We are a nation of have and have nots. We are becoming a nation of corruption.
No simple solutions but denying services to the needy is not a solution. We must once again be respected in the world for our moral fiber and for our products and services. Moral fiber is not religious beliefs but a foundation of fairness for all and reaching out to help one another. Understanding and empahty. It starts at home.
If countries don’t buy our services and goods we will continue with high umemployment and see more businesses going offshore.
Cutting the deficit is easy compared to doing the hard chores of ensuring our place in the world.
hawken on December 12 at 11:14 a.m.
I don’t recall seeing any spending cuts to date.
The deficit will not be corrected until major spending cuts are made. Like it or not, that will not change. Unless, we assume that ALL government spending is essential. Then, the only recourse is to raise everyone’s taxes to balance with the spending. Absurd, of course.
Extending the Bush tax cuts is not cutting taxes. It’s a refusal to raise taxes.
Extending the Bush tax cuts does not raise the deficit one penny.
Spending more than you make is the cause of deficits.
A short fall in revenue from a recession, from low taxes or because grandma didn’t send me my monthly allowance….. does not cause deficits. Deficits occur when spending exceeds grandma’s allowance.
Deficits are cured when spending is cut, to balance with revenue.
Exactly,,,, exactly,,,, what the State of Washington is doing as we speak.
The problem is that cuts in spending is totally foreign to the left. The basis, all of the complaints on this blog.
Major spending cuts WILL come. Unless, we as a nation are willing to accept insolvency. There is no escape from this reality.
liarsinnews on December 12 at 11:26 a.m.
Without an inflation, insolvency has landed. Our Nation must stop the reckless spending habits immediately.
greenlibertarian on December 13 at 5:10 p.m.
Ron Paul, Barney Frank, and 53 other Congress-critters (all Dems) aren’t afraid to say what HAS to be done, cutting military spending, which has DOUBLED since 2000.
http://www.house.gov/frank/docs/2010/fiscalcommissiondefenseletter.pdf
” According to an October letter to the National Commission on Fiscal Responsibility and Reform co-written by Congressmen Barney Frank (D-Mass.) and Ron Paul (R-Texas), “The Department of Defense currently takes up almost 56 percent of all discretionary federal spending, and accounts for nearly 65 percent of the increase in national discretionary spending levels since 2001.”
***Clearly, defense spending is the largest cause of our deficits.***
Furthermore, a significant portion of this spending is no longer in the interest of our national security. Much of the current defense spending is attributable to the continuation of the Cold War policy of defending foreign countries, many of which are now far wealthier than they were immediately following World War II. As the Frank-Paul letter states, “Years after the Soviet threat has disappeared, we continue to provide European and Asian nations with military protection through our nuclear umbrella and the troops stationed in our overseas military bases. Given the relative wealth of these countries, we should examine the extent of this burden that we continue to shoulder on our own dime.” Thus, Congress can generate substantial savings simply by terminating outdated policies.
Unfortunately, these cuts may not occur due to resistance from neoconservative Republicans. That’s right – many of the same people who made deficit reduction a signature issue on the campaign trail are unwilling to even consider cutting the largest source of our deficits.”(continues)
” It is simply inconsistent and illogical for Republicans to support cutting wasteful domestic spending, yet to stubbornly reject cutting wasteful defense spending. As Paul wrote in Foreign Policy last August, “We cannot talk about the budget deficit and spiraling domestic spending without looking at the costs of maintaining an American empire of more than 700 military bases in more than 120 foreign countries. We cannot pat ourselves on the back for cutting a few thousand dollars from a nature preserve or an inner-city swimming pool while turning a blind eye to a Pentagon budget that nearly equals those of the rest of the world combined.”
Some feel that it is simply un-American to advocate cutting defense spending. This argument is ridiculous. To me, it is genuinely American to be concerned about America’s economy and fiscal solubility. In 1951, World War II hero General Douglas MacArthur lamented, “Our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear.” Similarly, in 1961, President Dwight D. Eisenhower urged Americans to “guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”
It is time for Congress to honor MacArthur and Eisenhower by rejecting the “war hysteria” and “incessant propaganda of fear” of the neoconservatives. It is time for Congress to have the courage to cut defense spending, even if military-industrial complex lobbyists, such as defense contractors, protest.”
http://www.dailycampus.com/commentary/defense-cuts-are-essential-for-deficit-reduction-1.1828369
Afghanistan is the most corrupt country in the world. And now it’s OUR TAX DOLLARS propping up a failed narco-state and fueling the corruption.
bdr on December 13 at 6:49 p.m.
Excellent letter…..until we hit the magic Ireland number 34% of GDP will Republicans and Democrats ever learn NOT to Tax cut party or spend with credit all the way back to daddy’s house again.