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Deficit Upset

by Ouida on December 9, 2010


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While I was posting Deficit Unplugged, our President was compromising with Republican Leadership to create Deficit Ignored.  Should we have a payroll tax holiday?…yes we should.  Those tax cuts?  They should have gone the way of the DoDo.

Here is, honestly, why I am concerned about the deficit.  As a Nation we have promises to keep.  We have the promise to our citizenry that if you work hard and use your mind, you can have a better life than your parents, in other words, we have a promise of upward mobility, yet our middle class is shrinking.  For the last 75 years we have promised everyone who works that they, and in some cases their dependents, will have a safety net in old age and for the last 35 years we have promised elders some semblance of health care.

There is a risk now that all the promises will be as ashes.  In truth the giveaways that I talked about in Adult Conversation are part of the problem.  In order to make Social Security more appealing benefits increased and the retirement age was lowered even as the population began to see increases in  longevity.  In order to avoid fiscal responsibility, Social Security receipts were spent as part of the general budget.  When borrowing from ourselves wasn’t enough, we borrowed from other nations.

Engineering short term budget deficits will never allow us to attack the long term budgetary issues that affect our fiscal health.  We had a chance to let the tax cuts expire but now that ultimate decision has been kicked two years down the road.  Our tax code is a mess, to be sure: it is over 67,000 pages of nonsense and exceptions to nonsense. TAX prep is a 65 Billion dollar industry and roughly 61% of filers use a tax prep service.  Refund Anticipation Loans are a huge business in low income areas.  I have lost count of the number of articles I’ve read by economists over the past few weeks who advocate reforming the tax code, collapsing to two brackets, the top of which would be lower than the top bracket under the beloved Bush cuts, and adding a value added tax.  Taxing both production and consumption rather than production as we solely do now.  Some of the logic for not doing these things boggles the mind:  A value added tax would cause the poor to save rather than spend so we shouldn’t do it…huh???  We should preferentially tax the rich because the rich would save rather than spend….huh???  We should extend unemployment benefits because the unemployed will spend them….huh???

Since the 1970s the roots of our economy changed from a manufacturing base to a consumer base, an economy driven by spending.  What did George W. Bush urge us to do after 911? He urged us to remember our patriotic duty and shop.  But there is a problem with jobs based on retail and consumer spending and that problem was summed up by Lee Scott, CEO of Wal Mart:  “Some well-meaning critics believe that Wal-Mart stores today, because of our size, should, in fact, play the role that it is believed  General Motors played after  World War II.  And this is to establish this post-world war middle class that the country is so proud of.  The facts are that retail does not perform that role in this economy.”

Our economy has become dependent on people spending and when they run out of their own money to spend, borrowing to spend more.  No wonder we are in the mess we are in.  We have become a nation of “business as usual” trying to hang on to what it has rather than pave the way forward  with programs and incentives that will restore our middle class.  I actually believed that there would be a push for updated infrastructure and a new power grid.  It kills me that a chunk of my money every month is recycled back to the very extremist groups responsible for 911.

What do I think the President should have done?  How about lock everyone in a room with the camera’s rolling rather than hammer out an agreement after hours behind closed doors?  Make people responsible for their positions in public, not when surrounded by the safety of the herd as most politicians are when they make statements about the economy.  He should be in my face all day every day articulating his views.  That 70 minute internet only version of Mr. Obama’s 60 Minute interview was a revelation.  He has sound positions but is not doing a great job of communicating them.

I am not someone that my mother would call liberal; my mother occasionally calls me Neal (for Neal Bortz and she has even called me a selfish capitalist on my own blog)…I don’t believe in using the tax code to redistribute wealth, and I believe that everyone must pay.  I believe in term limits to certain safety nets like unemployment insurance coupled with sound public policy like a jobs bank and retraining.  By jobs bank, I don’t mean a jobs bank that the automakers had in which laid off workers were paid substantial incomes while at home waiting to be called back to automotive jobs.  No, what I mean is a database of jobs and industry trends so that people don’t have to guess what industries are fading and which ones are emerging, they don’t have to guess what the qualifications for any given job are, opening and closing dates for applications are posted and adhered to, resources for retraining are promulgated and there is funding for retraining. I believe in a national infrastructure bank with national priorities that are updated and funded and I don’t believe that public works projects should be awarded to  certain companies without the benefit of competitive bidding.

What we have now is a mess.  And political will only to posture rather than fix our problems.

I am afraid that the scenario that I outlined in Adult Conversation will take place.  I believe that Americans will ultimately have to forgive the intra-governmental debt Social Security now holds and Americans will have to accept less.  You avoid the iceberg when the tip is just a speck on the horizon, not when the berg is looming  off the bow.

By kicking the can down the road as our leaders just did this week we are surely headed for tougher choices down the road.

Please comment.

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