A Budget Solution


I think that I have stumbled on the compromise that Congress needs to make.

On the one hand, you have the Left that insist the ONLY way to address our deficit is to raise more revenue; certainly this is a fair argument that deserves consideration.

On the other hand, you have the Right that insist the ONLY way to address our deficit is to cut spending; there will be no raising of the tax rate.  Again, a fair position worthy of consideration.

My solution is simple.

Do both.

The Democrats should let the Republicans claim that they will not raise taxes.  In exchange for this, the Democrats should agree to cut spending.

How do we do this?

End this ridiculous practice that’s known as tax credits.

No new taxes.

Cut spending.

Extra income.

Done.

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13 comments
  1. I think you nailed it right on the head. They’re so adamant on declaring (threatening with) their rights yet they have zero consideration for his.

    • pino said:

      They’re so adamant on declaring (threatening with) their rights yet they have zero consideration for his.

      The problem is that we have created such a partisan atmosphere each vote up there is a referendum on their purity.

  2. I agree with you, there has to be both revenues and entitlement cuts. I have read several reports that Democrats have already agreed on substantial cuts to Medicare and other programs that both parties agreed (this is per Senate Republican McConnell on the morning shows today), however, when the talks turned to raising revenue that is when Eric Cantor walked out.

    It has been reported by several outlets that Democrats haven’t asked for any tax increase on individuals, they are looking to cut subsidies for oil/ethanol and remove loop holes used by corporations. McConnell was asked directly about this and he acknowledged this but responded that regardless of this, it would not pass the House, only entitlement spending would be on the table.

    I know the debt ceiling talks is a fluid situation but I am skeptical that Republicans want to compromise. The new Tea Party representatives voted in have said they have no intention of raising it. It appears that compromise is taking place but only on one side.

    • pino said:

      there has to be both revenues and entitlement cuts.

      Yes. Revenues must increase and spending must be cut.

      The simple answer is that as the population grows and the economy grows, revenues DO go up.

      Democrats haven’t asked for any tax increase on individuals, they are looking to cut subsidies for oil/ethanol and remove loop holes used by corporations.

      I think that when it comes to oil and energy, the industry should be on the same ground as any other industry. That is, if we don’t subsidize oil, then we shouldn’t subsidize solar and so on.

      And loopholes? Close ’em.

  3. Alan Scott said:

    If the economy actually grew, would not revenues increase ? If you tax economic activity won’t it cease to grow ? Once Republicans cave on tax increases won’t Democrats stop attacking them ? Like when George H,W, Bush caved on tax increases , the Democrats gave him credit for that and he was reelected , right ? Won’t Democrats control their addiction to spending ? All things are possible in the bizzarro universe . Like ethanol incentives going away . Like solar and wind subsidies going away .

    Ask me if I believe it , yes I believe it . And the deals to get all of this done will be transparent , like the transparency on the deals for Obama-Care . Like Natalie Wood in Miracle on 34th Street . ” I believe, I believe “.

    If the Tea Party Representatives cave on taxes they are dead politically . And since Obama wants to blame them for the checks not going out to the geezers and military families , I expect a default . Its almost inevitable .

  4. Cutting taxes has the same impact on growth as cutting spending. Most economists see tax cuts as an inefficient way to stimulate the economy because they often get saved, used to pay debt, or increasingly to buy consumer goods produced abroad (which actually adds to our current account deficit). Targeted spending is a better way to stimulate the economy, but at this point the cost in increased debt arguably does more harm than good.

    The solution: recognize that there is no easy way out. We’ve had 30 years of living beyond our means starting in 1981. Both parties cut taxes and increased spending. This means the medicine of a recession is probably going to be bitter and last awhile longer until we cut consumption, increase production, and get our budget in line. Given the costs of not doing so, we have to both cut spending and cut taxes, even though both risk slowing the economy. Given the need to increase production to rebalance the economy, spending might have to be shifted to investments in infrastructure or support for new businesses. That goes against some free market orthodoxy, but it has been proven effective — it’s one thing Germany and other countries have done, and they are running current account surpluses. Finally, the way DC works, the only feasible solution is to cut spending and increase taxes.

    Of course, we could default. Crashing the economy would be a far more painful way to rebalance things, but we could go that route and not raise the debt ceiling. That could be devastating to the world economy though.

    • Your fundamental flaw here is thinking government can fix the economy. I believe government is the problem. Milton Freedmen once said there are four ways to spend money…

      1. Spend your own money on yourself
      2. Spend your own money on someone else
      3. Spend someone else’s money on yourself
      4. Spend someone else’s money on someone else

      Each of these are done with declining care and stewardship. Which one is the government doing?

      • Moe said:

        Without government there is no such thing as ‘an economy’ – just a bunch of warlords trying to get each other’s stuff.

        As for budget solutions,pino, I agree – do both. But first agree and publicize that the Bush tax cuts WILL BE ALLOWED TO EXPIRE. That alone would have a huge impact.

      • pino said:

        Without government there is no such thing as ‘an economy’

        Well…..without property rights there is no such thing as “an economy”. And in so far as people, as a group, tend to look out only for themselves, Ill grant’cha that we need government to ensure those Liberties. But be aware, the Liberty came first, we are not free because of government.

      • Moe said:

        [we are not free because of government.]

        Well, not all of us.

        I know it goes both ways, governments enslave people and governments free people, but the trend in the modern world is toward organized governments freeing people.

  5. We’re not free because of government? That’s a loaded statement. First, without a government it would be rule by the strong over the weak — if you are strong you’ll have liberty. If you’re weak, probably not. Governments that freed the slaves and serfs used government power to redefine property rights not to include ownership of humans. Also, given that in complex societies anarchies usually lead to organized criminal gains vying for control, it may be that unless we were to go back to primitive societies, government of some sort is inevitable and necessary for individual liberty. Tribal governance was cool — it was mostly voluntary, but with customs and traditions strictly adhered to. Finally notions of liberty and human rights (especially all humans having equal value) have been recent conceptions. I’m not saying you’re wrong, only that the statement opens all sorts of avenues of possible contention. It would be a good political theory question: make the statement in your last sentence and ask students to label it true or false and give a detailed explanation of why.

    • pino said:

      We’re not free because of government? That’s a loaded statement.

      We are free, living in Liberty, because of those rights given to us through natural or divine rights. That is, we are born into a “rightful state” of Liberty. It is the nature of man to restrict the Liberty of others. And for THAT reason, we need government.

      We are given Liberty before government existed. After we have been given that Liberty, we create government to protect it.

  6. Alan Scott said:

    Scott,

    ” Most economists see tax cuts as an inefficient way to stimulate the economy because they often get saved, used to pay debt, or increasingly to buy consumer goods produced abroad (which actually adds to our current account deficit). Targeted spending is a better way to stimulate the economy, but at this point the cost in increased debt arguably does more harm than good. ”

    Please do not make a statement like that . Please say most ‘liberal’ economists see it that way .

    I believe that Reagan proved that tax cuts work . I believe that George Bush proved that tax cuts work . They were not the cause of the financial downturn . I believe that President Obama has proven that even the threat of tax increases kill an economy .

    So why isn’t President Obama running on his record ? It is quite impressive .He promised 5 million green jobs and he spent $ billions to make them happen . Green jobs . Tell me do you remember the $390.5 million that was lost to Solyndra, Inc a California solar panel maker . It went bust .The big stock holder in that company was billionaire George Kaiser who gave big bucks to the President in 2008 . I bet Mr. Kaiser is one rich guy the liberals do not hate .

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