Can't listen to the radio, or watch TV or read a paper, or surf the net without hearing about the impending 'fiscal cliff'. And this is economics, so yours truly is in hog heaven! I thought I would weigh in on this.
Last year, pre election, the two major parties in the US, refused to agree with each other on just how to mend our economy. So, as politicians often do, they appointed a bipartisan committee of unelected political animals to work out a deal. And, of course, they refused to compromise in a political year, so they put off the hard decisions until after the election. Now they are locked into a political battle, which neither side wants to cave. Basically Democrats wish to tax the pants off the rich, and Republicans want to prevent that. There are a couple of things to look at here.
First, do we need tax increases? It is one way to deal with deficits, but even the progressives in Congress, are not proposing enough increases to end the deficit. We do, however, need economic sanity. The debate will roll, and in the end, tax increases will probably happen. Why? Because that's what the people want. Honest, see elections mean things, and in this case it means the people voted divided government, but with the progressives controlling the White House and Senate, the House will probably be bullied into accepting tax increases. But wait, you say that they only want to tax the rich! They need to pay their fair share! It's the 1%! It's Wall Street! It's the bankers! It's Bain Capital! They won't tax me right? Wrong. Corporations never pay taxes, they only pass your money to Washington. It is an expense of doing business, so the price of things you need will be going up.
Add to that the tax increases in the Affordable Health care Act and the Alternative Minimum Tax, and the middle class Will be socked. But wait, as the hawkers on TV say, so will the poor. How can that be? How uncaring! True, but the taxes passed down through increased costs will hurt the very poorest the hardest. The rich? They will be OK. Because they have options. Perhaps it will be a minor inconvenience, but their life style will not be significantly impacted.
So the Middle Class and the Poor will shoulder the burden. They are already struggling in a weak economy. That is not fair. So what would be fair?
As I was reading a article on line this week, the comments on the bottom always interest me, it is a great way to gage the left and the right. One commenter said that the rich need to pay up, that tax rates are historically low. I researched that claim, and it is a lie. When Income taxes were first instituted the highest tax rate was 7%, a far cry from 35%. Rates did peak higher, up to 94%, but that was to fund World Wars. They stayed high until John F. Kennedy lobbied Congress to drop them in the 1960s. The 1950s and 1960s were good economic times in the US, so why lower the rates?
The main reason our economy surged in the 1950s and 60s is because we were the only game left. Europe was a shambles, as was Japan and most Asian countries. America was the only place to buy manufactured goods, especially capital goods. Toyota was non existent. Volkswagen was rebuilding. English factories were bombed out shells.
Now Progressives, or socialists, or Liberals say we should be more like Europe. Oh really? Why? But in some ways Europeans have it pretty good. Centralized Health Care (Britain announced that patients will be Skypeing with their doctors to save money), $5 per liter gasoline, to just name a couple. Is that what we want here?
And we need to put a number on what is the fair share. We have continually heard that said, without offering what that number is. When taxes go up, and spending goes up, we will again hear "they have to pay their fair share". I want to know exactly who 'they' are, and exactly what is their fair share. Progressives, define yourself! Maybe I would agree, but somehow I think they are afraid to tell you who 'they' are or what is fair, perhaps for political reasons? Higher taxes are nothing more than a money grab by the political class, and that is why in the end your taxes will go up.
All this does is freeze you into your current class. That means if you are poor, there will be no way out. If you are middle class, you may go down, but never rise up the economic strata. Same with the rich, they can move down, but not up. Only those who control government will benefit. We see it now, look at housing prices in Washington DC, or most state capitals, those are the markets doing well. Now look at Detroit, or Las Vegas, they are not doing so well. If you get the chance, watch an episode of Doc Martin on Netflix. It is filmed in a coastal town in Britain. Compare what you see to most of our coastal towns.
So now we all have health care, and higher taxes, and higher costs, and a weak economy. Think that will help the unemployed find a job? But it's OK our masters in Washington will take care of us.
Spend well!
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