Friday, February 27, 2009

Obama's One Trillion Dollar Tax Increase (Editorial Comment: Not Enough Revenue)

The heading is the Drudge main headline from yesterday (still linked as a lesser headline on Drudge). You gotta love Drudge, but this particular headline fails to impress me.

First, the headline assumes what is probably a lie: That people will actually pay the tax increase proposed by Obama, instead of figuring out ways to avoid the tax increase. It also assumes that the income of the "rich" will not drop--not only because of tax avoidance and losing the incentive to earn more money, but because Obama's policies are going to strangle the economy over a ten year period.

Yes. That is what is really wrong with the headline. It is talking about a trillion dollars over ten years. These Soviet style "Five Year Plans" and "Ten year Plans" are pure fiction.

Notice that 1 trillion dollars over 10 years is 100 billion dollars a year. Now that may sound like a lot of money, and it may be a lot of money to be taking out of a (hopefully) recovering economy, but it is insignificant in terms of the amount of money we (Obama and Congress) are now spending. Obama's GOAL (another fiction) is to cut the deficit in half by 2013. Since this year's deficit is likely to approach 2 trillion dollars, that means Obama's goal for 2013 (while increasing spending now--the future cuts being fiction until they occur) is to "reduce" the deficit to 1 trillion or so.

100 billion dollars does not even make a dent in that amount. Yes, that is a very sad and disturbing thing to say, but it is true. The fact is that the present spending spree is going to take much more than 100 billion dollars out of the future economy. That may not even be--probably is not--even enough to cover the interest on the debt we are creating. One way or another (taxes, borrowing, and/or inflation--probably all three), the trillions of dollars of money ("the same as cash": Yogi Berra) we are spending that the government does not have will come out of the future private economy.

Drudge's implication is right: We are going to strangle our future economyu. But it is not just the trillion dollar tax increase over ten years that will do it. That is just the beginning of the econmic catastrophe we are creating for ourselves, that there are not enou

No comments: