Growth of Deficit Makes Tax Hikes Unavoidable
Article Submitted By: Sam Cass
Don't believe what any politician tells you about taxes. Economic reality makes it certain that they will have to raise taxes at some point in their administration.
Both Barack Obama and John McCain are living in the twilight zone whenÂ they say they do not plan to broadly raise taxes.Â The reality is that the nation's fiscal house is in dissaray with the red ink expected to increase to increase significantly over the next couple of years.Â The deficit, the annual difference between tax revenue and government expense, is expected to swell to between $700 million and $1 trillion dollars over the next year and expand our national debt to over $12 trillion dollars.
At that point, the deficit would apprach 5% of the nation's GNP or economic output.Â That means for every one dollar created, five cents of debt is also generated.Â Only during the Reagan administration was the ratio of the deficit to GNP that high (it peaked at 6%) and both the Bush and Clinton adminstrations were forced to raise taxes to cut the deficit.Â Bush Sr. was even forced to break his famous - \"Read my lips, no new taxes\" pledge.
It upsets me that neither candidate is really willing to be honest with the American people.Â I don't know about you, but I'd rather have a candidate that says something like this:
\"None of us like taxes.Â But we've gotten ourselves into a situation that needs to be fixed for the sake of our children.Â Once the economy rebounds and is growing again, we need to focus on paying down our nation's debt.Â This is both an economic and national security issue.Â An indebted country is not a strong one.Â I realize this will cause some short-term sacrifice for everyone but as a nation, I'm confident everyone will be willing to roll up their sleeves and solve this problem.Â We're not just going to raise your taxes though.Â We're going to look to reform Medicaid and healthcareÂ and social security since both of these are two of the largest pieces of the budget.Â And we're going to reevaluate our military commitments abroad.Â A bankrupt country is not a militarily strong country.\"
Am I crazy?Â Would this be political suicide?Â Or would we prefer candidates who just lie to us about how they are going to increase benefits, cut taxes, and somehow secure our future.Â Haven't we learned that naively believing debt doesn't matter is a losing strategy?
As a saver, it pains me that our government is setting such a bad example on how to manage money.Â I believe the government's debts in the 1980s made borrowing and debt acceptable and helped set the stage for the collapse of our banks.Â It's now time the government started to act responsibly.