And so the fiscal cliff looms as Washington dithers. With no settlement in sight, it’s likely that most wage earners will see a large tax hike Jan. 1 and there will also be large cuts in federal spending. Nothing good can come of this. President Obama created this logjam by insisting that taxes be raised on what he calls “the rich.” He defines that as people earning over $250,000 per year. What he doesn’t say, however, is that a lot of people have their small businesses comingled with their personal taxes such that it inflates that picture. Many, if not most, small businesses are SubChapter S corporations. That means that the owners of the business report earnings on their personal tax returns, although that is not “excess” money. Small business owners use their profits to grow their businesses by expanding, hiring more workers and upgrading equipment.
So if President Obama has his way, many small business owners will see their taxes go up and there will be less incentive to expand.
It’s clear that the president has an agenda here and that isn’t to help the country climb out of the economic downturn. Even if President Obama and Congress taxed all “the wealthy” at 100 percent, it wouldn’t be nearly enough to fix the nation’s deficit and debt problem.
The president’s real objective seems to be to divide the nation, to demonize those who have been financially successful and to confiscate their earnings to redistribute to those who have not been successful. That might make for good left-wing politics by catering to those who work for government or live off of government largess, but it does nothing to fix the nation’s financial problems.
The real problem isn’t the lack of revenue. The problem is too much spending, especially with entitlements. Our culture has changed and no longer are most people proud to be independent. Just about everyone wants more from government — more entitlements and more services. That includes some of the nation’s largest businesses who in many cases are no different from the welfare queens who have their hands out for a handout. Remember too big to fail?
But all of that spending doesn’t come for free, nor can it simply be put on the backs of the nation’s top wage earners. If the U.S. continues to spend at its current rate, taxes will have to go up on the middle class (the bottom wage earners don’t pay federal income taxes and some get more money back than they ever pay into the system. That’s just another form of welfare.)
Of course, raising taxes on the middle class is something neither Democrats nor Republicans want to do. It’s politically dangerous, so both parties dance around and pretend the reality isn’t real.
Likewise, neither party can muster the courage to cut federal spending. Republicans are determined to keep military spending high, although waste and fiscal abuse in the military is just as bad as any other area of government. The military should not be exempt from spending cuts.
For their part, Democrats are determined not to reform entitlements or welfare services. That party gets its political power by showering money on those who live off government spending.
So what should be done?
Here’s a start:
--Cut federal employee salaries and benefits. There are today two classes of Americans, those who work for government and have gold-plated job benefits and those who work in the private sector and for the most part have much less generous salaries and benefits.
--Raise the age to qualify for Social Security and Medicare unless someone is disabled. People are living longer with better health and should be expected to work longer before being allowed to draw benefits. And as more of the baby boom generation retires, those dollars are being tapped even more. People who retire don’t draw what they’ve paid in; those dollars were spent long ago. It’s current workers who pay today’s benefits and there are not enough of them to sustain the system at the current level.
--Make everyone who works pay some federal taxes. Currently, nearly half of all workers pay no federal income taxes. But that is a rotten system. Everyone should have some skin in the game, even if it’s a small amount.
--Cut more spending. There is no area of government that should be exempt from cutbacks. Waste, fraud and abuse can be found everywhere.
While many of us blame the Congress and President for the nation’s ills, it is much bigger than just that. Our culture has changed and that has shifted the political dynamics. No longer does our society value hard work and thrift. Today we want it all and we want it now and we want someone else to pay for it.
And so the President and Congress are giving us what we’re asking for and they’re borrowing money from our children and grandchildren to pay for it.
But someday those debts will come due and then the entire house of cards will come crashing down. The nation cannot afford the high taxes that will be required to pay for our spending.
Economic growth will stop and the coming recession will make the last four years look like a mild downturn.
We may not live long enough to see that, but our offspring will.
What fools we are to steal our children’s future just so we can have everything we want today.
Mike Buffington is co-publisher of the Barrow Journal. He can be reached at email@example.com.