Location: Pantego, Texas, United States

Monday, July 18, 2011

The Democrats and Republicans are not doing a good job of explaining what is actually at issue in the current debate over increasing the national debt limit. The real issue is the spending level of the United States government and the size of government itself. Since the end of World War II the United States government has spent about 18 to 20% of the GDP each year. Obama and the Democrats want to increase that to 25%, and possibly even more. This is about the spending level of EU countries, and it hasn't worked out well for them. It produces structural unemployment in the range of 9 to 10%, and slow economic growth. There is indication that it reduces income "inequality," but that may be an illusion since there is more "class" structure in society in the US, with people more likely to remain in the "class" in which they were born. Democrats claim that debt levels of 90% of GDP are not a problem for a country like the United States (though it is for a small country like Greece or Ireland). They discount the possibility that interest rates may rise above the current low levels, a rosy outlook that assumes that other countries will be happy to lend to us endlessly. Democrats talk like revenue can be dramatically increased by taxes only on the "rich." This is simply not true. Consider the "Bush tax cuts," reviled by the Democrats. They claim that these tax cuts reduced government revenue by about $340 billion per year (though revenue actually went up after the cuts were enacted). They want to solve our revenue shortfall by rescinding the Bush "tax cuts" on the rich. The problem is that the revenue shortfall is $1.6 trillion per year, but the revenue from rescinding the tax cuts on "the rich" is only about $40 billion per year. Thus the nasty little secret is that Democrats will eventually have to raise taxes on everyone to raise the revenue they need to pay for their spending desires. Actually they already have tax increases in place, but they do not go into effect until 2013 after the next. As is his usual practice, Obama does not want the bad news to be realized by the public until after the next election. The Republicans are not doing a good job of explaining the situation to the people; that Obama is turning the United States into an EU type entitlement state. It appears that they think that the majority of people actually favor what the Democrats are doing, that socialism is what the majority of people actually want. The Republicans are at a disadvantage because the media are in the tank for Obama, and continually tell people the lie that failure of Republicans to give Obama what he wants will result in social security payments not being made, etc. But, the Republicans are losing the PR war to Obama, and this has serious negative implication for the future of the country.


Post a Comment

<< Home