Deficit Reaches Highest Level In Six Years

The economy boomed in the three quarters that followed last year’s Republican tax reform, but economic news has become more mixed of late with a topsy-turvy stock market and Mr. Trump’s tariff war beginning to affect bottom lines and employment. Now comes more news about the deficit that should rankle any fiscal conservatives who remain in Congress or the country at large.

The fiscal year for the US government ended in September and the figures on the federal budget deficit are not good. In fact, even though the US economy is booming, the deficit is the largest deficit run by the government in six years. The deficit for the 2018 fiscal year was $779 billion, a 17 percent increase over the $666 billion deficit in fiscal 2017. The last time the deficit was higher was in 2012 when Barack Obama presided over a deficit of more than a trillion dollars.

The deficit is the difference between what the federal government spends and what it earns. When the federal government spends more than it receives in revenues, as it has every year since 1960 (with the exception of 1998), it must borrow the difference. Each annual deficit is added to the mountain of federal debt which currently stands at more than $21 trillion.

Democrats were quick to blame tax reform for the exploding deficit. A deficit of this magnitude in an economy this strong is historically unprecedented,” Jason Furman, chairman of the Council of Economic Advisers in the Democratic administration of President Obama and an economic policy professor at Harvard University, told the Wall Street Journal. “Undertaking permanent fiscal stimulus [through tax cuts] at this stage of the economic expansion is contrary to all sound tenets of economic policy.”

According to Treasury Department statistics, flat federal revenues were part of the deficit problem. Total federal receipts were $3.329 trillion in 2018 compared with $3.316 trillion in 2017. FY 2018 included three months – October, November and December 2017 – at higher tax rates. This means that the 2019 revenue picture looks even worse.

Under tax reform, withholding was lowered in February for individual taxpayers. Despite this, tax receipts from individuals increased by one percent. Tax payments by businesses fell more than 30 percent for the year, however.

Flat revenue was not the only contributor to the rising deficit. Federal spending also increased. Total outlays for 2018 were $4.108 trillion compared to $3.981 trillion in 2017. The spending increases were driven by rising interest costs paid on a greater amount of federal debt as well as increased military spending, which rose by six percent, and Social Security spending which increased by four percent.

Republicans argue that the tax reform is fueling economic growth, which will eventually lead to higher tax revenues. Nevertheless, Kevin Hassett, chairman of the Council of Economic Advisers, admits that spending and the deficit are big problems.

“The deficit is absolutely higher than anyone would like,” Hassett told Bloomberg last week. “As you watch our next budget come out -- and you’ll start to see things in the next few weeks -- then you’ll see a much more aggressive stance” on spending issues.

For the past half-century, the only combination that resulted in lower deficits was when a Republican Congress put the brakes on spending by a Democrat president. The much-maligned John Boehner led the Republican House to cut the deficit in real dollars between 2012 and 2015 thanks to the sequestration. Interestingly, once Republicans gained control of both houses of Congress in the 2014 elections, both spending and the deficit again started to climb. The same combination of Republican Congress and Democrat president yielded the last budget surplus in 1998.

It is perhaps ironic that the Republican deficit hawks would preside over a blowout in the deficit. It is unsurprising, however. Historically, the only thing the parties have been able to agree on is borrowing and spending at ever higher levels and the problem seems to get worse when one party controls both Congress and the White House.

Regardless of the outcome of the election, the deficit problem seems unlikely to change any time soon. Unless federal revenues can be increased or spending can be cut, the 2019 federal deficit is forecast to be on the wrong side of a trillion dollars once again.

Originally published on The Resurgent

Ted Cruz: Dems Told Single Moms 'Tough Luck' on Tax Reform

When the Republicans need a fiery orator to make a point, the most obvious senator that comes to mind is Ted Cruz (R-Texas). The staunch conservative typically pulls no punches and that was the case this week when he delivered a blistering criticism of Democrat opposition to the tax reform bill on the Senate floor.

Cruz pointed out that the bill doubles the child tax from $1,000 to $2,000, a provision that would particularly help single parents, yet “Every single Democrat in this body is going to say to the single mom ‘tough luck. We aren’t cutting your taxes,’” Cruz said. He also noted that his amendment to the bill includes an expansion of educational savings plans to allow parents to spend the educational IRA money on K-12 schools.

The senator called out the Democrat claim that the bill would make taxes go up for most Americans. “In January, take a look at your paystubs,” Cruz said. “The Democrats are claiming, wildly falsely, that somehow your taxes are going to go up. Let me tell you, for virtually every American taxpayer in the country, your taxes are going to go down.”

To prove his point, Cruz noted that “every single income tax bracket is going down.” He also pointed out that the standard deduction is being doubled.

“There is one subset of people whose taxes will go up,” Cruz conceded, “Rich people in high tax Democratic states.”

Cruz urged voters to look at their paystubs in January and, “if they weren’t telling the truth, if you’re paying less taxes, you ought to stop and ask yourself, ‘Gosh, why did 48 Democrats in the Senate all tell me something that was false?’”

After noting that Democrats have crossed the aisle to vote with Republicans for tax relief in the past, Cruz answered the question of why the current Democratic caucus voted in lockstep against the reform bill.

“Because they can’t stand the President,” Cruz said. “They’re angry at the President. That’s fine. If they’re angry at the President, stand up and yell at the President, but don’t take it out on kids who are homeschooled. Don’t take it out on kids with disabilities.”

The tax reform bill passed on Wednesday with a party line vote. Despite providing tax relief for the middle class, the bill was largely unpopular among voters. FiveThirtyEight pointed out that the tax cuts were even less popular than some tax increases have been.

The responsibility for the bill’s unpopularity lies with media misrepresentations of the bill based on Democratic falsehoods, but Republicans who did not adequately defend and explain the legislation share the blame. If every Republican spoke as strongly in favor of tax reform as Sen. Cruz, public opinion would be very different.

Originally published on The Resurgent

McConnell Plans To Pass Tax Reform With Only GOP Votes

Majority Leader Mitch McConnell has announced his intention to move forward on tax reform with no Democrat support. To advance the bill without a filibuster by Democrats, Republicans will need to use the Senate’s budget reconciliation process that requires only 51 votes for cloture.

“We will need to use reconciliation,” McConnell told reporters, adding that Democrats are “not interested in addressing” items that Republicans favor. McConnell referenced a letter signed by 45 of the 48 Senate Democrats in which they refused to consider tax plans that cut rates for “the top 1 percent” or that added to the deficit. At the same time, Democrats called for a bipartisan reform bill.

“I don’t think this is going to be 1986, when you had a bipartisan effort to scrub the code,” McConnell said. He added, “Democratic senators who did not sign the letter who may be open to pro-growth tax reform.”

Unlike healthcare reform, where no Democrats broke ranks to vote with Republicans, the failure of three Democrats to sign the letter on tax reform may represent an opening to Republicans. Joe Manchin (D-W.V.), Heidi Heitkamp (D-N.D.) and Joe Donnelly (D-Ind.) are all up for reelection in 2018 in states that Donald Trump won. They are expected to have tough re-election battles, which may inspire them to side with Republicans on the tax bill.

There are difficulties for the Republicans as well. McConnell faced heavy criticism from his own side for his heavy-handed tactics and secret drafting of the healthcare bill. The secrecy and rapid changes in the content of the bill apparently swayed some senators to vote against the Obamacare reform.

Grover Norquist, president of Americans for Tax Reform, recently told Politico that there was less disagreement among Republicans on tax reform than there had been on healthcare. Norquist claimed that the GOP was at “97 percent” agreement after the decision to drop the border adjustment tax on imports, adding, “It’s now a question of making it fit” within the rules for reconciliation bills.

Under Senate rules, reconciliations can be used to pass bills that increase the deficit, but, per the Center on Budget and Policy Priorities, senators can still block bills that are projected to raise deficits beyond the period that the budget resolution covers. Because scoring by the Congressional Budget Office often predicts that tax cuts will add to the deficit, these changes may be required to be temporary, probably less than 10 years, in order to be enacted as a budget reconciliation.

If McConnell and congressional Republicans can avoid the mistakes and division that they experienced in the run-up to the healthcare vote, they stand a slightly better chance of enacting tax reform. If Republicans can split off some Democrat votes to pass a bipartisan bill it would be a major victory for the Trump Administration and one that is sorely needed.

Originally published on The Resurgent

Why you should vote for Mitt Romney

Recently Examiner made the case against Barack Obama’s reelection. There are a multitude of reasons to vote against Obama, but that is only half of the equation. There are many reasons to make a positive choice to vote for Mitt Romney.

First, when it comes to the economy, Mitt Romney is the anti-Obama. Obama’s plan, only unveiled on October 23, is to raise taxes, increase regulation and spend even more. On the other hand, Mitt Romney wants to reform the tax system by lowering rates and eliminating loopholes that favor the wealthy. He wants to replace burdensome regulations like those in Obamacare and the Dodd-Frank finance law with rules that reflect market realities and common sense. Romney would immediately reduce spending to 2008 levels. Romney proposes to cut spending back to 20 percent of GDP (from its high last year of 24.3 percent) by the end of his first term. In spite of Obama’s claims in the debates and on the campaign trail, Romney does provide specifics. You can find the details of his plan on his website.

Romney’s economic plan is based on history. Tax rate cuts have led to economic growth at several points in U.S. history, most famously under John F. Kennedy and Ronald Reagan. Higher taxes and higher government spending has the opposite effect. These policies led to the Great Depression and the stagflation of the 1970s. The same is true in other countries as well. When Ireland cut its taxes and government, it went from one of the poorest nations in Europe to one of the most successful. When Japan tried to stimulate its way out of a recession it led to a “Lost Decade.”

Romney is also the anti-Obama on many social issues. Where President Obama negotiated a UN small arms treaty that threatens American Second Amendment rights, Mitt Romney promises to respect the rights of gun owners and is endorsed by the National Rifle Association. Where Obama presided over the erosion of religious freedom, Romney has a long record of supporting religious liberty. Where President Obama is out of the closet as a supporter of same-sex marriage, Romney favors an amendment to the Constitution defining marriage as being between one man and one woman. Noted evangelist Billy Graham told Mitt Romney, “I’ll do all I can to help you. And you can quote me on that” according to the Washington Post. Graham also took out several full page newspaper ads urging voters “to vote for those who protect the sanctity of life and support the Biblical definition of marriage….”“

The second reason to vote for Mitt Romney is his choice of running mate. Paul Ryan is the most serious reformer in Congress. Ryan is the only person of either party to put forth a credible plan for saving Medicare and balancing the budget. Ryan’s plan, the “Roadmap for America’s Future,” preserves Medicare and Social Security in their current form for seniors while giving younger Americans more choice in their health care and retirement planning. Ryan’s plan also does not raise taxes. By choosing Paul Ryan to be his vice president, Mitt Romney showed that he is serious about reforming the federal government.

Third, a recent Pew poll profiled in the Los Angeles Times indicates that a majority of Americans feel that Iran is a major threat and want the United States to take a “firm stand.” President Obama and Vice President Biden don’t seem to take the threat seriously. In the vice presidential debate, Biden said that he wasn’t worried about an Iranian nuclear weapon because “they have to be able to have something to put it in. There is no weapon that the Iranians have at this point.” The Wall Street Journal points out that building a weapon is the easy part. Iran is currently working on the hard part: amassing enough enriched uranium to explode one or several nuclear bombs. The Obama Administration resisted sanctions and issued waivers to Iran’s largest trading partners including China. Under Obama’s watch, Iran’s rate of enrichment has tripled according to the Washington Post.

As he made clear in the foreign policy debate, Mitt Romney wants peace not war, but realizes the danger to the United States that a nuclear Iran poses. Romney would make the sanctions even tougher, although time for sanctions to work is rapidly slipping away. Romney also pledges to support the Iranian opposition, noting on his website that President Obama missed the opportunity to support Iran’s Green Revolution in 2009. Romney says on his website, “Only if Iran understands that the United States is utterly determined when we say that their nuclear weapons program is unacceptable is there a possibility that they will give up their nuclear aspirations peacefully.”

Fourth, voters should not be concerned about the fictitious war on women that the Democrats allege that Mitt Romney and the Republicans are engaged in. In reality, the president does not have the power to end abortion, no matter how much he opposes it. In reality, no one has proposed banning contraception. In reality, the Democratic position is that taxpayers and employers should be forced to pay for contraceptive and abortifacient drugs, regardless of whether they want them or not. The issue isn’t the freedom to use contraceptives; the issue is the freedom to not purchase them.

The fifth reason to vote for Mitt Romney is because he isn’t a wild eyed, out-of-touch radical as the Democrats have led voters to believe. As Americans saw in the three debates, he is an intelligent, personable man with a command of the facts and issues that confront the United States. He is generous, having donated nearly 30 percent of his income to charity in 2011 according to the Wall Street Journal. His record in business and as governor of Massachusetts is one of building teams and getting things done.

When Americans go the polls on Nov. 6, they have a real choice. The two candidates differ on almost every issue. Americans must choose between a return to the policies that made the United States an economic powerhouse and the envy of the world or a continuation of the Obama Administration policies of the past four years. Choosing President Obama might very well lead to an American Lost Decade and a loss of liberty as well.

See reasons to NOT vote for Barack Obama

Originally published on Examiner.com:

http://www.examiner.com/article/why-you-should-vote-for-mitt-romney

The anti-choice Democrats

As Americans in Georgia and across the country begin to go to the polls (in Georgia early voting starts October 15) they should consider the freedom of choice and which party and candidate will really support their right to choose. Although the Democrats have traditionally assumed the mantle of “pro-choice” on the issue of abortion, there are many other issues on which the right of Americans to make choices for themselves is at stake.

One of the most obvious areas of concern this year is the right for Americans to make their own choices about health insurance. Even though President Obama has repeatedly (and as late as the first debate on October 3) said that Americans could keep their own health insurance if they liked their current plan, in reality Obamacare takes away the right to choose to self-insure or purchase a no-frills, high deductible policy. Under the president’s health care law, the federal government has the right to dictate the terms of health insurance policies that all Americans are now required to purchase. The law also provides a powerful incentive for companies to drop their group health plans and leave employees to purchase their own insurance on Obamacare’s exchanges.

Freedom of choice in Medicare is also at stake this November. President Obama and the Democrats oppose allowing seniors to choose private insurance policies subsidized by government price supports, which Obama derided in the debate as vouchers. Instead, the Democrats support the current system in which all seniors are forced into the government-run Medicare program in spite of the fact that fewer and fewer doctors accept the government insurance because its reimbursement rates are so far below the market prices for care. The problem will undoubtedly get worse as Obamacare forces an additional $700 billion in cuts on the Medicare program.

Yet another issue of health care choice is the Obama Administration’s mandate that all insurance policies cover contraceptive and abortifacient drugs. Regardless of whether a person wants or needs such coverage, all insurance policies must now include these drugs at no out-of-pocket cost. The effect is that the cost of these services is now included in the policy premium, contributing to the rising cost of health insurance. The choice to opt out of these coverages for religious reasons or personal preference is forbidden.

The mandate also applies regardless of whether the policy holder or insurance company believes that abortion and contraception is moral. There was a narrow exemption for churches, but not other religious organizations or individual religious believers. President Obama offered a further compromise that religious organizations would have to accept the coverages, but at no cost. The cost would be passed along to other insureds, again causing policy premiums to rise.

The freedom to choose your child’s school is also at issue. Most Democrats do not support school vouchers or school choice, largely due to the fact that the party is beholden to teacher’s unions. The recent Chicago teacher strike was not only about money; it was also about keeping bad teachers from being held accountable. Under the status quo, children are assigned to schools based on their residence, regardless of whether that school is failing or meets their needs. In several cases, parents have been arrested for sending their children to better schools outside their district.

In areas where parent trigger laws allow parents to fire school administrators and turn failing schools into charter schools, Democrat-supported unions wage wars of harassment on parents rather than surrender control of schools, even though some Democratic politicians and a large majority of voters support the trigger laws. Harassment of parents and endless legal wrangling effectively negate parental choice.

An old issue of choice is the choice to own a gun. Even though the Supreme Court has upheld the individual right to keep and bear arms, with every high profile shooting or terrorist attack Democratic operatives reiterate calls for gun control. Democrats and gun opponents have called to eliminate the freedom of choice to purchase handguns, semi-automatic weapons, assault weapons, guns that look like military weapons, magazines that hold more than 10 rounds, and ammunition.

The Democratic anti-choice tendencies extend even to mundane household items. In 2007, the Democratic congress banned incandescent light bulbs. The infamous light bulb ban prompted the closure of several U.S. factories that produced incandescent bulbs and forced Americans to purchase expensive and potentially hazardous compact fluorescent bulbs.

The lists of products that liberal Democrats oppose or want to force Americans to buy are long. In either case, it conflicts with the basic freedom of choice. Liberals have opposed the freedom to buy gas guzzling SUVs, soft drinks, chocolate milk, and coal-based electricity among other things. Conversely, they have favored forcing people to purchase health insurance, ethanol-based fuels, trigger locks, hybrid cars and to ride trains instead of driving. They also support government monopolies on health care, Social Security, college loans, and who knows what else.

On social issues, the Democrats also oppose choice that conflicts with liberal orthodoxy. It is now taboo and bigoted to be a supporter of traditional marriage as Chick-fil-a CEO Dan Cathy discovered. Likewise, Democrats and liberals have little tolerance for those who revere life over abortion. Democrats even favor disclosure of the names of petition signers and donors to opposition groups so they can be singled out for partisan attacks and intimidation.

Perhaps the most telling difference between the Democrats and Republicans is that Democrats oppose giving Americans the choice of how to spend their own money. This is true on two levels. As given in the above examples, Democrats are more than happy to mandate that all Americans spend money on products that Democrats believe they should buy.

On another level, Democrats want to spend Americans’ money through higher taxes. After four years, President Obama’s only real plan to heal the economy and close the deficit is by raising taxes. If taxes go up it is axiomatic that there will be less money left in their paycheck to take home. The increased taxes will go directly to support federal spending at the cost of the spending power of individual Americans.

It isn’t even a question of whether President Obama will raise taxes on just the rich or the middle class as well. He already has raised taxes on the middle class numerous times. Obamacare is a bundle of tax increases masquerading as a health care law. Americans for Tax Reform has compiled a list of 21 new or higher taxes that President Obama has signed into law. Many of these taxes fall directly on the middle class. Many are part of Obamacare.

In the end, the anti-choice positions of liberals and Democrats underscore the fundamental difference between the parties. Conservative Republicans believe that people should be free to make their own decisions about what is best for their life as long as it does not hurt others. This position accepts that sometimes people will make mistakes and bad decisions. If people aren’t free to fail, then they aren’t really free.

To the contrary, leftists believe that, left to the own devices, people will not make the best decision. They believe that, because people cannot be trusted to do what is best for themselves, that government experts must tell them what to do and force them to do it. They also believe that, if necessary, people who do not comply should be punished… for their own good.

Originally published on Examiner.com:

http://www.examiner.com/article/the-anti-choice-democratic-party-1?cid=db_articles

Why the economy is in trouble no matter who wins the election

The United States might well be headed for a double-dip recession regardless of who wins the presidential election in November. Two years ago, President Obama convened a bipartisan commission to examine ways to deal with the ballooning federal debt. The Simpson-Bowles commission recommended a variety of fixes including spending cuts and tax reform, but Congress and the president could not agree. The result of the stalemate was a compromise in which automatic spending cuts and tax increases were slated to go into effect on January 1, 2013 if Congress did not act. Now, three months away from the deadline, it appears likely that the doomsday plan will become reality.

It has been called “the tax cliff” or “Taxmageddon.” Regardless of the name, the approaching tax increases represent a significant threat to the already fragile economy. According to a new report released this week by the liberal Tax Policy Center, nearly every tax cut passed since 2001 will expire at once leading to double or triple digit increases on January 1. Taxes will go up an average of $3,500. Nine out of ten Americans will see their taxes increase.

First, there is the expiration of the low Bush-era tax rates which will increase income tax rates for almost all Americans. The top marginal rate will increase from 35 to an effective rate of 39.6 percent. Without action from Congress, rates for lower tax brackets will also increase so middle and lower income taxpayers will also see increases. Many Americans who currently have no tax liability would have to start paying taxes again. The marriage penalty would return.

Second, the capital gains tax will increase from 15 percent to 23.8 percent. This is an increase of more than 38 percent. History has shown that the increasing the capital gains tax discourages investment and businesses seek tax shelters to protect their cash. According to the Wall Street Journal, rate reductions in the capital gains tax in 1978, 1981, 1997 and 2003 helped fuel the tech boom of the 1980s and 1990s and spurred the growth of companies like Wal-mart, Home Depot, Apple and Google.

Third, the dividend tax is slated to increase from 15 percent to 43.8 percent, the same rate as ordinary income. This means that the tax rate for dividends is increasing by a margin of 192 percent in spite of the fact that dividends have already been taxed as corporate income. The U.S. corporate tax rate is already the highest in the world. The dramatic increase in the dividend tax will be a shock to the economic system that will discourage investment in American companies.

Finally, the death tax will increase from 35 percent to 55 percent, a 57 percent increase. The increase in the death tax includes a double whammy since, at the same time the tax rate increases, the exemption for gift and estate taxes will be lowered from $5.12 million per person to $1 million. This means that not only do heirs and recipients have to pay a higher rate on gifts or inheritances, but more of the money in question is taxable. The death tax also represents double taxation since money in an estate or given as a gift has already been taxed as income, capital gains, or dividends.

If Mitt Romney wins the election, his tax reform plan calls for lowering tax rates across the board and simplifying taxes by eliminating some deductions that favor certain categories of taxpayers or businesses. Romney would keep the current 15 percent rate for capital gains and dividend taxes and would eliminate the death tax entirely.

President Obama would keep current rates for the middle class and lower income taxpayers, but would increase rates on taxpayers who earn more than $217,000. The president’s plan would also increase taxes on dividends, capital gains, and estates. According to a Wall Street Journal analysis, President Obama would increase the dividend tax rate to 43.4 percent, the capital gains tax rate to 30 percent, and the death tax to 45 percent.

The rub lies in President Obama’s desire to raise taxes on the wealthy to help pay for the increased spending of his administration. Republicans as well as many Democrats believe that increasing taxes would destroy the recovery and plunge the country back into recession. While some Democrats have indicated a willingness to compromise to avoid the tax cliff, others, including President Obama, have drawn a line in the sand against extending the current low tax rates for the wealthy. Some Democrats have even spoken in favor of allowing the automatic tax increases to go into effect for Americans of all incomes.

Most analysts believe that a compromise to stave off the looming tax increases is unlikely before the election. The Republican base will not accede to any tax increases while the Democratic base is adamant about the need to force the wealthy to pay their “fair share.” Fears of alienating supporters mean that neither side is likely to budge until after the results of the election are determined.

Compromise may be elusive even after the election. President Obama will still be president and the Democrats will still control the senate for almost three weeks after the tax increases go into effect. If President Obama and the Democrats win the election, they will not see a need to compromise since they will be able to hold out and then craft their own bill. Likewise, if the Romney and the Republicans win the election, President Obama and the Democrats may see the doomsday tax hikes as their only means of getting the tax increases on the wealthy that they spent the last two years pushing for. If the tax hikes go into effect and the economy crashes, they can blame President Romney and the Republicans who will be taking office just as Americans are feeling the effects of the Taxmageddon.

Recent reports in the New York Times indicate that congressional leaders are hoping to work out a compromise in the post-election “lame duck” session. By then it may too late to avoid much of the damage however. The Washington Post notes that uncertainty and the inability to plan for the future is already having a negative impact on businesses. Investments and expansion plans are being postponed until the true shape of the tax climate can be determined. More and more businesses are deferring investment until after the election or the first of the year, making a significant recovery unlikely for months.

 

Originally published on Examiner.com:

http://www.examiner.com/article/why-the-economy-may-tank-no-matter-who-wins-the-election

Obama vs. Bush

In the campaign for his re-election, President Obama often points to the fact that the country was in a deep recession when he took office. Obama’s reasoning is that the country was in such a dreadful state in 2008 that it is taking much longer than he originally thought to restore it to prosperity.

It can be instructive to look at the results of the policies of both President Bush and President Obama and compare them side by side. One common criticism of President Obama is his administration’s spending habits. When he recently claimed that “Federal spending since I took office has risen at the slowest pace of any president in almost 60 years,” CNS News and many other outlets fact checked the claim and found it to be untrue. In fact, a chart from USgovernmentspending.com shows that, as a percentage of GDP, President Obama’s spending is at a higher level than at any other time in our history except World War II. While spending did increase slowly under most of George W. Bush’s tenure, it was only in 2008, when TARP was enacted, that it jumped sharply.

A closer look shows that, according to figures from the Tax Policy Center, President Bush ran a deficit for all but the first year of his administration. As a percentage of GDP, Bush’s average deficit was about 2 percent. In dollars, Bush averaged deficits of about $251 billion per year. In contrast, in President Obama’s three years, he has averaged deficits of more than nine percent. In each year of his administration, the federal deficit has been more than $1 trillion. Obama’s average deficit in dollars was $1.33 trillion.

When viewing the data from the Tax Policy Center, it is easy to see why deficits increased so rapidly under President Obama. Even as President Obama was increasing federal spending with his various attempts at stimulus, tax revenues were falling due to the recession. Since spending increased at the same time that the government was taking in less money, the difference had to be made up in borrowing.

Borrowing leads to an increasing federal debt. It is true that the debt increased dramatically under George W. Bush. On January 1, 2001, just before President Bush took office, the federal debt stood at $5.6 trillion according to U.S. Treasury figures. When he left office on January 20, 2009, the debt stood at $10.6 trillion, an increase of almost five trillion dollars. As of June 1, 2012, the federal debt was at $15.7 trillion, an increase of $5.1 trillion. The federal debt has increased by as much under President Obama in three years as it did under Bush in eight. CNS News noted in October 2011 that President Obama had added more debt than all other presidents from George Washington to George Herbert Walker Bush.

The difference is even more stark if the election of 2006 is considered to be the dividing line. In 2006, Democrats took control of both houses of Congress. At the beginning of 2007, as the new Democrats took office, the debt was at $8.6 trillion, which means that three trillion dollars was amassed by President Bush and congressional Republicans. It also means that a staggering $7.1 trillion was borrowed by the Democrats from 2007 through 2012. A chart from USgovernmentspending.com illustrates how radically government spending increased after 2006, when Senator Harry Reid and Rep. Nancy Pelosi assumed control of Congress.

Democrats argue that deficit spending was needed to combat the 2008 recession, but what did taxpayers get for their money? According to the Bureau of Labor Statistics, unemployment averaged 5.26 percent during the Bush years. The average during the Obama years was 9.26 percent.

Even more telling is the fact that the Civilian Labor Force Participation Rate, the percentage of Americans working, has declined from 67.2 percent in January 2001 to 65.7 in January 2009 and to 63.8 percent in May 2012. According to Multpl.com, the U.S. population increased in each of those years, from 285 million in 2001 to 306 million in 2009. The U.S. population now stands at 313 million according to the U.S. Census. This means that fewer total Americans are working now than when President Obama took office even though the population has increased by 7 million. When President Bush left office 20.1 million Americans were working. Today only 19.9 million are in spite of a population growth of seven million.

Even though the Great Recession officially ended in June 2009, five months into Obama’s presidency and three years ago, the economy and the job markets have not recovered. By many measures, the economy is worse today than it was three years ago. The Federal Reserve announced last week that American wealth had decreased by 40 percent between 2007 and 2011. Home prices, which crashed in 2008, have not recovered and continue to decline in many markets. The Wall St. Journal reports that economists are “increasingly pessimistic” and more are predicting that the stagnant recovery will turn into another recession.

Foreign policy was an area where President Bush faced intense criticism. The 9/11 attacks, along with the wars in Iraq and Afghanistan, were the defining events of his time in office. President Obama campaigned against the wars and Bush policies such as the detention of terrorists at Guantanamo Bay. Three years later, the prison there remains open. Many leftists decried Bush’s “illegal wars” in Iraq and Afghanistan even though he sought and obtained congressional approval. President Obama did not notify Congress or seek approval before intervening in Libya.

In fact, Obama has quietly adopted a defense policy that is similar to that of President Bush. Perhaps the biggest difference is George W. Bush’s policy of capturing and interrogating terrorists where Obama primarily targets them from afar with drones. Obama’s personal involvement in targeting terrorists is reminiscent of President Lyndon Johnson’s personal involvement in selecting targets – and placing others off limits - during the Vietnam War. Obama did remove all but a token force of U.S. troops from Iraq, but American forces remain in Afghanistan. Perhaps this, along with his reluctance to embrace uprisings in Muslim countries, is why many Arab countries have an even more negative view of the United States under Obama than they did under President Bush according to Pew Global.

With respect to Iran, President Obama’s record is mixed. Obama resisted toughening sanctions on Iran until he was mandated by Congress. Obama also continued Bush’s program of cyber attacks against the Iranian nuclear program, but leaks from his administration detailing these and other intelligence matters have hurt U.S. interests. Breaches of security from the administration may have led to the life sentence for treason of Shakil Afridi, a doctor in Pakistan who helped the CIA determine bin Laden’s location.

Perhaps the greatest missed opportunity of the Obama era was the president’s failure to capitalize on the 2009 Green Revolution uprising in Iran. A secret memo obtained by the Washington Examiner reveals that leaders of the dissidents had requested American help in toppling the regime. President Obama failed to act and, as a result, the Iranian government is growing ever closer to becoming a nuclear power.

President Obama’s greatest triumph, foreign policy or domestic, was undoubtedly the killing of Osama bin Laden, yet if Obama had his way the programs that generated much of the intelligence that led to bin Laden’s whereabouts would have been closed down years ago. As Real Clear Politics explains, the enhanced interrogation techniques used during the Bush Administration uncovered much of the intelligence that led to bin Laden. Obama should get credit for issuing the order to attack, but President Bush should also get credit for making the attack possible.

Liberals charge that Bush’s defense and war spending is what led to the massive federal debt. A chart from USgovernmentspending.com does show that defense spending in total dollars increased under President Bush, but it has also continued to increase under President Obama. However, between 2002 and 2008, defense spending as a percentage of GDP remained between four and five percent under President Bush. Total defense dollars and defense spending as a percentage of GDP both increased under President Obama. According to the Center on Budget and Policy Priorities, defense spending makes up 20 percent of the federal budget and is dwarfed by Social Security, Medicare, other safety net programs and interest on the federal debt, which together account for 60 percent of the budget.

As Americans head to the polls this November, President Obama is unlikely to ask, “Are you better off now than you were four years ago?” as President Reagan famously did in 1984. Three years after the official end of the Great Recession, President Obama and his policies deserve the blame for the lack of recovery. Obama has yet to offer any new tactic that has not been tried previously without success. On foreign policy, Obama’s position has evolved, but he has displayed little desire to take strong and decisive action, resulting in many missed opportunities.

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Ga. GOP introduces last-minute tax reform

In a surprise move the Joint Special Committee on Tax Reform unveiled its proposed tax reform package yesterday with only seven days left in the current session of the General Assembly. According to the Atlanta Business Chronicle, the proposal is made up of eleven provisions, all of which have been attempted unsuccessfully in the past.

The tax reform bill, officially called H.B. 386, would make the following changes to Georgia tax law:

· Phase out the sales tax on energy.

· Replace the ad valorem and sales taxes on cars. The “birthday tax” would be replaced with a one-time title fee on cars that would capped at seven percent.

· Eliminate the sales tax exemption on film production in Georgia. A separate tax credit for film production would remain.

· Restore the sales tax holiday for school supplies and energy-efficient appliances.

· Reduce conservation tax credits property owners.

· Cap the exemption for non-wage income earned by retirees at $65,000 per year for individuals and $130,000 for couples. Income taxes would be paid on non-wage income above these amounts.

· Authorize the collection of sales taxes for online purchases from retailers like Amazon.com.

· Reduce Georgia’s “marriage penalty” by increasing the exemptions for married couples filing jointly from $5,400 to $7,400 and from $2,700 to $3,700 for couples filing singly.

· Extend on a break in the sales tax on purchases of jet fuel.

· Revise sales tax exemptions on farm equipment purchases.

· Create a discretionary fund to be used by the governor to offer tax incentives to out-of-state companies who relocate to Georgia.

The ABC quotes Senator Chip Rogers (R-Woodstock), the majority leader, as saying, “This is a tax cut. [It] reduces taxes on Georgia taxpayers.”

While the original intent of the committee was to create a “revenue neutral” reform proposal, the bill in its current form would reduce tax revenues by $53 million according to a Georgia State University analysis cited on AJC.com. The reduction represents just under 2.5 percent of Georgia’s 2012 budget.

Proponents of the bill believe that the reform would help to spur growth and investment in Georgia. Since the onset of the Great Recession in 2008, Georgia’s unemployment has been consistently above the national average. Georgia’s real estate market has also been one of the hardest hit and the foreclosure rate remains among the nation’s highest.

In theory, the tax reform would attract new business to the state, which would create jobs and reduce unemployment. The foreclosure rate would then decrease and property values would stabilize as Georgians find new jobs and new workers come to the state.

Opponents of the measure question how the state would pay for the $53 million in tax cuts. The state budget has been the subject of painful cuts in recent years amid lost tax revenue during the recession. Others complain that the bill does not do enough to reduce the state’s tax burden and instead merely shuffles the taxes from one group to another.

Tax reform was also proposed last year. The 2011 reform bill died in the house amid complaints that it raised taxes. The last-minute introduction of the 2012 reform bill may have been intended to not give opponents time to rally against the current legislation.

Originally published on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/ga-gop-proposes-last-minute-tax-reform

Why the Republicans are considering a tax increase

Recently the story that Republicans are in favor of allowing the payroll tax to increase over President Obama’s opposition has been making the rounds on the internet. The story, presented as evidence of Republican hypocrisy on taxes, is more complex than it seems.

The cut in the payroll tax stems from last year’s compromise to extend the low, Bush-era tax rates for all Americans. A provision of the compromise deal lowered the Social Security payroll tax from 6.2 percent to 4.2 percent for employees during 2011. Employers were still required to pay the full 6.2 percent for their portion of the payroll tax. The self-employment tax was also cut by two percent. If not extended, the payroll tax will return to 6.2 percent for employees at the end of the year. The employer portion will remain the same.

The tax cut obviously did not stimulate economic growth. Economic indicators have trended negative over the past few months leading many economists to predict that a second recession is increasingly likely.

Speaking to the Associated Press, Rep. Jeb Hensarling (R-TX) said, “It's always a net positive to let taxpayers keep more of what they earn, but not all tax relief is created equal for the purposes of helping to get the economy moving again."

The payroll tax cut is an example of the most ineffective type of tax cut, one that is temporary, targeted, and tiny. From the beginning, the payroll tax cut was only meant to last for a year, which means that it would not affect long term economic decisions. It was targeted to employees, and did not apply to the employer match, where it would have had a greater impact.

Perhaps most important, the payroll tax cut was tiny. For a worker earning $50,000 the two percent tax cut is worth $1,000 for the year. However, the taxpayer does not get this savings all at once. It is prorated throughout the year in each paycheck. This means that the true savings is only $83 per month. If a worker is paid weekly, it amounts to only $20 per paycheck. This is not even enough to buy a tank of gas and is barely noticeable to most workers.

Social Security payroll taxes only apply to the first $106,800 of income. Therefore, the largest savings that any worker would realize from the tax cut, no matter how much they earn, would be $2,136. This translates to $178 per month or $41 per week.

Conversely, the payroll tax is used to fund Social Security which, under current estimates, will go bankrupt by 2036. That year the trust fund will be exhausted and Social Security will no longer be able to pay benefits without using current taxes. In 2010, Social Security expenditures exceeded revenues. Social Security is already operating in the red.

For 2010, Social Security tax receipts were $865 billion according to the Congressional Budget Office. Half of this money was paid by employers and half, $432.5 billion, was paid by workers. The two percent tax cut would be equivalent to $8.65 billion. This figure is slightly more than one percent of Social Security’s 2010 expenditures of $700 billion.

Since the payroll tax cut was too small to produce economic growth, it follows that allowing it to expire would have a minimal impact on the economy. Even a small impact might tip the scales toward recession though. On the other hand, the increased revenue might be able to buy a little more time to reform Social Security before the entitlement program goes bankrupt. The money in question is a tiny part of Social Security’s annual expenditures. Neither option is likely to be palatable for Republicans.

Nevertheless, it is likely that Republicans will agree to extend the payroll tax cut. Former house speaker and current presidential candidate Newt Gingrich was quoted by Talking Points Memo as saying, “I think it's very hard not to keep the payroll tax cut in this economy. I don't know what Republicans are going to say but I think it's very hard to say 'no.' We're going to end up in a position where we're gonna raise taxes on the lowest income Americans the day they go to work and make life harder for small businesses.”

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Economist proposes “space alien” stimulus

In a tacit admission that the left is out of ideas on how to fix the economy, economist and New York Times columnist Paul Krugman recently proposed a new stimulus program in the form a military buildup to ward off an invasion by extraterrestrial aliens. Drawing upon the history of the Great Depression and an episode of “the Twilight Zone,” Krugman postulated on CNN that government spending on military hardware to combat aliens would revitalize the U.S. economy in short order. Krugman subscribes to the Keynesian belief that World War II and the debt-financed military buildup that followed finally ended the Great Depression after ten years of FDR’s debt-financed social programs failed to restart the economy.

In reality, the military buildup of the 1940’s and the New Deal stimulus programs were very similar. The military draft that removed hundreds of thousands of workers from unemployment rolls had civilian equivalents in the Civilian Conservation Corps, the Works Progress Administration and other New Deal government organizations that hired workers for make-work projects. Similarly, government orders for military hardware that busied factories were akin to New Deal construction projects commissioned by the Public Works Administration and the Civil Works Administration.

Krugman doesn’t actually believe that an alien attack is imminent. He merely favors a hoax to provide a rationale for spending:

“If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat - and really inflation and budget deficits took secondary place to that - this slump would be over in 18 months. And then if we discovered, oops, we made a mistake there aren't actually any space aliens.”

“There was a Twilight Zone episode like this, which scientists fake an alien threat in order to achieve world peace. Well, this time we need it in order to get some fiscal stimulus.”

Krugman, a Nobel Prize winning economist, misses several important points here. The most obvious is that the U.S. is already at war. We don’t have to invent an extraterrestrial enemy because we have a very real terrestrial enemy in the form of Islamic terrorist groups. The wars in Iraq and Afghanistan have caused wear and tear on military equipment. The government could spend money to replace and refurbish our existing military hardware, as well as purchasing more F-22 Raptor and F-35 Lightning II advanced technology fighters that would ensure air superiority against a new generation of high-tech Chinese and Russian fighters. The F-22 is a built by Lockheed Martin at its plant in Marietta, Ga. Presumably real world military spending is not large enough in Krugman’s eyes.

The second point that Krugman misses is that spending on WWII did not actually jumpstart the economy. The problem is that removing hundreds of thousands of idle workers from the economy and purchasing millions of dollars of tanks, aircraft, and other equipment is not a change that could be sustained indefinitely. When the war was over, as the armed forces demobilized these workers would likely return to the unemployment line and the factories would go idle if the government did not fund new New Deal programs to provide jobs and demand for material goods. In reality, this is not what happened.

In the Wall Street Journal, Burt Folsom, author of “New Deal or Raw Deal,” notes that Congress, led by Georgia Senator Walter F. George, rejected President Truman’s attempts to revive New Deal policies after the war. According to Folsom’s research, Congress reduced income tax rates across the board, cut the corporate tax rate, and repealed the Excess Profits Tax. According to tax.org, the tax reforms and reductions began even before the war ended with the Tax Adjustment Act and the Revenue Act of 1945. The Revenue Act of 1948 was smaller, but included more comprehensive and controversial reforms.

Senator George, a resident of Vienna, Ga. who served on the Senate Finance Committee at the time, is quoted by Folsom as saying that if the tax reform “has the effect which it is hoped it will have, it will so stimulate the expansion of business as to bring in a greater total  revenue." As a chart on USgovernmentrevenue.com shows, federal revenues increased dramatically in the 1950’s even though tax rates were lower than they had been during the New Deal and war years.

Finally, Krugman ignores the fact that federal debt levels today are much higher than they were at the onset of WWII. Data from USgovernmentspending.com reveals that the federal debt as a percentage of GDP is almost as high today as it was at the end of WWII, not the beginning. The government could afford to spend billions on tanks and armies in 1941 because, even after a decade of New Deal spending, the federal debt was less of a burden than it is today. If the U.S. tried to engage in another massive military buildup today, the debt would shortly become unmanageable and the result would either be a default or inflation (which Krugman also advocates).

Krugman’s idea of an anti-alien buildup is simply a sci-fi twist on the same old Keynesian policies that have failed to work for President Obama in the past. President Obama should instead follow Senator George’s example and enact broad-based, permanent tax reforms that would encourage businesses to invest.

Photo credit:  Vince DeVries/Wikimedia

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Meet the candidates: Jon Huntsman

Jon Huntsman was born in California, but grew up in Utah. His father is the founder of Huntsman Corp., a global chemical company.

Huntsman dropped out of high school in his senior year in order to pursue a music career as keyboard player for his band, “Wizards.” His website notes that with “priorities adjusted,” he earned a G.E.D. and entered the University of Utah the next fall. After taking two years to serve as a Mormon missionary to Taiwan, Huntsman returned to enroll at the University of Pennsylvania where he graduated with a bachelor’s degree in International Politics.

His political career began almost immediately, first as an intern for Senator Orrin Hatch and then as a staff assistant to President Reagan. Huntsman has served in a variety of appointed diplomatic positions beginning with the first Bush administration. He served as Deputy Assistant Secretary for East Asian and Pacific Affairs, Deputy Assistant Secretary of Commerce for Trade Development, and Ambassador to Singapore for President George H. W. Bush. In the administration of George W. Bush, he was a Deputy Trade Representative and a Trade Ambassador. He also served as President Obama’s Ambassador to China until he resigned to run for president. While in China, Huntsman’s name was censored from internet searches by the Chinese government after he was captured on video at a Jasmine Revolution protest.

Huntsman has also held elected office, serving two terms as governor of Utah. He was a very popular governor, winning re-election with more than 70 percent of the vote. According to the Deseret News, his approval ratings were as high as 90 percent.

Huntsman’s tenure as governor was marked by business-friendly policies and tax cuts. He introduced an optional flat tax with a lower rate and cut the state sales tax on food according to the Cato Institute. The institute also notes that spending increased 10 percent annually during his tenure, however.

Huntsman also has a business experience with the family firm. According to Project Vote Smart, he has served as CEO of the Huntsman Family Holdings Company and the Huntsman Cancer Foundation as well as Chairman of Huntsman Corp. He has also served as a board member for numerous charitable organizations.

Huntsman has a strong record on diplomacy and economic policy, but his record on social issues will cause problems with many Republican voters. He is a supporter of civil unions for homosexual couples, although he does believe that marriage is between a man and a woman. He has also stated in a tweet that he believes in evolution and global warming. In a 2007 video clip, Huntsman also said that he was “comfortable” with a “requirement” for health insurance.

Huntsman does have a conservative position when it comes to abortion. He supports a right-to-life amendment according to the Salt Lake Tribune. As governor, he signed several bills that limited abortions including a parental notification law and a law that required that women be informed that a fetus can feel pain.

In the most recent Real Clear Politics average of polls, Huntsman placed second to last with 2.2 percent of respondents supporting him. The only candidate to fare worse was former Pennsylvania senator Rick Santorum. In an Insider Advantage poll of Georgia voters, Huntsman received only one percent. He may boost his numbers in Georgia when he comes to Atlanta this week. He will attend fundraisers on August 23 and meet with Georgia Republican leaders on August 24.

Jon Huntsman has a strong economic and foreign policy background, but his moderately liberal stance on social issues is troubling for conservatives. He would likely appeal to libertarian-leaning Republicans if Ron Paul were not already in the race and more well known. Nevertheless, his deep pockets make it possible for him to continue the race even with little support.

 

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Who pays taxes

Recently there have been a number of calls by liberals ranging from President Obama to Warren Buffett for the “wealthiest Americans” to pay their “fair share” in order to help the economy recover. According to this theory, taxes for the rich were cut to virtually nothing by President Bush. This led to the deficits and mounting national debt that we face today.

According to 2008 tax data, the most recent that is available from the I.R.S, in the Heritage Foundation 2011 Budget Chart the prevailing liberal view that rich Americans are getting a free ride is not accurate. The top one percent of wage earners paid 38 percent of all federal income taxes in 2008. When the view is expanded to include the top 10 percent of wage earners, the richest 10 percent of Americans paid almost 70 percent of all taxes. Conversely, the bottom 50 percent of wage earners paid less than three percent of all taxes in 2008. Democrats have not said what percentage of the tax burden they believe would constitute a fair share.

Interestingly, the charts show data back to 1980, so claims that tax cuts benefit the rich can be examined on a yearly basis. Under President Reagan, taxes were cut in by the Economic Recovery Act of 1981 and the Tax Reform Act of 1986. The tax data for the top one percent earners shows that their share of the tax burden rose after the 1981 tax cuts. In 1986, their tax burden rose over 1985, but declined in 1987. It rose sharply in 1988, before declining as the economy slowed to a recession in the early ‘90s. After falling with the recession of 2000, the tax burden of the top one percent rose to over sixty percent, an all-time high, in 2007 after the Bush tax cuts. The tax burden of the top one percent earners has doubled since 1980, in spite of several rounds of tax cuts.

When the bottom 50 percent earners are examined, the results are the opposite. The bottom 50 percent’s tax burden peaked in 1981 at 7.45 percent. Their tax burden declined slightly after the 1981 tax cuts, but fell sharply in 1986 and after. In 2008, the tax burden of the bottom 50 percent was less than half of the amount of their 1980 tax burden. This is because many low-income families have been totally removed from the tax rolls. An astonishing 47 percent of Americans don’t pay any federal income tax at all according to Yahoo Finance.

Because of the system of tax withholding, many people may not even realize that they don’t pay taxes. These people may have federal income taxes deducted from their paychecks, but then get a refund of all income taxes paid when they file a tax return. Unless a taxpayer examines their tax return closely, they will not know how much they actually pay in taxes, or whether they pay them at all.

The Tax Foundation publishes data which examines the net cash flow to the federal government from the states. The most recent data is from 2005. The states that send the most tax revenue per capita to the federal government were Connecticut, New Jersey and Massachusetts. The states that paid the fewest taxes per capita were West Virginia, Louisiana and Mississippi.

The states that pay the most taxes do not receive the most federal spending however. The states with the highest ratios of federal spending to tax dollars per capita were New Mexico, Mississippi, and Alaska. The states with the lowest ratios were Connecticut, Nevada, and New Jersey. In practice, this means that blue states with high wages and high costs-of-living are subsidizing red states.

Georgia, which ranks 29^th in taxes paid and 40^th in federal funds received, has historically received federal funds that are approximately equal to the taxes that it sends to Washington. Georgia ranked 34^th in the ratio of federal spending per taxes paid.

When Warren Buffett tells says that millionaires don’t pay their fair share, he isn’t telling the whole story. Much of Buffett’s income is from capital gains and dividends, which are taxed at 15 percent. But this money has already been taxed once as corporate income, which is currently taxed at 35 percent, the highest corporate tax rate in the world. Second, Buffett uses the charity deduction to avoid paying taxes on much of his income. He is a generous giver to a variety of charities and, in 2006, made the largest donation to charity ever given by an individual, a $37 billion donation to the Bill and Melinda Gates Foundation. This gift was tax-deductible.

Buffett’s company, Berkshire Hathaway owns several Georgia companies including Berkshire Hathaway Homestate, an insurance company in Alpharetta. Shaw Industries, the world’s largest carpet manufacturer which is headquartered Dalton, is a Berkshire Hathaway company. Berkshire Hathaway is also heavily invested in other companies that many Georgians recognize including Wal-mart and Costco.

Far from being an answer to the country’s spending problem, the Wall St. Journal reports that millionaires are an endangered species. Between 2007 and 2009, the number of millionaires fell from 390,000 to 237,000. This is a decline of 39 percent. With fewer millionaires to “share the sacrifice,” Democrats will have no choice but to turn to the middle class to finance their spending spree unless federal spending is cut sharply.

Photo credit:  Pete Souza/Public Domain

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The looming Obama tax increases

Will the Bush tax cuts become the Obama tax increases?

There has been much talk recently of extending the Bush tax cuts.  These tax cuts were passed during President Bush’s administration in 2001 and 2003 to fight the recessions that resulted from the tech stock bubble and the 9/11 terror attacks.  To get the votes needed to pass the tax cuts, an expiration date of December 31, 2010 was written into the law.

These tax cuts are already established into law and taxation has been based on these rates since 2003.  Therefore, the discussion now is not about whether to cut taxes, but about whether to increase them.  If Congress fails to extend the tax cuts, then Georgians, like the rest of America, will receive a tax increase on January 1.  This will be approximately the same time that taxpayers will be receiving their Christmas credit card bills.

The effect of increasing taxes in an already slow and fragile economy is likely to be a double-dip recession.  As money leaves private hands to go into government coffers, people will have fewer dollars to save or spend.  Businesses will sell less and hiring will slow.  As more people become unemployed, spending and hiring will further slow in a vicious cycle.

The disagreement between the two parties is that Republicans want to extend all tax cuts while Democrats only want to extend the cuts for people who make less than $250,000 per year.  Republicans have threatened to block any legislation that does not extend the cuts for all taxpayers.

Democrats cite the need to raise tax to pay for the record-breaking spending spree of the last two years.  On the contrary, noted economist W. Kurt Hauser points out that regardless of tax rates, the government takes in about 19% of gross domestic product (GDP).  This is known as Hauser’s Law. 

Since the government’s revenue rate will be approximately the same regardless of tax rates, the better option would be the policy that leads to economic growth.  Lower tax rates usually foster more growth that high ones.  Keeping tax rates low means that the government would be taking 19% of a larger economic pie and would actually take in more real dollars that with higher tax rates.

In the weeks remaining before Congress adjourns for the year, we can expect much maneuvering on the issue.  Republicans, who won the election, don’t have enough members of Congress to force passage of the tax cut extension but can block a tax increase with a filibuster.  On the other hand, Democrats, many of whom are lame ducks that will be leaving Congress, have no incentive, other than the greater good of the country, to work with Republicans.  It is likely that Congress will adjourn without having resolved the issue and leaving Americans with a New Year’s tax increase.  If this happens, it will be up to Republicans, including Georgia’s Representative-elect Austin Scott to work with a Democratic-controlled Senate to extend the lower rates retroactively to prevent a second recession.