Deficit

The Debt Ceiling

July 29, 2011 by Rickety Leave a Comment

It is obvious that by not raising the debt ceiling you are in effect simulating how a balanced budget amendment would work. Looking at a chart of the deficit you would see the dollar amount rising at an alarming rate. But now, for several weeks, the river of red ink has been stopped at $14.3 trillion. The line on the chart is holding steady.

This is how a balanced budget would work. You would not be able to borrow any more money. It would be like maxing out your credit cards. Or cutting them up. Now you have to work with the income that you have. And the government still has a lot of income continuously flowing into the treasury.

Now, with a balanced budget law you would have some way to temporarily borrow, perhaps with a super majority. The problem with the federal situation is they habitually do not balance their budget. So in a year that they suddenly have to balance, it is much more difficult. Hence the anxiety to raise the debt ceiling.

However, if you really want a balanced budget now, all you have to do is do nothing.

Filed Under: Deficit, Government ·

Strong National Economy Critical To Security

February 17, 2011 by Rickety Leave a Comment

Congressman Adam Smith, a Democrat and Ranking Member of the House Armed Services Committee, at yesterday’s hearing on the Defense Authorization Request, said this:

And we also need to be mindful of the fact that a strong national economy is critical also to our national security. An out-of-control deficit jeopardizes that economy. So we have to try to make sure that we can live within our means and do the job that we all have been asked to do.

Congressman Adam Smith, your namesake would be proud that you have grasped the seriousness of the ongoing deficit spending that so many of your colleagues have yet to recognize.

Filed Under: Deficit, Economics, Government ·

Portugal Raises Taxes to Mollify Market

May 30, 2010 by Rickety Leave a Comment

After Britain, Italy, and Spain cut spending, Portugal would not be left out. Portugal’s legislature is planning a June 2nd vote to:

Raise income taxes up to 1.5%
Raise the Value Added Tax by 1% across all categories
Tax companies with more than 2 million euro in profits an extra 2.5%
Cut top government employees pay by 5%

This package is skewed to raising taxes rather than spending cuts. It is designed to mollify the market. When the United States finally joins the party we will see both spending cuts and tax increases. But don’t expect any real action soon. It will take an extraordinary emergency to get Washington to act.

Filed Under: Deficit, Taxes ·

The Market Forces Spanish Cuts

May 27, 2010 by Rickety Leave a Comment

In my last two posts I wrote about Britain and Italy cutting spending for fears that they may turn into another Greece. Today Spain’s parliament voted to cut 15 billion euros by:

Increasing the retirement age to 67
Cutting state payments to parents of newborns
Cutting civil servants salaries
Freezing state pensions

The point to remember in all of this is that it is the market that is forcing these cuts. The same market forces will soon move in on the United States and give the government no choice but to cut spending. It would be better to tackle these reductions now while there are more choices.

Why wait to be forced to make tough choices? Why not exercise some initiate while there is some room to maneuver?

Because initiative is in as short supply as federal budgetary discipline.

Filed Under: Deficit ·

The Market Always Wins

May 25, 2010 by Rickety Leave a Comment

Italy will introduce cuts of 24 billion euros for 2011-2012. This is aimed to cut the deficit from 5.3 percent of gross domestic product (GDP) to 2.7 percent in 2012. The measures will bring Italy into line with an European Union limit of three percent.

Civil servants will have their salaries frozen for three years, ministers and other officials face wage cuts, and the tax on stock options and private sector executives’ bonuses will increase.

Last year Italy’s debt was 116 percent of GDP, even higher than the United States 86%. Italy’s intent is to reassure investors that it is committed to keeping its finances in order. It is hopeful that the cuts will shore up confidence amid the Greek debt crisis.

Soon the U.S. will be forced by the market to make even larger cuts to shore up confidence.

Eventually the market always wins.

Filed Under: Deficit · Tagged With: Italy, United States

Britain Begins Spending Cuts

May 24, 2010 by Rickety Leave a Comment

With a new government the United Kingdom has moved quickly to cut their budget deficit. £6 billion in spending cuts is expected to be announced next week to cut into their £163 billion deficit, which is 12.6% of GDP. The cuts are modest, bringing the deficit down by only 0.5% of GDP. However, it is expected that more cuts will be coming in the future.

They will be needed because Britain’s debt-to-GDP ratio will hit 90% next year about the same as for the United States. So when is the U.S. going to cut its budget deficit? Not any time soon with the current congress.

What can be done? No much, except to remind Congress, via the voting booth, who is really in charge.

See you in November.

Filed Under: Deficit, Election ·

A Journalist Tax

March 3, 2010 by Rickety Leave a Comment

Time magazine, in an article entitled U.S. Deficit: Higher Taxes Needed to Cut Rising Debt wrote that the Obama administration is setting the stage for higher taxes. Further, Time said that the only other alternate to higher taxes is more quantitative easing.

Like me, you can easily spot another alternative that is missing — spending cuts. Who writes this stuff at Time? Politicians?

The article further suggests that the top rate could be raised from 35% to 45%. Haven’t these people learned yet that wealth comes from productivity. Hence you do not tax productivity, you tax consumption.

If Time really wants to raise taxes how about the Journalist Tax? That’s the tax levied against every writer that advocates raising taxes without mentioning spending cuts.

Filed Under: Deficit, Taxes · Tagged With: Tax Increases

Debt Reduction Commission

February 19, 2010 by Rickety Leave a Comment

President Obama’s Debt Reduction Commission will be able to find ways to cut spending. Most of you can think of specific items for elimination.

For example, how about tax credits? I am told that there are a trillion dollars in tax credits that are currently available. Surely these are not all needed?

What about tax deductions? The home mortgage deduction could be fazed out over 30 years. Do you really need a charitable deduction to be charitable? And for children you get a deduction (called an exemption) and a tax credit. These deductions add up into the billions.

How about the wars in Afghanistan and Iraq? Do we really want to continue these expensive boondoggles even as the dollar falls to new lows daily. What are our leaders thinking?

OK, you get the idea — it is not so hard to come up with a trillion or two in savings. But actually implementing the Commission’s recommendations will be impossible. Unless a miracle happens and the voters make their cuts this November and decimate the ranks of delinquent Democrats and reprobate Republicans.

During the Reagan years a commission was formed to study U.S. debt. Since 1985 its recommendations have gathered dust. Let us hope that the Debt Reduction Commission does not go the way of the Grace Commission.

This time around we would all like to see Change We Can Believe In.

Filed Under: Deficit, Government, Tax Credit · Tagged With: Cuts, Deficit Spending

The Income Tax Blues

February 4, 2010 by Rickety Leave a Comment

I just finished my income tax returns. It is quite sad. A large part of my Federal income is taxed at the 25% level. I hadn’t noticed that before because I used a tax preparation program that masks these sort of horrible details.

This year I dived in and used the online filing at irs.gov and utah.gov. When you grapple with the raw forms you discover just how obscene the Federal government has become. It is discouraging to see all those earnings sucked into the great black hole of government. What do we all get for our money? Trillions in debt. It is enough to send me screaming back to my native England.

Except that they are in even worse shape.

Filed Under: Deficit, Government, Taxes ·

In My Opinion