Monday, August 9, 2010

We, the People, deserve better! - Part II

The problem is so much larger than Republican vs Democrat, and China is only part of the problem.

However, as the following document from the Treasury Department will show, China may be the largest holder of treasuries, but they are not the only ones. Is it cause for concern? Absolutely.

A point that many Republicans and Democrats disagree on is tax cuts. Tax cuts spurred the economy and created growth. In fact, the Dow Jones hit it's all time high of over 14,000 in 2006. Unemployment was at all time lows.

Jack Kemp, Bob Doles' 1996 vice presidential nominee, once told me that if the government taxes at 0% the government will receive no revenue (obviously). If the government taxes at 100%, the government will also receive no revenue. The reason - nobody wants to work for free. The question isn't whether someone is willing to pay taxes. There are a few who, wrongfully, insist that the government shouldn't tax anyone - yada yada, but they are a very small minority. The question should be what is the tax rate that garnishes the most benefit for the people, businesses and the government. What is the maximum rate that will allow the economy to grow and employ more people, while at the same time maximizing revenues to the government and simultaneously allow people to keep a good sized portion of their revenue? He said this because when the tax rate is too low, the government doesn't receive enough revenue to provide for the common defense and the welfare (not the welfare programs, mind you) of the people. If the tax rate is too high, government revenues go down because people start moving their capital overseas or placing them in tax shelters. He estimated (in 1997) that the maximum tax rate should be around 18%.

However, there is still another factor to be considered - the monetary policy of the Federal Reserve. I'm not one of those who wants to End the Fed, and don't believe there is this vast conspiracy of the Federal Reserve. Yet we have since learned that when the Fed doesn't do it's job properly, it severely impacts the economy by creating inflationary bubbles - aka Alan Greenspan keeping the interest rates artificially low. This was a contributing factor into the recent housing crash, which bled into other sectors of the economy.

Ultimately, if we are to continue to exist as a nation, we need to get our spending under control. We need to insist that the budget be balanced. Prior to the Obama administration, the largest yearly deficit was $465 billion dollars. Out of a then $3 trillion budget, I'm sure we could have found ways to cut $465 billion in a given year through eliminating waste, fraud and abuse; streamlining government by eliminating duplication of services among Federal agencies, ended antiquated programs and departments - and then, if there is still a need to trim, start cutting programs and services.

If we were to eliminate our National Debt by paying it off, we would then be bargaining with China out of a position of strength instead of economic weakness. Ask any Congressman what he/she would do with an extra $500 billion each year and I'm sure you would find a wishlist a mile long. If we were to eliminate the National Debt, our economy would grow and we could then take that extra $500B and invest it into more social programs, better military equipment, save social security, expand the S-CHIPS program and still have money left over.

Until We, the People, see this, nothing will change regardless of what party is in power. 

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