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Posts Tagged ‘recession’

The truth shall set you free

September 16, 2010 8 comments

We are in the midst of one of the worst economic contractions in American history.  Meanwhile, if you turn on the TV you will hear that people are frustrated with our soaring deficits while at the same time wanting tax cuts and are desperate for employment.

Historical government spending by major functi...

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So what’s the problem with this picture? The truth is that while both tax cuts and increased government spending stimulate the economy/create jobs they also increase the national debt.

Personally, I am concerned for about both the state of our economy and our national debt.  I think it’s a time to evaluate both our tax structure and government spending programs and make some tough choices.

If we take a look at our national spending, the bulk of spending goes to do three things: national defense, Social Security and Medicare.  If you’re serious about cutting spending, you have to look at reforming those three areas and reform them and/or cut services.   So far I really don’t hear anyone in either party stating that truth and coming up with plans to tackle this reality.

On the revenue side, while it is true that the top 10 percent of Americans pay about 73 percent of all taxes, the top 1 percent of Americans also own a majority of the wealth in this country:

Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the ’80s, ’90s, and early 2000s (Wolff, 2007).

Top US Federal income tax rate from 1913 to 2009

Plot of top bracket from U.S. Federal Marginal...

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Tough choices on both the revenue and spending side of the balance sheet are necessary  to avoid a very dire fiscal situation in the future.  I think both parties will have to give in: reform entitlement programs (yes, Social Security and Medicare), reform and cut wasteful defense spending (we’re not in a cold war anymore), but also we must realize that higher taxes for the richest Americans are unavoidable while we work on getting back to the years of surpluses.

In the meantime, we’ll have to prioritize what’s more important, stimulating the economy, tackling the issue of the national debt or a combination of a little bit of both.

What are your thoughts? Be sure to comment and share with your friends and networks.


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Midterm madness

September 8, 2010 3 comments

The State Emblem of the Union of Soviet Social...

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I just got off the phone with my friend John.  We were discussing how no one is happy with Obama.  His base feels that he has catered too much to Wall Street and made too many concessions to the Republican Party and conservatives think he’s Stalin incarnate.

I believe that there are many reasons why this is happening.  “It’s the economy, stupid” remember that famous phrase? Well, it’s once again the reason that the American electorate is uneasy.  There are other reasons, of course… among them: the Democratic majority/administration passed healthcare reform but it was severely watered down and does very little to contain cost; spending has increased at a very rapid rate, yet the unemployment rate has not come down; the Republicans in congress have seized this opportunity and voted in lockstep to derail every proposal by this administration and point fingers at them for all the spending increases, while providing very little if any alternatives and solutions.  The bottom line is that no one person or party has all the answers or is culpable for all the  challenges our country faces, after all:

  • Bill Clinton signed the repeal of the Glass-Steagall Act in 1999, leading the way for the collapse of the separation that previously existed between Wall Street investment banks and depository banks.  This was a major cause of the financial meltdown.
  • The Democratic congress did not do enough to bring about regulation and avoid the collapse of the markets when the writing was on the wall.
  • George W Bush laid out a plan he called “America’s homeownership challenge” This paved the way and forced Fanny and Freddy to put people into homes they couldn’t afford.
    (en) John Boehner and President Bush in Troy, ...

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  • Republicans could have improved healthcare, they could have improved the stimulus packages… but they knew there was more political capital by staying in the sidelines.
  • George W Bush gave billions of dollars in tax breaks (nearly $1 trillion) to the top 2 percent of Americans, while involving the US in two wars that cost us over $1 trillion while cutting no expenses.  These actions lead the way for the national debt to double.

I just really wish that people stopped for a second and were a bit more logical, that they thought things through before they go on an incumbent massacre this coming November.  That they realized that Obama is not a foreign-born muslim comrade, that no one party caused this economic downturn and that although some government capital infusion is necessary to get the economy moving again, this is not the magic or only answer to this economic contraction.

If there is one thing that Americans should demand this November is for both parties to work for the American people, not just to gain power and to bring down the other party. That at a time when we have record unemployment, we should not have a party stonewalling everything and a majority that does not reach out to work together to get things done for the American people.

People who are in desperate need of results and accountability.

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