by | BLOG
There are a lot of people out there – mainly liberals – saying we should not reduce federal spending now because it would halt the tenuous recovery. This is pure baloney! Even if the most aggressive spending cuts proposed by the most fiscally conservative Republicans were to be enacted, the current year’s budget will still be running a trillion dollar deficit.
This Keynesian approach to the economy is suspect at best. But, even if you believed in it, the remaining trillion dollar deficit reduction through spending cuts would still be an incredibly stimulative program!
by | ECONOMY, POLITICS
The Republicans are proposing substantial tax cuts in the discretionary spending portion of the budget. Meanwhile, the Democrats demagogue the spending cuts as dangerously cutting programs for the sick, elderly, and the poor.
From FY2008 – FY2010, federal spending on projects increased roughly 25%. Such a dramatic enlargement of the budget deficit is bordering on criminal. There was no actual money to do so, and now the Republicans are being vilified for trying to go back to the point at which the Democrats, ignoring all financial reality, substantially overspent taxpayer money.
How can we be blaming those people who are, for the first time, showing us all of the worldly irresponsible actions and promises that have been created over the last two years? The reality is that during that time, the Democrats have made outrageous promises to the sick, elderly, and poor that they had no hope of being able to carry out.
The point is clear. The blame needs to squarely rest upon the tax-and-spend liberals, not the people who are trying to actualize fiscal responsibility by cutting back to previous and more reasonable spending levels. The politicians who enacted reckless legislation with money that was not theirs should be held accountable to the fullest extent.
by | ARTICLES, ECONOMY, POLITICS
One of my favorite elected officials, House Majority Leader Eric Cantor, wrote an Op-Ed for his local newspaper in Virginia. Cantor addresses the fundamental and necessary economic premise that cutting spending will grow the economy.
Cutting spending will grow the economy
By TIMES DISPATCH STAFF | ERIC CANTOR
Published: February 26, 2011
America is at a tipping point, and Republicans have begun to take action.
Last week, the House passed unprecedented legislation reducing discretionary spending this fiscal year by more than $100 billion. In addition, we made clear that our long-term budget, to be unveiled in the spring, will address the entitlement crisis that threatens to bankrupt our country — a long overdue move that politicians for too long have kicked down the road. This show of fiscal restraint represents not merely a clean break with Congress’ free-spending past, but a rededication to economic growth and a laser-like focus on job creation.
It’s important to recognize the link between cutting spending and growing the economy. Like the gardenerpruning the tree, we do not cut for the sake of cutting, but out of necessity. It’s the only way to restore economic health and free up the private capital necessary for new growth. Put simply, less government spending equals more private sector jobs.
Economic growth is generated when businesses weigh their risks against their potential reward (returns after taxes) and make a decision that an investment is worthwhile. That investment can take the form of a capital investment or an investment in additional labor (jobs). Especially in this increasingly interconnected world, businesses will logically move their investments to wherever they can achieve the greatest returns without assuming too much additional risk.
For many years, America offered unparalleled opportunity for businesses to grow and succeed. Investors could find in the United States comparatively low taxes, a consistent regulatory environment and a stable currency. Tens of millions of jobs were created as America served as the global driver of growth and prosperity.
Yet today many doubt whether America can still power the world economy forward. Uncertainty over our deteriorating fiscal situation and increasingly burdensome regulatory structure has made job creators and investors think twice about deploying their capital in the United States.
As the federal government continues to borrow nearly 40 cents for every dollar it spends, America’s $14 trillion debt hangs over the economy like a dark cloud waiting to unleash a violent storm of higher taxes, inflation and higher borrowing costs. The very businesses and investors we need to grow our economy are waiting to see if this cloud will pass.
The more local and national business owners I meet with, the more obvious it becomes that our businesses are innovative and poised to grow; government just has to stop making it harder for them to compete.
As part of our larger effort, Republicans are reviewing and cutting job-impeding regulations that stifle job growth. Next week, we will repeal the onerous 1099 reporting requirement to provide small businesses with much-needed relief. Additionally, we are focused on other ways to grow the economy, including tax reform and implementing job-creating trade agreements.
Will the administration and the Senate join us in getting our fiscal house in order? Or will they continue to add entitlements and borrow and spend at unsustainable levels? If only they would unite with us, confidence can be restored in America and capital investment can return.
But if they don’t walk us back from the precipice, businesses will see only weaker prospects for profit and growth on our shores — and turn instead to other countries they deem safer. What does this mean for America? It means we would be a lot more like Europe. Our graduates and work force would have less opportunity to find work. Our prospective entrepreneurs would have less incentive to pursue their ideas. Unemployment would be permanently higher and growth would be permanently weaker.
During his recent speech to the Chamber of Commerce, President Barack Obama insisted that in response to his policies, businesses have a “responsibility” to hire more workers and support the U.S. economy. But that’s not how it works in market-based economies. There is no magic hiring wand.
If the president genuinely wants to create jobs, he should take a cue from Virginia. Gov. Bob McDonnell has turned a $1.8 billion deficit into a $403 million surplus, cut $4.2 billion out of the 2011 and 2012 budgets — and he has done so without raising taxes.
America needs to show the world that we are serious about slashing our debt. By cutting $100 billion off the president’s proposed budget and taking the lead in reforming entitlements, House Republicans have demonstrated that we are more than ready to help make the tough choices necessary to move us in the right direction. Moving forward, we will use every tool at our disposal to remove barriers to economic growth so that people can get back to work and we can start to get our fiscal house in order.
http://www2.timesdispatch.com/news/2011/feb/26/tdopin02-cutting-spending-will-grow-the-economy-ar-868581/?referer=http://www.facebook.com/l.php?u=http://timesdispatch.com/ar/868581/&h=82b92&shorturl=http://timesdispatch.com/ar/868581/
by | BUSINESS, POLITICS, TAXES
The truth about Obama’s remarks:
#1) ON TAX BREAKS FOR THE WEALTHY: “And if we truly care about our deficit, we simply cannot afford a permanent extension of the tax cuts for the wealthiest 2% of Americans. Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break. It’s not a matter of punishing their success. It’s about promoting America’s success”.
FACT: The highest-income earners are the greatest investors. Investment is much more stimulative than consumptive spending; raising the tax margin punishes the earners and the economy – while theat extra revenue will go straight to the government. These top 2% earners also provide nearly 50% of small business income in this country; by targeting them, Obama is also hurting businesses.
#2) ON FIXING THE TAX CODE: “Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world”
FACT: This is purely populist rhetoric. Accountants and lawyers do not eliminate tax liabilities. And it is not so much lobbyists as it is legislators pandering for votes who put in provisions intended to help their own individual special interests. This happened in the 1986 Tax Act under Ronald Reagan, when tax rates from 50% to 28% in exchange for a large number of deductions and writeoffs. However, the ink was barely dry when Congress used that as an opportunity to jack the rates up from 28% to 39.6% — which lasted until the Bush tax cuts pushed them back a little bit.
#3) ON A FEDERAL FREEZE FOR FIVE YEARS: “I am proposing that starting this year, we freeze annual domestic spending for the next five years. This would reduce the deficit by more than $400 billion over the next decade, and will bring discretionary spending to the lowest share of our economy since Dwight Eisenhower was president”.
FACT: Obama’s federal freeze comes after he has increased our spending 25% in two
years. We need to go back to FY2008 and start from there.
#4) ON JOB CREATION: “We’ll invest in biomedical research, information technology, and especially clean energy technology – an investment that will strengthen our security, protect our planet, and create countless new jobs for our people”
FACT: “Invest” is just code for increased government spending. Here’s an example of the government picking industry winners and losers, something they have no business – or qualifications – doing. This policy will result in a net job losses – taking away from market directed companies in order to subsidize activities that cannot justify investment by the free market. A better and more impacting idea would be to give businesses research credits that companies could use and develop on their own.
#5) ON CLEAN TECHNOLOGY: “Now, clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they’re selling. So tonight, I challenge you to join me in setting a new goal: by 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas”.
FACT: There is no clear consensus on the best type of clean energy. This only means continued uncertainty in the business markets, which will hamper the rate of recovery.
