I was on FBN’s Cavuto last night and the question posed was: would the best stimulus for everyone be that there are no tax hikes for anyone?
For the majority of American economists and politicians, it currently appears too revolutionary a suggestion that since the US economy has expanded for 5 consecutive quarters and that such indicators as charitable giving are now on the rise, that the recovery is secure enough to stop stimulus altogether.
But, at some point in the near (ish) future, the US deficit will have to be addressed. And to deal with the deficit there will HAVE to be a combination of tax rises and spending cuts – no politician has the stomach for the level of spending cuts required without tax rises, it is why even Republicans have been resolutely quiet on exactly how they would implement deficit reduction. Defence, Social Security and Medicare spending will all have to be reduced.
The Bush tax cuts, as I have said before, come from another era. An era where Dick Cheney said: “deficits don’t matter”. Well, deficits do matter. Reducing them, by definition, is deeply unpleasant. Everyone will suffer from the prolifagate spending of the past. It isn’t fair. Yes, everyone should have lower taxes. Unfortunately the numbers don’t add up.
Since in the near future, most of the American powers at be are determined to keep some sort of stimulus in the form of these tax cuts, let it be short term stimulus, an emergency measure, before the job in hand is focussed on – deficit reduction.
Millionaires were up by 8% in the US last year – they don’t need this stimulus. However, in the same time period, the number of Americans living in poverty had their highest ever increase since records began – up to 14.3%. Those earning the least are the ones who need the cash now and will spend it now, thus helping stimulate the economy immediately and sure up the recovery. The rich typically save the money not spend it, as they can – they don’t need this measure to remain and the country can’t afford for it to remain for them.
Wikileaks has not helped America this week. But both Secretary of State Clinton and the chairman of the Joint Chiefs have stated that the deficit itself poses a threat to national security. For America’s – and the world’s – sake, I hope that in the near future, somehow Washington, from politicians to lobbyists and special interest groups, can work together and address this ticking timebomb.