Much debate is going on about whether the Bush tax cuts will remain in place or not – is the American economy robust enough to survive their removal without going into double dip territory?
I’m afraid it is inevitable that these tax cuts will have to go to some extent – they come from another era. A time when Dick Cheney commented that in relation to tax cuts, deficits didn’t matter.
Well, deficits do matter – the size of the US’s federal deficit, running at 10% of GDP, has led to talk that its Triple A rating is under threat.
Latest projections show that holding onto the Bush tax cuts will add $2 trillion to the federal deficit over the next 10 years. They are a form of stimulus that America cannot afford.
We are living in a time of limited resources, where we all are having to cut back. Which is why a Presidential deficit reduction commission is studying the UK’s Cameron-Osborne formula of a combination of 4 pounds of spending cuts for every 1 pound of tax increases…
We are all going to have to become accustomed to this new reality.