Tuesday, December 06, 2005

On taxes and debt

The Republicans have instituted budget cuts that are targeted at Medicaid and other social welfare programs to the tune of $50 billion. They are attempting to do this to try and salve those of us who are upset about out of control spending. This to me is the most ridiculous of all of the ways to cut the deficit. They have done nothing to reduce the pork spending that they have become so enamored with. This is not to say that it is ony targeted to the rich. Denny Rehburg has been touting some $350 million that he got for a local fire and police improvements. Those do not just benefit Republicans, but the community as a whole. So much for the usual Democratic rants.
This is not to say that what they are doing is enough, or in the right areas.
The problem that we face is that deficit spending has the same effect on the economy as increasing taxes. For instance, if you raise taxes, you pull money out of the economy that could be used for capital improvements which could improve productivity. On the other hand, increasing deficit spending means that the government has to increase its borrowing. This takes available money out of the pool that would be otherwise available to make improvements.
So, if borrow and spend is no different from tax and spend what are we supposed to do? The first thing that we need to do is identify that which we must have, either because it could result in the collapse or destruction of our nation, or that which is mandated by law. These two are different because you can always change a law, but if something could destoy the country, that is beyond the powers of Congress to control.
So, after we look at what is required, and what is left, what do we have? If there is anything left over, then we could set about prioritizing what we want to spend the money on. Spending the money on improving fire and police facilities is nice, but what would happen if we didn't? Could we wait four or five more years if that would mean lower borrowing rates?
And the local apportionmnet is not the only one. What about all of the festivals and other local trail improvements and such that are nice but not critical?
In order to improve the national productivity and improve our economy, whoever is in Congress will have to get control on spending. Incresing taxes or borrowing is really the same thing. What we need are those people who recognize priorities and can act on them. As a friend told me in the Army a long time ago, when everything is a priority, nothing is a priority.

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