Tuesday, August 9, 2011

1898 Revenues. 2011 Revenues?

The United States has the lowest tax rates it has had in generations, and one of the lowest effective tax burdens in the world of developed economies.  The democracy of our great country is hamstrung by a small group of wild-eyed zealots, bound by signed documents thrust in front of them by Grover Norquist, who has never had the responsibility for the budget and the welfare of any citizen of any country anywhere in the world.

Yet here we are, an S&P downgrade only 1 business day past, and the stock market is in free fall.  For all the so-called conservatives that have pushed this absurd brinkmanship policy to test whether the US should default on its debt, I doubt one has noticed where all the money has been going that is running out of stocks.  Look at the price of US Treasury Bonds.  The yields are going down.  Investors and the market are running to US Government debt for safety and to reduce risk. 

Ponder the irony.  The capital markets are spooked by the downgrade, brought on by the dysfunction of our democracy and the willingness to play chicken with our debts.  However, capital doesn't yet actually fear the size and scope of the total debt at present.  Treasuries remain a preferred safe haven.  I believe the reason for this is that the market understands that the US has enormous and elastic capacity to actually pay off that debt if it chooses to, and in such a way that additional revenue collection threatens little the economy's future capacity to grow or produce jobs.

But those that push an aggressive and no-prisoners anti-tax policy do so with a faith-based conviction.  That there was no US deficit in 2000, and the 30 year long bond had been retired, and that our economy had been experiencing years of growth, is of little consequence to them.  Massive tax cuts were put in place, and the deficit came back.  And despite the tax cuts, our economy, and the world economy, has suffered the greatest setbacks since the Great Depression.  The revenue decline has done little to stimulate jobs.  The withering truth that neither the tax cuts or the presence of deficit raising stimulus packages has not bailed us out of our economic problems is not important to faith-based thinkers. 

If the debt matters, get it down.  Capital doesn't fear new revenue.  Our policy makers have options.  The left, and American society as a whole, needs to come to terms with unaffordable entitlement programs.  Nothing should be untouchable, including defense.  But as wingers draw their lines in the sand, increasing taxes, while decreasing defense and entitlement spending all become off limits.  These times require the moderates and compromisers to rise to the top and put some sense back into the equation of our national budget process.

1 comment:

  1. Bring back the check tax!

    (Bush Senior actually considered it...)