The Bear's Lair: The Fiscal Crisis of 2005

[midwayer]

By Martin Hutchinson
Published 7/5/2004 1:34 PM


WASHINGTON, July 5 (UPI) -- Everybody appears to agree that the federal budget deficit is a problem that needs to be dealt with, but not yet an urgent one. After November's election, of course, the urgency of the problem will become fully apparent. It's therefore with asking, with considerable trepidation, what solutions might be found.

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This problem will come to a head in the first months of 2005, when a re-elected President Bush or a newly elected President John Kerry faces the unpleasant constitutional necessity of providing Congress and the public with a federal budget for the year to September 2006 whose figures add up. If as I expect by that stage the budget deficit has shown signs of widening further, interest rates have crept up, the economic recovery has faltered somewhat and the bond markets are showing signs of balking at all the new debt, an unpleasant reality will have to be faced: Taxes must go up.

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Of course, introducing the necessary tax increases in 2005-06 will throw the U.S. economy into deep recession, just as President Herbert Hoover's tax and tariff increases did in 1930-32. But that's what you get, after the political system perpetuates an entire decade of economic bubble and flim-flam.



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http://www.upi.com/view.cfm?StoryID=20040702-021401-4763r

[wishlist]

1. Bush's TV ad says Kerry will raise taxes 900 Billion in his first 100 days

if we elect him. Saw this ad for the first time here in N.C. yesterday on our Sinclair Broadcasting owned ABC affiliate.
We laughed out loud over the outrageous ad since the irony is that Bush has sunk us into billions of dollars of debt that will require taxcut rollbacks. At least Kerry is making it clear that he will target those with high income whereas BushCo is setting us up for major hits hurting Social Security and other social programs that the average American relies on.

I look forward to Kerry/Edwards hammering Bush on this issue.
Interestingly, Elizabeth Edwards has spent years working as a bankrupty attorney. Can't wait for her to discuss this issue too!

Our economy and the markets seem on shaky ground right now

[Centre_Left]

2. The super-rich always avoid tax increases

I will point out that one way to cut deficits is to reduce spending. Of course, our fatcat politicians are highly unlikely to find the political courage to make the necessary cuts. They would much rather raise taxes since most of them are wealthy and well-connected to evade nearly any increase in the income tax.

The people paid to help the wealthy and the powerful evade taxes are simply much smarter than the people who actually write the tax law. As a result, the tax law functions to hit hardest the people who have a significant amount of money but not quite enough to afford a legion of tax lawyers. Of course, the poor are squeezed as well for whatever material amounts they can contribute.

If either Bush or Kerry is elected and taxes rise, the increases will hit the middle class and upper-middle classes the hardest, no matter how the law is written or publicized. This inequity may occur by accident or by design since, as I pointed out, politicians recognize that they can always dodge a tax increase.

[phantom power]

3. actually, the GOP would love to cut spending

it's all part of their "starve the beast" plan. Of course, their goal is to only cut spending on the parts they don't like. Basically, any social service or safety net will go out the window in their ideal scenario.