The recession is dealing a hard blow to government revenues with tax receipts expected to drop 18 percent this year. The big question being lathered across the Nation, but not being answered honorably by the Administration, revolves around tax increases. The double-speak and denials are only adding annoyance to the feelings surging around the stress already felt by the taxpayers. Not only will the “middle class” be saddled with fresh tax increases, but so will you and your neighbor if you live in America.
The strategy of repeatedly pretending that only the wealthy are going to pay for the massive spending increases is quickly getting old and not believable. From the mansions in Beverly Hills to the park benches of Central Park, all residents will be sending more dollars to the government in one way or another. This is not about new tobacco or alcohol consumptions taxes, or even about the massive tax-grab that will come from Cap And Trade, this is about new tax measures, and new taxes on everything that can be squeezed for cash starting with your income. Forget the campaign promises you almost believed about middle-class tax cuts, and forget Sunday meet-the-press equivocations by well-trained emissaries like Geithner and Summers. Your taxes are about to increase dramatically.
The Administration is very demonstrably building a larger government than national revenues can support. With the Nation stuck in a long-term economic quagmire hurting all taxpayers who are already feeling the weight of chronic tax-creeping, the imposition of obvious and visible new income taxes is politically dangerous. The sophistication of the speciousness will find new levels of creativity during the coming weeks.
The White House will no doubt launch a campaign to “talk-up” the economy in the hope that positive proclamations will make them so. Reality is that unemployment, well above the claimed 10%, is somewhere around 16% when you include “marginally attached workers” as well as those employed “part time for economic reasons,” calculated as the “U-6 rate” by the Bureau of Labor Statistics. Unemployment increasing is neither a turn around, nor a bottom to the recession, and is a far different reality from the “8% or less” predicted by the Administration when it launched its stimulus program. So much for rose-colored forecasting by economists.
Tax receipts are apparently down by 22 percent on individual incomes, and are down 57 percent on the corporate front. When you blend that with a deficit that will surge to almost $2 trillion this year, and a National debt accelerating past $11.6 trillion, your options are limited. We can assume that cutting federal spending is an ideological impossibility, leaving the government with two principal choices, and neither induces positive tingles up your spine. You can be asked to sacrifice and have your income taxes increased massively, or the dollar’s value can be allowed to drop significantly as more of them get printed. The likely path will be a less harmful blend of both of these alternatives. The key will be to allow the dollar’s value to slide gradually so that there are no sudden shocks striking at the heart of national and international markets. International creditors like China will be irritated, but will accede to the gradual process of easing down the dollar. Forget the doomsday scenarios, however, America will take years to work its way out of this recession, then pay off past and current government spending sprees, on its way to growing through the new financial demands on its treasury that will surface over the next decade from baby boomers, social security and healthcare.
To initiate an advance on the lengthy economic turnaround, the joy ride of debt-spending-with-wanton-abandon mindset enjoyed by Bush and continued by Obama must be brought to a close. Deficit growth cannot continue on a path exceeding the rate of economic growth. The Administration should surface out of its decision closet, and become resolutely emphatic on a course of action that will reverse the deficit’s current trend. Obama’s next address to the Nation should be, “I know I promised that if you made under $250,000 per year, you would not see your taxes increased a single dime. Not your income tax. Not your payroll tax. Not your capital gains tax. No tax. I was wrong. I was hasty in forming that covenant with the electorate. We are a government living beyond its means, with currently no end in sight to the discrepancy. Here is my plan for an overhaul of the tax code, and what it will mean to every single one of you. You can expect your income taxes to increase an average of ten percent, for starters. Now, about a national sales tax, …”
A constituent of the vast baby boomer generation with a career which has been fortunate to know the ponderous corporate worlds, as well as the intimately pressurized, and invigorating entrepreneurial domains of high tech and venture capital, I have harvested my share of mistakes meandering through corridors of enterprise from Silicon Valley, to London and endless, colourful, sometimes praetorian points in between. The voyage has provided an abundance of fodder for a pen yielding to an inquisitive keyboard, a foraging mind, and a passionate spirit.
Whether political or business or social or economic or personal, is it not all political? It is a privilege to write, and an even greater privilege to be read by anyone, and sometimes with the wind at my back the writing may occasionally be legible. I do not write to invite scorn, nor to invite respect, but if I get really lucky the writing can stimulate thinking. I also write for the very selfish purpose of animating my own processes, and engaging the best of what life offers. Above all, whether biting fire or swatting shadows, I am grateful to be gifted the freedom to write and publish whatever flows down to the keyboard. To all those who enabled this freedom, and to all those standing guard to preserve it, I am indebted.
What concerns me, among many of my concerns of the direction this administration is going, is the tripled budget congress has passed. What is he going to do with all this money? Clearly, he will no longer need congress to issue money for his pet projects that are guaranteed to undermine this country. He has enough to do whatever he wants. Even if these funds are earmarked for certain items, what has ever stopped him from breaking the law and ignoring the Constitution?
Another thing I want to know is why are we still giving billions to every shirttail country in the world even the ones who hate our guts? If our economy is so bad we need to keep this money in this country. I thought the original meme of distributing this money was to contain communism. Well, we are rapidly becoming what we have fought againstfor the last 6 decades and more.
When Bush was president I could understand giving out this money to get co-operation from these countries to fight Al Quaeda but Obama does not seem to want to fight terrorism. He’s too busy knuckling under to all the despots of this world.
One of the things that has puzzled me for some time is the notion that “Rich” people will stand still for this lopsided gouging for very long. The reason they are rich is that they know how to avoid paying huge tax bills. There is a sense of fairness with some very wealthy people and they not only donate but willingly pay ther taxes. But this will not last at the confisacatory rates that BHO is planning. Then what will BHO do? You guessed it, raise taxes on the MIDDLE CLASS!
Think things are bad now, wait until the bottom falls out of commercial properties as many (who should know) are warning. Then like dominoes the effect will widen.
Yes taxes are going to go up for everybody and most likely some kind of value added, or consumer based tax will be initiated along with bigger penalties for tax evasion of any and all kinds. States will be going bankrupt, unemployment money will come out of your pockets for anyone in any other state. Growth will stop in all sectors and every business will turn in to themselves for survival and many will just not be able to weather the storm.
Those worthless dollars will become even more worthless.
Underground economies will flourish, barter will become the new wage, families will be forced to do many things they could not even envision at this time. It is going to get bad and then worse still.
Start preparing yourself and your family now.
Papa Ray
West Texas
@ Inspectorudy
I know that the same tired quote from Warren Buffett has been repeatedly plastered everywhere by friends of Obama, regarding, “the rich should pay more taxes,” however, … that is bunk. Period. All of the very wealthy individuals whose paths I’ve crossed over the years, did absolutely everything they could to MINIMIZE their taxes, … everything.
That is why there are millions of “off-shore” accounts and “holding” entities and “trusts,” in countries from Singapore to Switzerland. Many individuals simply move off-shore but retain some assets “on-shore.”
Just don’t believe the crap being fed out there about the rich being so readily altruistic and benevolent. There is a reason talented accountants and tax lawyers make more than average wages. They hide income very deftly. Rich or poor, no one likes taxes, and every nickel counts.
@ Papa Ray,
Have you planted your vegetable garden yet? That’s is where the rubber might meet the road.
Why, yes, I planted a good-sized garden, my first. So far, I’ve harvested a pea pod, a radish, a baby carrot, and at least 6 grape tomatoes. I was hoping to get some practice and save some money on groceries. Fortunately I wasn’t counting on feeding anyone this year.
@ Nellie,
Good for you. That is a good start, next, … 12 grape tomatoes. Plus, what you grow will probably be more nutritious than what you buy.
Life may get that simple through the next decade as government increasingly monetizes more and more of its debt.