This is a good article that discusses the underpinnings of the coming tax revolt that I have been Cassandrasizing about since I joined the FairTax bandwagon some years ago.
Some say there is no solution. But ‘no solution’ is not an option.
Some will say we cannot economically ‘grow’ ourselves to a scale that will withstand the demographic tsunami that is coming at us.
The broad brushstrokes of where we must go are:
1) Creat a baby boom tax environment.
We expanded our elderly demographic without expanding our lower age demographics and those lower age portions need to double in relation to elderly demographics.
2) Cut government spending and freeze COLA adjustments on the remaining government workforce and retiree groups.
Large layoffs in the government sector could be accomplished without noticeable effects on the private sector economy. As government employees are forced to take jobs in the private sector their tax base would move from secondary to primary status thereby increasing the overall tax base.
3) Implement the FairTax, Repeal the 16th Amendment and federalize the Federal Reserve.
The benefits of the FairTax include a revival in American manufacturing, increased competitiveness in foreign markets and an unwinding of a large portion of entangled productivity. Repealing the 16th Amendment nails the coffin on the source of corruption and entitlement creep. Bringing the Federal Reserve inside the federal government (Treasury) eliminates borrowing from the Federal Reserve and interest on that borrowing. This latter will result in substantial government spending cuts and will greatly improve economic efficiency.
But none of the above will happen until the conditions are ripe for revolt, meaning until the status quo has played out its hand and shown to be bluffing. Credibility is already in the process of full reversal since the time of Reagan. Roe vs. Wade and high taxation have had 30+ years to do their damage to the demographics.
The perfect economic storm is now visible on radar accompanied by a demographic tsunami now on the horizon. Unfortunately this is factual and not doom and gloom hyperbole. But the broad steps listed above can turn attendant fear into positive action.
We can and must survive.
An important part of the solution is an accurate assessment of public employee compensation. The public sector has carefully disguised the amount of compensation from retirement.
The public does not have a clear idea about the amount of deferred compensation disguised as a pension. Retirement compensation in most government jobs is much higher than in the private sector. Although a few private sector executives receive golden parachutes at retirement, most government workers receive golden parachutes in large amounts of deferred compensation that is carefully disguised as a pension. Many government agencies however, claim that retirement compensation is higher in the private sector than public sector.
For example, in Colorado, the Department of Human Resources conducts an annual compensation survey to ensure that compensation of public employees is comparable to private sector employees. Amazingly, the agency claims that retirement compensation in the private sector is higher than the public sector. If retirement compensation is higher (or at least comparable), why do public sector employees retire at much younger ages at higher levels of benefits?
Here is a summary of a recent study that analyzes retirement compensation of public employees in Colorado. The study indicates that career public employees receive large amounts of deferred compensation. This deferred compensation when allocated to a career employee’s salary can increase compensation 30% to 50%.
http://www.i2i.org/articles/IB-2007-D.pdf