Posted on 12/10/2010 5:33:25 PM PST by sickoflibs
This week Washington displayed the kind of "bipartisanship" that will bankrupt our country and wreck our currency. Coming at a time when both parties say they want to address our long-term fiscal imbalances, the compromise extension of the Bush era tax cuts should be a wake-up call to anyone who somehow expected the American leadership to ever have an "adult conversation" about the country's long term economic health.
The administration and Congress are prepared to take the bold political move of not raising some taxes while significantly lowering others and greatly expanding Federal benefits. The entire cost of the $900 billion package will be financed entirely by adding to the national debt. Talk about tough love. While other countries consider ways to live within their means, Washington is intent on devising ever more creative ways to delay the day of reckoning.
While Democrats wanted more government spending,they were unwilling to vote for broad-based middle class tax increases to pay for it. Instead they want what Democrats have always wanted: higher taxes on the "rich." Republicans want lower taxes, but as has become typical, they were unwilling to cut government spending to enable it.By running up the deficit both sides get what they want without any political sacrifice.Sure, they break their campaign promise to cut the deficit, but the political fallout that results will be far less costly than voting for the tax hikes or spending cuts.
In truth however, there are no real tax cuts in this proposal. The true burden of government is not measured by how much it taxes but how much it spends. Since this deal ensures that government will be more expensive next year than it was this year, American citizens will have to shoulder the added cost. Just because Congress has decided to deliver the bill with debt rather than current taxes does not mean that the spending will not be paid for. The only thing the plan accomplishes is to alter the means by which government spending is financed.
If we had a truly independent Federal Reserve (one that was not willing to buy all the excess government debt) these larger deficits would make much more of an immediate and discernable impact on the financial markets and the economy. A glut of government debt should lead to much higher interest rates. Higher government borrowing also tends to divert savings and investment capital that would otherwise flow into the jobs-creating private sector. However, with the Fed engaging in quantitative easing, Ben Bernanke's "Sixty Minutes" denial notwithstanding, the money needed to buy the additional debt is simply printed. As such,the nasty side effects have been avoided in the short term. Instead we are set up for more inflation and a weaker dollar down the road.
Those who understand the implications of the "inflation tax" have already moved savings and investments out of U.S. dollars, expecting that the value of their savings and investments would diminish as a result of the inflation the Fed creates. In addition, working Americans will see the real values of their paychecks fall, as consumer price increases outpace the gains in after tax incomes.
As a result, this plan will do nothing to help our economy. The benefits of holding taxes low will be more than mitigated by damage done by larger deficits. In fact, despite the Fed's efforts to artificially suppress interest rates, the fear of larger deficits is already driving rates up. Many on Wall Street have jumped to the erroneous conclusion that rates are rising because this new fiscal stimulus will spur economic growth, which in turn will make further quantitative easing unnecessary. In truth, the only thing this plan will stimulate is larger deficits, meaning the Fed will be forced to do more, not less QE in an effort to restrain rates.
It is the fear of additional QE that has really spooked the bond market. Sure Fed buying might initially boost treasury prices, but as the additional dollars created to buy the bonds work their way into the economy, rising consumer prices erode the present value of the bonds.
Unfortunately, nothing in the plan addresses the fundamental economic imbalances that underlie our economy and that brought us to the brink of ruin in the first place. What we really need are massive cuts in government spending so we can have true tax relief. In addition, we need to remove the government-imposed barriers which make our economy uncompetitive, and which are preventing market forces from correcting the imbalances. By expanding government and increasing debt, the plan puts us farther than we have ever been from a real recovery.
If you realize both parties in Washington think that our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus who is going to get elected in Washington, cut your taxes , spend a few trillion and that will jump-start the economy, this list is not for you.
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The Austrian School’s Commandments plus :From : link
1) You cannot spend your way out of a recession
2) You cannot regulate the economy into oblivion and expect it to function
3) You cannot tax people and businesses to the point of near slavery and expect them to keep producing
4) You cannot create an abundance of money out of thin air without making all that paper worthless
5) The government cannot make up for rising unemployment by just hiring all the out of work people to be bureaucrats or send them unemployment checks forever
6) You cannot live beyond your means indefinitely
7) The economy must actually produce something others are willing to buy
8) Every government bureaucrat should keep the following motto in mind when attempting to influence the economy: “First, do no harm!”
9) Central bank-supported fractional reserve banking is an economically distorting, ethically questionable activity. In particular, no government should ever do anything to save any bank from the full consequences of a bank run, no matter what the short-term consequences.
10) Gold is God’s money.
Add mine:
1) Businesses don't hire workers just because of demand for products or services, they hire because it makes them money. Sorry to have to state the obvious.
2) Government spending without taxing is still redistribution
3) Taking one man's money and giving it to another is not a job.
4) Paul Krugman and Bernake have been wrong about everything, as well as the other best and brightest Keynesian's who have been fixing our economy for over a decade.
5) Republicans in the minority (esp out of the White House) act like Republicans, in the majority they act like Democrats .
Um... I think it started back in the 1930s...
Goodness—that’s a rather condescending remark..............
I Do!
You can see this with both parties.
1) They get caught up with the us vs them mentality. Next thing you know so called ‘conservatives’ say we have to support a phony McCain. Libs will go though the same with Obama.
2) Both sides have their Santa Claus's : Tax cuts pay for themselves(Reps), welfare stimulates the economy(Dems)
The fact that Schiff was right and they were completely wrong doesnt matter. Voters want the black and white and the Santa. All eyes on Republicans next year to see if anything has changed.
This deal is looking like TARP and may very well fail.
This deal is looking like Obama’s TARP1 with all the bribes but unlike TARP may very well fail; possibly because this fight is just is after an election rather than before.
Democrats are on the deathwatch list!
Bump to the top !
Austrian School bump!
bump for later
One item at a time please, kiddies.
No more “Christmas tree” bills or new acts that are too long for anyone to read.
Keep it short, sweet and simple. No amendments. No earmarks. No pettifoggery.
Thank you, Peter Schiff
A voice of reason and honesty is so rare these days.
How much intelligence does it take to know that you cannot spend more than you earn or “take in “?
It’s not about intelligence.
It’s about “magical thinking” by the elites who think they are exempt from the Laws of the Universe,and by their lackeys who think they are entitled to everything that can be conjured up.
We are being led by the Delusional, and are in no different economic peril than the USSR and its satellites before that system collapsed.
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