...Why it Won't
We are in the midst of the worst financial crisis since the great depression. The core tenants of our economic system have been challenged and there is a deep mistrust in our financial system. In the midst of the crisis, our perception has changed and the country waits for any sign of recovery.
President Obama has vowed to cut the deficit by raising personal income taxes on individuals making over $250,000 and has proposed raising capital gains taxes from 15 to 20 percent. Our economic conditions are worsening, and the countryís income and assets are deteriorating while Obama has proposed raising taxes, something that will only worsen future expectations.
The deficits pose a substantial problem for the long term viability of our country, but eliminating government waste is the best way to reduce them, not raising taxes.
First, transfer payments are the federal governmentís biggest expenditure, and they will continue to rise because of an aging baby boomer population and less workers paying into the system. We can increase the age people get benefits to reflect growing life expectancy ages. Second, lobbyists powered by large sums of money have considerable influence to create favorable laws for their industries and get large subsidies.
The Obama administration can follow campaign promises and truly change Washington to reduce the influence of lobbyists. Third, wasteful earmarks are a bipartisan failing that wastes our tax dollars. Fourth, we have had a series of misguided financial bailouts that lack clear goals and transparency.
The Obama administration can work proactively to not repeat the mistakes of Secretary Paulson and have clear goals and transparency in regards to financial bailouts. We must reduce our deficits by cutting our wasteful spending, not by raising taxes.
Reducing the deficits is a challenging problem that will come from reduction in spending. The sources of government revenue are printing money, government bonds and taxes. Printing money is clearly the wrong way, because it will increase the chances of long term inflation and reduce the legitimacy of the government.
Government bonds currently yield near zero percent, and investors have put a record amount of money in government bonds, because they view at as a safe asset in troubling times. Investors will not always let their money yield near zero percent because they would eventually lose money. Taxes will ruin future expectations and deepen the current recession.
Corporations will lower future expectations which will hurt our economy because they will increase layoffs and consider moving other jobs abroad. The Dow Jones Industrial Average is at its lowest point since 1997, and capital is growing scarce. The stock market has lost 50 percent from its peak in late 2007. Raise taxes on capital gains and higher earners will surely worsen our recession, not create recovery.
Literally the best way to reduce our deficit is as Obama has said, Ã¬to cut it line by line,Ã® not to raise taxes during this recession.
Obama should stick to his campaign statements to reduce government waste line by line. Obama should effectively work to reduce government waste without raising taxes, an action that would clearly worsen this terrible recession.