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Posts from the ‘Politics’ Category


What to Do About Taxes

After reading an article published by the Mises Institute claiming that President Bush has not cut taxes, I got to thinking about things. I’m convinced that Mises has got it right. The best, and only correct, measure of whether taxes have gone up is government spending.

Spending = Taxes

This makes a lot of sense for two simple reasons. First, if the government spends money, that money has to come from taxpayers eventually — if later, then it actually costs us more because of interest.

Second, if the government sells an asset it owns, like large sections of Nevada, then taxpayers are still paying for it because now we, as citizens, don’t own that asset anymore. This represents a decrease in our wealth — another way we pay.

So if government spending is the best indicator of taxes, both current and future, what should we do about it?

A Balanced Budget Isn’t Enough

The solution that has been proposed numerous times is to “balance” the budget by offsetting any increase in spending with a corresponding increase in taxes. Balancing the budget would probably work to some degree, but I believe it would fail to accomplish much because it deals with each spending item individually. A much better approach would be to deal with the issue as a whole.

Taxes Should Follow Spending

I think that adjusting taxes automatically to match spending would be much better. If some Senator wants to spend $223 million to build a bridge in his home state, fine. Next year, every taxpayer would have to contribute 74¢ for each person in their family for that bridge. Knowing that just might make him (or her) reconsider how happy his constituents might be about that bridge.

This would allow Congress to spend when they wanted to spend, but would deny them the ability to pretend that it doesn’t cost taxpayers anything. And since most taxpayers are voters, I think a lot of their pet projects, so-called “earmarks,” would get eliminated quickly.

Long-standing nation debt would have to be handled differently because it’s too large to payoff quickly. Perhaps setting a goal to eliminate it in 30 years would work. That’d be the same as putting 10% of our national spending (about $300 billion) into debt reduction.

Each year, the Department of the Treasury, Congressional Budget Office, and Government Accountability Office could get together an adjust taxes automatically based on actual spending for the prior year. All new debts would be scheduled to be paid off within 4 years.

Another problem needing a solution is what to do about promises to spend in the future. Social Security and Medicare come to mind. Currently, the government just ignores these promises when campaigning and making financial projections. The U.S. Treasury’s report for 2006 includes these commitments and should become the basis for starting to accumulate a nest egg to pay for them. Perhaps another 10% could be put towards the retirement of our citizens.

Basic Money Principles

So, as a nation can we put 10% toward debt reduction and 10% towards retirement while starting to live within our means? Does this advice sound familiar? It should. The best thing is that eliminating earmarks (congressional pet projects) would almost pay for both of these. Instead of a balanced budget amendment, maybe we should just try some basic principles of sound money management.


American Honor

It has bothered me for years that no one expects Palestine to act with any decency while, at the same time, holding Israel to almost heroic standards of restraint and forgiveness. The amazing thing is that Israel actually achieves those standards nearly all of the time, despite intense international disdain for the fact that Palestine has been deliberately targeting Israeli civilians. Only terrorists deliberately target civilians.

The same sort of situation exists in Iraq, which is fighting a war (with America as one of its few allies) against outside forces determined to kill anyone who ever voted for democracy or doesn’t want to “convert” to Islam.

Orson Scott Card has written a great article asking whether Americans still value honor. It’s clear that many of us do, including everyone who volunteers to serve in our military. But I find it hard to believe that any in Congress could pretend that known and unrepentant terrorists should have any respect. From Card’s article:

Remember the name “Nancy Pelosi.” It will stand someday beside the name “Neville Chamberlain” in the pantheon of deluded fools whose poll-following stupidity led to the deaths of hundreds of thousands of their own nation’s citizens, and the deaths of millions of others who would have lived if those deluded fools had done what was necessary to preserve their national honor.

It makes me angry to know that so many of our so-called “leaders” will lie, causing untold American deaths, for their own political advantage. There are scoundrels in both parties, but I hope we can find someone with integrity to put into the oval office.


How Tax Dollars Are Spent

Yahoo Finance has an article describing how our tax dollars are spent. One interesting thing is that around 70% of the budget is required spending — Congress and the President don’t have any choice about it. This includes Social Security, Medicare and Medicaid payments and other help for individuals. It also includes interest payments on the national debt which, at 10%, seems like a huge liability.

The full breakdown is: * Social Security: 21% * Miliarty: 20% * Aid to the needy: 16% * Medicare: 15% * Interest on the national debt: 10% * Health & Education: 4% * Civilian & Military Retirements: 4% * Veteran’s Benefits: 3% * Transportation: 3% * Other: 6%

I guess that spending 102% of our tax dollars is how Congress got us such a large national debt in the first place.


The United States is $50 Trillion in Debt

The Financial Report of the United States was released by the US Treasury today. The actual report can be found at the Treasury’s website or the Governmental Accountability Office.

The most interesting part of the report was in the conclusion from a section addressing what they call a “Fiscal Imbalance.” From page 156 of the report:

While we are unable to express an opinion on the U.S. government’s consolidated financial statements, the following key items deserve emphasis in order to put the information contained in the financial statements and the Management’s Discussion and Analysis section of the 2006 Financial Report of the United States Government into context. Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000. As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008. Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.

The US went from $20 trillion in debt in 2000 to $50 trillion in 2006. Not a Good Thing™. This report uses the same Generally Accepted Accounting Principles (GAAP) that the SEC requires all publicly traded companies to use. So it is far more accurate than the cash-basis reporting normally used which ignores long-term obligations that don’t have to be paid yet, such as Medicare and Social Security.

I found this article from WorldNetDaily to be helpful in summarizing the report, though I didn’t follow any of the links at the bottom.

UPDATE: There is another article by Dr. Chris Martenson on that covers this issue very well. He says he’s heavily invested in gold and silver, which should help in the event of massive inflation. It’s a good way to avoid losing your savings once the financial obligations we’re in, which are common in many Western nations by the way, start coming due and the government starts inflating its way out of debt.

My plans are a little unsure at the moment. I believe in the coming crisis (who couldn’t with the US Treasury itself announcing it) but don’t really want to start buying gold with the little cash I have. I do have several paper investments (like stocks and mutual funds) and am planning to switch to things that generate direct income, such as real estate and businesses. There is a good Wikipedia article on buying gold if that ever starts to look like a good choice.