Saturday, May 22, 2010

Follow Up Thoughts from Thomas

Here is an interesting graph based on CBO estimates that shows how we got into this deficit problem in the first place. By far, the biggest one is all the tax cuts, which I think were ill-advised, especially with two wars and an unfunded expansion of medicare in the form of prescription drugs. I'm not advocating raising taxes at this juncture. The economy is just starting to find its feet again, and it doesn't make a lot of sense to increase taxes during a recession. But as far as dealing with the deficit in the future, I think increased revenue is an important option to consider. As you know, I'm not part of the anti-tax crowd, nor do I think we are over-taxed. (side note: our current income tax under Obama is at a historical low, 9.2%.) Anyway, along with spending cuts (and here I would advocate cuts in subsidies to big business, like the nearly 40 billion that goes to the oil and gas industry) I think increased revenue in the future would be a good approach to the deficit issue.

If may be so bold as to use an analogy (because analogies can be slippery sometimes), it's like an average person in debt trouble whose only going to solve the problem by cutting spending without even considering the option of also earning more money, like a second job, to get out of debt. It's a like financial planner telling you the only way of your debt is to cut out that pesky third meal a day, move your family into a one room apartment, and put off that tumor removal, but by all means don't work more and make more money and if fact take a few days off. That last one is a bit facetious, but I think you get the point.

Anyway, to get back to the graph, one partial solution would be phase out the tax cuts or let them expire. That way we'll have a more manageable problem on our hands. Personally, I don't mind paying a bit more money if it means putting our economy on a sturdier foundation. In the long run, it not only benefits me, but it also benefits society at large and future generations.