It’s Not The Fall That Kills You. It’s The Sudden Stop
Peter Schiff wrote an interesting article at the Wall Street Journal last week. the foal of his article is to debunk the myth promoted by President Obama and his acolytes that making the rich pay a higher percentage of their income in taxes is the way to solve all of America’s economic woes. Among their supporting arguments is
…that in the 1950s, when America’s economic might was at its zenith, the rich faced tax rates as high as 91%.
Schiff acknowledges the truth of their argument but claims there is much more to the story.
In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%.
Now you are probably going to want to read all of Peter Schiff’s article. As usual it is well done. But, I want to stop the parsing here. That little paragraph quoted above is packed with enough stuff that a blogger like me could write several posts on the questions that come to mind.
Let’s start by keeping this thought in front of us. No government, be it communist, socialist, or free market capitalist can long survive if its revenues continually fall short of its spending. Soviet Russia learned this. Cuba learned this. China has learned this. The only countries that have not yet learned this are the Euro Zone countries, Venezuela, and the United States of America.
That little paragraph by Mr. Schiff tells us a lot. Especially if we couple it with the fact that in the last twelve years our government has added over $16 trillion to our debt. It tells us that the American wealth pie has grown but the richest Americans are getting a bigger share of it and yet although the tax rate on the super rich is just over a third of what it was in 1958, their share of the burden of funding the government has gone up from 29.2% to 51%. So, are the rich not paying their fair share? The fairness issue made by the left can not be supported by the numbers. It is an emotional argument; a feel good argument. What the left is really saying is the rich can afford to pay more so it is only “fair” that they do pay more. But, it doesn’t solve our debt and deficit problem, does it? It doesn’t solve our pathetically weak economy problem, does it?
So, it should be obvious to even the most left of the left that we could tax the rich into the poor house and it wouldn’t solve our problems. But, it is not obvious to them and it is not even obvious to most Republicans. America over the last five decades or so has developed some very serious structural problems in our government and the leadership of both parties is afraid to tell America the truth because they know that they are responsible for the mess we are in today. There has been one exception, however. Congressman Ron Paul has been sounding the alarm bells for years. Did anyone in Congress ever listen to him? No. In his farewell address to congress, Ron Paul said America has already gone over the cliff; it’s just that we haven’t hit the bottom yet. In other words, we have yet been killed by the sudden stop.
Is there no way to avoid the crash of a sudden stop? Theoretically there is a way. Let’s suppose that President Obama woke up this morning and realized that history was going to treat him very badly for leading America over the cliff. He says to himself that he doesn;t want to be remembered that way. It would be much better, he thinks, to be remembered as the President that saved America from a certain demise. So, he calls for a private meeting with the Republican leadership and the conservative caucus and he makes the following pitch to them:
Okay guys, listen up. You and I know that for years both parties have been leading this country down a garden path to disaster. We have grown government to a size that can’t be supported by any aceptable taxing, we have made committments we can’t pay for so we keep passing the buck to future generations, and we have been supporting an economy that has allowed America to live beyond its means by borrowing money and piling up debt. We can’t go on doing this without totally bankrupting the country. We in this room all know that the smelly stuff is about to hit the fan. It falls on us to save America.
As President, there are a lot of things that I can do and I am willing to do them. I will roll out of the 2013 fiscal budget my stimulus package from 2009 that because of the 1974 Budget Control Act is now $1 trillion. I can tell all agencies to roll back all regulations of the last ten years and then we will see which ones we really need. I will stop the funding of green energy projects. The global warming scare was a hoax. I now know that. Those are some of the things I can do alone. But, I need your help on a number of other things that will be necessary if we are to save America.
We all know that there are several government agencies that do no real good and we must shut them down. In short, there are many ways we can reduce spending. But, we also need to increase revenues. Before you get your shorts in a knot, let me explain. The tax code has to be simplified and the tax base has to be broadened. We need more taxpayers and all need to pay a little more. But, most importantly we can increase revenues by growing the economy. I have some thoughts on how we can do that.
We should eliminate capital gains tax and reduce corporate tax rates to 15%. We must open up all federal lands to gas and oil development and put America on the path of becoming an oil exporting nation. That will include the promotion of changing all of our transport to operate on natural gas instead of gasoline and diesel fuel. Those are just some of my ideas on how to save America. I am sure that you have even more ideas.
Guys, we can do this. Are you with me?
No one believes that Obama will ever make that pitch, do they? Nor will anyone else. America is falling and will die due to the sudden stop that is going to happen. The question is: Who will pick up the pieces? Maybe the better question is: Who will have the will to pick up the pieces?
Well, now you know what I’m thinking. What are your thoughts?