Home > Economy, Politics > Tax and Cut Armageddon

Tax and Cut Armageddon

Forget the threat of the end of the Mayan calendar later this year- American political and governmental dysfunction is a more realistic doomsday scenario.

This article in the Washington Post lays it all out. As soon as the withering, vicious, nasty and exhausting national campaigns end this November- our government will have to figure out how to deal with the expiration of the Bush tax cuts on all Americans-middle class and rich alike. That’s also the time the temporary payroll tax cut expires.

Meantime, because of their inability to compromise on a deficit reduction package that was supposedly the solution to the debt ceiling fiasco of last year- a bunch of automatic budget cuts are scheduled to hit the Pentagon and the poor.

In a normal world where politicians put country ahead of party and ideology- the solutions would be easy. There would be compromise on the Bush tax cuts, extending them for middle class folks so as not to burden their finances in a still stubbornly recession-like economy. There would be consideration of allowing them to expire for the top earners. The increased revenue could then be used, in part, to help pay for the continuation of payroll tax relief that mostly middle income Americans have now come to depend on over the past couple of years and that add to the average consumer’s spending ability.

Normal politicians would then split the difference on cuts in Pentagon spending and entitlement programs. All in all, you would have actually engaged in a little budget discipline while still managing to keep some of the tax cut incentives necessary to incent spending and grow the economy.

But, of course, we do not have normal politicians in Washington right now. We have a system that is broken with massive ideological rifts preventing any semblance of compromise or rational governance.

And it’s too bad because there are positive signs out there for the American economy. Home builder sentiment is at its most positive point since the start of the recession. A new USA Today/Gallup poll finds 58% now optimistic about an economy recovery.

But the people who invest and spend on America look at governmental gridlock and see nothing but uncertainty ahead. Small businesses are going into their shells and slowing their pace of hiring. Defense contractors are freaking out and they’re slowing their hiring too. And God help you if you’re not one of the well-off in this society- because the concept of a safety net will be tattered beyond recognition as the government cuts Medicaid, food stamps, college loans- you name it.

If the President would like to get himself re-elected, you’d think he would address this tax and cut Armageddon that’s looming in November, because the very prospect of it could strangle our current anemic recovery and fatally injure his electoral chances. And if Republicans want to be taken seriously and not viewed as a party taken over by uncompromising ideological rigidity, you’d think they’d take seriously that their electoral success looks just as threatened as the President’s.

Some worry about Europe and whether countries like Greece and Italy will default. Some fear that date in December when the Mayan calendar supposedly ends. I laugh at those measly threats. Our biggest fear should be the American politician. If only they could offer leadership as well as they play politics.

  1. May 15, 2012 at 7:36 pm

    Well put.

  2. ejgnik
    May 16, 2012 at 2:31 am

    I agree with Rex. Well put.

    IMHO, sound monetary policy is the only answer. And, producing our own goods employs our own people. Worked fine up until GATT NAFTA, but spiraling downhill ever since, and neither party will admit it or try to fix it.

    It is as if some nefarious higher power has them by the fiscal short hairs and refuses to let them. A higher power that purposefully keeps the US in debt. The ‘drug dealer’ of false monetary policy who feeds the ‘addicts’ with their fix, keeps them slaves to wars and their constituents slaves to welfare nanny state.

    No answers from the two parties, just go back to the troff, get more free money, spend it, devalue it, create more debt and more inflation. Then stick their heads in the sand, and do it again. The devaluation and the debt is perpetual in this scenario, and the economy doesn’t ‘grow’, the only thing that does is a devalued money supply.

    Just another one of my biased and uniformed opinions. 🙂

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