Tax Increases (or Cuts) Not the Real Issue

by | Jul 14, 2012 | Taxation

According to the Congressional Budget Office’s figures, extending the Bush tax rates will only increase the deficit by 4 percent. Actually, critics of the way the CBO figures this out are saying the 4 percent number is too high. They charge that the CBO does not take into account any fiscal benefits from tax cuts. […]

According to the Congressional Budget Office’s figures, extending the Bush tax rates will only increase the deficit by 4 percent.

Actually, critics of the way the CBO figures this out are saying the 4 percent number is too high. They charge that the CBO does not take into account any fiscal benefits from tax cuts. For example, tax cuts can lead to more spending in the private economy, which in turn leads to more tax revenue. This probability is ignored by the CBO as well as most politicians, especially those who oppose tax cuts.

CBO data DO show that additional spending is three times more responsible for increases in the deficit than any tax reductions.

So the facts show us that when it comes to deficits, the overwhelming culprit is: Spending.

Politicians in Congress and the White House would have us believe that tax increases are the way to eliminate the deficit. They assume that tax increases will have no impact whatsoever on private spending, or on the private economy as a whole.

If Obama is reelected, then we’ll be able to put this to the test. Obama will definitely raise taxes. If nothing else, he’ll make sure that the Bush tax rates expire, which will in itself be a tax increase. They keep calling them “the Bush tax cuts,” but these rates have been in place for a decade. To let them expire is, in effect, to raise taxes.

Back in 2009, Speaker of the House Nancy Pelosi stated that a “value added tax,” a national sales tax, is on the table to help defray costs.

One way or another, that option is going to return to the table. Pelosi, like many politicians, does not think this would be a burden. However, to millions of people it would be. It would affect their spending. This would further restrain economic growth, causing even more unemployment and more economic damage than we have already experienced.

The problem with these career politicians whom we allow to run our lives is that they have no sense of reality. They cannot relate to people who live in the private economy, which are most people.

They don’t know what people of limited income are up against. If they did, they would not support things like value added taxes, or tax increases of any kind. They would be fighting furiously for significant cuts in taxes, along with significant cuts in spending.

They don’t understand what business owners, and even CEOs of large corporations, are up against. If they did, they would not support things like income tax and corporate tax increases.

They don’t care about what it’s like to confront a capital gains tax every time you make a profit, whether from selling real estate or anything else. They don’t know, and they don’t care. Yet we give them the keys to our economic well-being. In fact, we choose the least aware and the least knowledgeable about what it’s like to live in the private economy. Case in point? President Obama. The man has zero adult private sector experience, and clearly could not care less about the private sector. Even many of the Republicans on Capitol Hill have been in office longer than some of us have been alive.

Why do most of us elect people to office who will never understand or care about us? Because of false promises. The false promise is to be “taken care of.” It’s false, because these politicians cannot take care of anyone. The majority of them are only concerned with preserving and protecting their careers, their images, their “place in history,” in the case of a president such as Obama. They don’t care, even if they think they do, because they don’t know HOW to care. They have no clue of what most people, of any income, are up against in their daily lives.

These politicians do transfer wealth. They take from some, who are producing income, and give it to others. But this isn’t taking care of someone. If I hired a mob man to hold up my neighbor at gunpoint, take some of their money, I have not been made wealthier. I’m now beholden to the mob man. It’s the same principle with politicians. Once we become their constituents, and obtain benefits at the expense of others, then we’re beholden to them.

The CBO numbers are misleading, because they fail to acknowledge the impact that reducing taxes has on the economy. But even if you accept their own numbers, you can plainly see that increasing taxes will not assist with the deficit and the national debt.

Our elected leaders are showing us that they care about only one thing:

More spending. Most of these politicians, in both parties, have records of big spending. The longer they’re in Washington DC, the more they spend. The ones who support tax increases are doing so just to rationalize their spending habits. Many of the ones who claim to be against tax increases still support spending. An unprecedented national debt and peacetime deficit have no impact whatsoever on the central purpose of politicians today: Spend, spend and more spending.

Why do they spend? Because people demand it. Or, more precisely, enough people demand it. In a democracy, the people get the government that the majority demands and deserves. When the majority, in polls, state that they hate Congress, most of them should admit that they’re looking in a mirror.

Politicians appeal to the worst and weakest within you. The greatest vulnerability of most people is fear. Fear is usually irrational, or exaggerated. Most people are afraid of living in a private economy where the government, especially the federal government, does not intervene, other than in cases of force or fraud. As a result, we get continuing high costs of government represented by high taxes and even higher deficits. Most people don’t like the debt and deficits created by all this spending, but they’re not about to give in on any spending cuts which might affect them personally.

That’s where we’re stuck. A change of control in Congress cannot by itself alter this. Nor will a change in administration, by itself, be enough. Obama promised to “transform” America, but there was nothing to transform America into, other than more spending and government control (which he has decisively done). The only transformation left for America is the one that a majority do not seem to consider: A totally free market economy, with no government intervention outside of violent and fraudulent criminals. This would involve a complete U-turn, a total reversal in policy of the last 75 years or more.

America today resembles a drunk, a drug addict or a compulsive gambler.

Our current politicians represent the final spree of a reckless and out-of-control addict. Soon we’ll either “hit bottom” and begin that course reversal, or be finished for good. Before long, we’ll know.

Dr. Michael Hurd is a psychotherapist, columnist and author of "Bad Therapy, Good Therapy (And How to Tell the Difference)" and "Grow Up America!" Visit his website at:

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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