President Barack Obama recently proposed a new budget of $3.8 trillion, which includes tax increases as well as additional economic stimulus money. The Administration argues that this budget proposal will reduce the deficit by $4 trillion along with starting to put the nation on a path of fiscal restoration, while continuing the economic recovery.
President Obama’s budget largely reflects his class warfare view of taxation that the wealthy should “pay their fair share” as symbolized by the “Buffet Rule,” but it is still unclear what percentage of taxation is considered a “fair share.” In a February 14, 2012 editorial, Investor’s Business Daily noted that “the proposed new ‘Buffet Tax’ will hit wealthy Americans with a marginal tax rate of 90 percent or higher.” “Tax wise, this is a disastrous budget — one that sets the U.S. on a course for a decade of stagnation, meager job gains, and little or no real income growth,” argued Investor’s Business Daily.
The national debt currently stands at over $15 trillion — and the nation is currently running trillion dollar deficits. Although it has been over 1,000 days since the Congress has passed a budget, it is uncertain that a compromise will occur over a budget because of the stark philosophical differences between Republicans and President Obama and the Democrats. Nevertheless, policymakers must seriously address the fiscal crisis that is facing the nation. The economy is still in a fragile recovery and the economic storm clouds over Europe may cross the Atlantic to create another recession. In order to resolve the fiscal crisis policymakers must reduce spending, and that is the only solution to avoid further economic decline.
The economic recovery of the nation will not be helped by the continued policies of the current Administration. The level of debt being accumulated by the United States must be controlled and entitlement programs must be reformed in order to not only preserve them, but also avoid a European-style social welfare collapse.
It is clear that in order to not only revive the national economy, but also to avoid a disastrous fiscal crisis, policymakers will have to cut spending. The problem is a spending problem and not a revenue problem.
John Hendrickson is a Research Analyst with Public Interest Institute in Mt. Pleasant, IA.