Lots of people have been calling for new taxes and tax increases at the Federal, state and local levels. We also know that Washington will allow the Bush tax cuts to expire soon. So, taxes are going up. No doubt about it. But, as our taxes go up and up, will our deficits and debt decline? A brand new article in The Wall Street Journal sheds some light on this important topic that impacts both jobs and economic growth. Let’s talk more about it right now.
As first thought, it might seem to make sense that we need to increase taxes to cover Washington’s lavish spending spree. Remember all those costly stimulus bills that failed to bring down unemployment substantially? Unemployment is still around 9.9%. It’s actually 17.1% if you count all those people who have given up looking, or all those people who have settled for part-time work because they couldn’t find full-time work. Washington has spent lots of money following the discredited Keynesian policies of the past.
However, we now know that raising tax rates doesn’t necessarily raise tax revenues proportionately. Why? People look for tax loopholes, or they change behaviors, or they move to less taxing jurisdictions, or sometimes they simply cut back on working to avoid giving a larger share of their hard-earned income to the government. It’s human nature to want to keep your own money.
According to a new article in The Wall Street Journal this week, there is a practical limit to tax revenues. It’s about 18 to 19% of GDP. From 1929 – 2009, tax revenues have never exceeded 19% of GDP. What does that mean?
Even though tax rates are going up, tax revenues will hit a ceiling. We can then expect our debts and deficits will continue to increase. This means we can expect more and more unemployment, and less and less economic growth.
Increasing taxes, especially at this time, is simply the wrong fiscal policy to follow.
How do we get our deficits and debt under control? The answer is also simple. The government at all levels must CUT SPENDING and CUT TAX RATES.
By the way, cutting tax rates means more money for private sector investment in new businesses and new jobs. It also means economic growth and increasing GDP. That’s why government does better too! When GDP goes up, 19% of GDP results in increased tax revenues for the government.
Is Wealth Redistribution the Best Way to Get Excellent Health Care?
Dr. Berwick, the new interim apppointment to head the Centers for Medicare and Medicaid Services (CMS), is in the news a lot lately over his remark about “… any health-care funding plan that is just, equitable, civilized and humane must – must – redistribute wealth from the richer among us to the poorer and less fortunate.” Is wealth redistribution the best way to get excellent health care? Is forced socialized medicine for all Americans the way to help some Americans who need help with paying for health care? And … if Medicare is teetering on bankruptcy now with an unfunded liability of $38 Trillion, how can we expect the government to fund a complete takeover of the health care industry? Let’s talk about it now.
Here’s the bottom line. Is wealth redistribution the best way to get excellent health care? The answer is an emphatic NO! Here are a few reasons why the answer is NO!
1. Big government has a bad track record of running Medicare, Medicaid, and Social Security. There is no reason to believe ObamaCare will be run any better. We can expect higher costs for premiums and lower quality health care. Look at the Massachusett’s universal health care program to see how costs have skyrocketed.
2. Shortages and rationing are inevitable. Look to Britain and Canada to see how poorly rationing works. Look at all the examples of people denied the tests, treatments, and drugs that are vital to save lives.
3. Redistribution of wealth means burdenly tax-paying Americans with more taxes. Taxes are already too high and are killing jobs now. More taxes mean more job losses. Expect unemployment to increase dramatically as the Bush tax cuts expire in 2011 and many, new taxes kick in.
4. Redistribution of wealth also means economic growth will be curtailed. The whole economy will be hurt. Within the health care industry expect fewer innovations in drugs, medical devices, tests, and treatments.
5. ObamaCare is not needed. The problems with our pre-ObamaCare, health care system centered largely around an intricate and complex set of regulations, subsidies, and tax policies that hurt the system. About 50% of all health care expenditures were controlled by government and much of the rest was indirectly controlled by government. Government was the problem with our health care industry. More government control will only exacerbate the problems.
The list goes on.
Remember, it might take some time in some countries. But, socialism always leads to moral and economic bankruptcy.
Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.