Living in Fantasy Land

I have mentioned this problem previously, but this article illustrates better than I could explain it. The article is based on a Zogby poll that addresses the budget of the Federal Government and the next president. Specifically, it addresses how the budget will be balanced. Guess what the people want? Their programs to stay the same and no taxes increased. While I can certainly understand the sentiment, it is a real problem.

This leads me to the thing I think is most important for Democrats in the future, the debate. Right now, the debate, the conversation, is dominated by Republican themes. While reality has intruded on their theories, the debate is still one that the other party designed. The real question for the future is how do we change the nature of the debate? We may have to suffer times of unpopularity to do the right thing. We must be aggressive in defending our positions and aggressive about attacking wrong-headed Republican policies. We must lead the country.

In Defense of Harry Mitchell...

Robert Robb in the Arizona Republic wrote a little blurb about Mitchell's proposal on capital gains and the estate tax. I wrote about it here. He is critical of the expiration of the Bush tax cuts and the need for Harry Mitchell and Congress to off set them.

The bill also illustrates the foolishness of the budget off-set rules that Mitchell has supported.In reality, the Mitchell-Shays bill wouldn't reduce the federal government's current revenues much, if at all. However, since big increases in both capital gains and estate taxes are scheduled for 2011, under the current rules, the bill would require approximately $330 billion in other tax increases or spending decreases over 10 years, to offset its phantom "cost."

Robb tries to make it look like requiring offsets is a bad idea. It is not. Very simply the rules require new programs or new tax cuts to pay for themselves with spending cuts or tax increases in other areas. Only a tax cut and spend Republican could view that as a bad idea.

But let's get down to the real point, who created the situation where these tax cuts would expire? Why were they setup this way? The answer is easy, the Bush Administration did not want to admit the real long-term cost of their tax cuts, so devised the clever scheme to have them expire in ten years. That way they could set the costs much lower. Sure is it bad policy and disingenuous, but that is how the current batch of Republicans operate. Not only is it bad for our budget, but it is damaging to business. Most businesses that benefited from the cuts, I am sure appreciated the largess, but the cost of shifting regulation can be expensive. Continuity of regulation can be almost as economically beneficial as a tax cut.

So, once again Mr. Robb you only have yourself and your fellow tax cut and spend Republicans to explain for this bad policy. Not only did they not think through how to implement their policy from a budget standpoint, they also over-reached and will lose most of the gains that they desired.

Mitchell Trying to Get Reelected

Harry Mitchell is in a tough district and is clearly trying to get reelected. The East Vally Tribune has an article about the bill the recently elected Democratic Congressman from Arizona has proposed.

I think in someways it is a good proposal. I have wondered for a while why the estate tax is not graduated. There are two problem that I see, one the proposal is DOA and two, we need the money. I know it is not popular to talk about, but the Federal Government is headed towards bankruptcy. Our third largest expenditure is the interest on the federal debt around $300 Billion a year. The Bush administration has made this problem much worse with their tax-cut and spend policies. In the end, we may not like tax increases and probable cuts in services, but they are better than insolvency.

The United States public debt, commonly called the national debt, gross federal debt or U.S. government debt, is the amount of money owed by the United States federal government to creditors who hold U.S. Debt Instruments. As of the end of 2006, the total U.S. federal public debt was $4.9 trillion. This does not include the money owed by states, corporations, or individuals, nor does it include the money owed to Social Security beneficiaries in the future. If intragovernment debt obligations are included, the debt figure rises to $8.7 trillion. If unfunded future obligations are added (i.e. Medicare and Social Security) this figure rises dramatically to a total of $59.1 Trillion [1].
In 2005 the public debt was 64.7% of GDP. According to the CIA's World Factbook, this meant that the U.S. public debt was the 35th largest in the world by percentage of GDP.[2] [3]

http://en.wikipedia.org/wiki/United_States_public_debt

This is the issue that keeps me up at night...

Sometimes I just want to throw up my hands...

This article was on MSN yesterday and made me want to pull my hair out. It basically goes into why the war in Iraq is not all that expensive because it is a smaller portion of our GDP than previous wars. I am still amazed that this crazy thinking is tolerated. I don't understand the disconnect between the out of control federal deficit and debt and how bad it is for the future of the country. I believe the total debt is about 6 trillion. I also believe that interest is now our third largest expense (around $300 billion a year). In a vacuum, that maybe doable debt-wise, but then add the borrowing from Social Security (even in the our best balanced budget year under Clinton, we borrowed $100 billion from SS) , Medicare, a trade deficit and the Bush tax cuts. I know people think I am wearing a tin-foil hat when I say that the US maybe headed towards insolvency, but I do think that is the reality.

We are quite simply living beyond our means. What is worse is that we are not going into debt to invest in research, education, restructuring our economy to deal with outsourcing and globalization which would likely payoff over the long-term. No, we are giving rich people tax cuts, paying for a war and spending big on corporate welfare. It is the equivalent of buying round after round of drinks for your friends when you got your first credit card in college. It seems like fun at the time, but when the bill comes you are shocked and cannot even remember how you spent so much. I am not normally an alarmist, but I think the financial state of our country is the biggest issue facing us.