Sorry for the lack of optimism in the new year, but the basically the average American was not the winner in the budget deal passed by Congress this week. Yes, we avoided the fiscal cliff, but we continued the direction of more government spending and bigger government.
Bloomberg reported yesterday that the bill the Senate passed would raise taxes on 77 percent of American households. The Hill reported yesterday that the bill the Senate passed will add roughly $4 trillion to the deficit when compared to current law, according to new numbers from the Congressional Budget Office (CBO).
On December 31st, Breitbart.com reported that the Congressional Budget Office has determined that the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.
So where do we go from here? I guess it depends on what America wants to be. When you look at the history of America, you realize that America was settled by people who were not content to stay where they were in their social or religious situations. The Pilgrims came here to find a place to practice their religion without government interference, the Irish fled the potato famine and the harsh conditions imposed by their British lords, and many Jews fled the pogroms of Russia and European countries. All of these people (particularly early in our history) took risks in coming here. Americans later left the comfort of their eastern homes to settle the western frontier. Historically, we have been a people with a work ethic who expect to be rewarded for our efforts. If government spending and programs continue at their current rate of growth, will we be able to maintain that spirit of adventure, risk taking and achievement or will it be wiped out by government programs? Recently I was talking to a friend who is a retired teacher, and she shared a story with me about an experience she had while working on her graduate degree. One of the students in the graduate program was the third generation of his family to be on welfare. Obviously, one of his goals in getting an education was to break that cycle. That is wonderful. However, it was less wonderful when he stated that if he couldn’t get the job he wanted after completing the program, he would simply go back on welfare because that paid pretty well. That is the danger we face with an ever-expanding government.
With the current President and current Congress, our chances of changing our current direction toward bigger government and increased taxes is very small. Conservatives are a very small part of Congress, and frankly, the Republican establishment is not a whole lot different from the Democrats when it comes to big government. The only real hope to turn this country around is the mid-term elections in 2014. Otherwise, we can expect to become Greece very soon.
One (very unpopular) solution to our current fiscal problem would be to make sure that every person in America pays taxes. Right now approximately 50 percent of Americans pay no income tax. If all Americans paid income taxes, they might be more inclined to elect people who were not likely to increase them!
Just one other note on the general state of affairs. As the third Quantitative Easing (QE3) begins to take effect, expect gasoline prices to rise. The current price for gasoline that we are paying at the pump is more related to the sinking value of the U. S. dollar than it is the price of oil. Unfortunately, unless economic policy in Washington changes, that will continue to be the case.