Monday, March 12, 2012

The Rich, The Poor & Deficit Reduction

Every politician claims to love the poor, the downtrodden, the unemployed. Yet, the same politicians vote to cut the deficit, hurting those poor he/she loves so much. Sadly, the poor buy into it. Both parties claim that reducing the federal deficit will reduce unemployment and benefit the working class and the poor.

Exactly how a reduction in net federal dollars flowing into the economy will stimulate employment and benefit the working class, never is explained, because there is no explanation. It is a bogus argument.To reduce the deficit requires taxes to be increased or federal spending to be reduced.

The Democrats want to reduce the deficit by increasing taxes on the “wealthy.”
The Tea Partiers/Republicans want to cut the deficit through federal spending reductions.

Functionally, there is no difference between a tax increase and a spending reduction; both reduce the amount of money being added to the economy.Traditionally, the Republicans have favored cutting taxes, an act that benefits economic growth. Democrats traditionally have wanted to spend more, which also benefits economic growth. Unfortunately, the Tea Party, which is in my opinion is a outgrowth of President Reagan’s memorable statement, “. . . government is the problem,” has taken over the Republican Party, who now will do and say anything to get into power. This has dragged in the Democrats, who will do and say anything to stay in power, so both parties now are preaching an anti growth line, being led by a group of economic know-nothings.

Extreme views often gain favor during difficult times, when people are desperate for a solution, and in this case, the extreme views are supported by the wealthy. Note how people like Bill Gates and Warren Buffet have made statements actually supporting a tax increase! Why do rich people want their taxes raised? Not out of generosity. Read on .Because a growing economy requires a growing supply of money, a tax increase and/or a spending reduction reduce economic growth

And no matter how it’s done, deficit reduction hurts the lower incomes most. Consider a tax increase on the wealthiest. What does it accomplish? It reduces the amount of money in the economy. A Monetarily Sovereign nation does not spend tax money. It has no need to. The spending itself creates money. So what happens to tax money? It leaves the economy and is destroyed. It simply ceases to exist. History shows that every depression and most recessions not only have been caused by reductions in the money supply, but even by reductions in money supply growth. Who suffers most during recessions and depressions – the wealthiest or the poorest? Right, the poorest. Although tax increases will force the wealthiest to pay more taxes, that will not affect their life styles. They’ll find more tax “loopholes.” They’ll get by on two cars rather than three (Dealerships may fire some working salespeople), and the remodeling of the 2nd home may be delayed a year (Some tradespeople will lose their jobs). But life will go on for the wealthy. Not so for the less wealthy who, during a recession, may become unemployed, lose their housing, spend less and cancel plans for children’s college

In short, all taxes and tax increases hurt everyone in the economy — they are recessionary — but they hurt the poor more than the wealthy, so by comparison, the wealthy become wealthier. Tax increases make the wealth gap grow.Now consider a federal spending reduction. Medicare and Social Security are the biggest targets, and who relies most on these federal programs. If Medicare and Social Security are cut, the rich will hardly notice. Warren Buffet probably doesn’t even know whether he receives Medicare and Social Security benefits.

Financially, it is meaningless to him. Cutting social programs hurts the poor more than the rich, increasing the gap between rich and poor. Or, we could cut military spending. This would cut profits and jobs from all those industries that sell to the U.S. military, and it would cut the number of salaried service people. Cutting military programs hurts the poor more than the rich, increasing the gap between rich and poor.

No comments:

This is a Rural Blog that provides views & insights from a Conservative Georgia Democrat

Blog Archive