Two Budgets

Last week the Congress reached an agreement on a short term spending resolution that supposedly cut around $40b from the budget.  What I find humorous is that our representatives aren't hiding in shame over their efforts.  That is because in the time it took them to reach the agreement, we had spent more in interest on the national debt that they supposedly saved.  They continue to nibble around the edges of the problem instead of tackling it.  Nero fiddles while Rome burns.

Now the Congress is taking up the larger issue of increasing the debt ceiling and passing next year's budget.  Those fights will make last week's threat of a government shut down look like a small skirmish.  Raising the debt ceiling will get done since it is the only way Congress can continue to spend money, and America cannot risk defaulting on our debts.  The battle royale will be on next year's budget.  There will be 2 budgets submitted for debate.

The first budget has already been released by Rep. Paul Ryan.  His budget tackles entitlements through various ways, such as block granting funds to the states, and privatizing certain responsibilities.  His budget also provides some tax reduction intended to stimulate economic growth.  Since Ryan's budget focuses on spending, there is a lot of pain in it.  Liberals have already, and will continue to criticize the budget as friendly to business and hurtful to the middle and lower income citizens.  It is probably a fair criticism.  Those who benefit from government spending the most will feel the most pain.  Those who generate the most government revenue will be spared much of the pain.

Within the next few days, a liberal budget will be released.  That budget will increase taxes, especially on corporations and the wealthy.  That budget will not seriously address entitlement spending.  That budget will be an easy sell to the American public who rarely look beyond the surface.  The sound bites will sound good, and their budget will become the most popular.  But it will not solve our debt crisis.  Why?  The simple answer is that we don't have a tax rate problem, we do have a spending problem, and the liberals will never agree on reduced spending.  If the next budget were to increase the tax rate to 100% for everyone earning >$250k a year, all fortune 500 companies, and confiscate the assets of every American billionaire, they could not fund the federal government for a single year. 

Any American who supports increasing the corprate tax rate is deluded.  Increasing that tax only increases the cost of doing business for the corporation.  As with any cost of doing business, it is passed on through higher prices for their goods and services.  Does anyone really believe a corporation that eats the higher tax rate will be in business very long?  Increasing the corporate tax rate increases cost to all Americans.  It is simply a hidden tax that makes for a good sound bite.

Any budget that does not aggressively attack entitlement spending is simply smoke and mirrors that will not solve the problem - SPENDING.