Budget equation has two sides
By David Post
A funny thing happened on ourway to having a second, and then a third, child. Our costs went up.
When we pondered our increasing costs, our friends had different reactions.
Some said, “Well, duh!! Of course.”
Others said, “Just cut your costs.”
How could we stretch our diapers and food for one child to cover two more children? An even greater challenge was how to make our college savings plan for our first child also cover the costs for the next two, especially with college expenses increasing more than inflation.
What could we do? Not only were our costs up, but our income declined when my wife stopped working. Clearly, education was the most important investment we could make in our children, both to improve their lives and perhaps to assure our own futures. Borrowing to cover their educations was one option. Telling them to figure it out on their own was another option. Not educating them was another.
This mentality has created a logjam in Congress. The new Congress surfed in on the “cut spending” wave. When many arrived, the most powerful budget person in the country, Grover Norquist (who?), pressured them to take a “no tax increase” pledge. The penalty for not signing? Find a new job in the next election cycle.
A budget is composed of both income and expenses. How does any family or nation responsibly take a pledge to ignore the income side of that equation?
As a nation, we know costs are going to rise. Not only is the population growing but 75 million baby boomers are on the verge of retirement and expecting Social Security and medical benefits.
These numbers are staggering, and something is going to give whether we like it or not. Even so, many in Congress believe that rising obligations — if they are, in fact, obligations — should be covered with a static amount of revenue.
Much to his credit, Rep. Paul Ryan (R-Wisc.), chairman of the House Budget Committee, has addressed the inevitability of the demographics changes on the horizon. He’s no Robin Hood, since his idea is to take from the poor and give to the rich, but at least he began the debate.
President Reagan — the Great Tax Cutter — cut individual income taxes from an average of 8.5 percent to 8.4 percent of GDP. (Of course, we need to sneak into these parentheses to recall that after his big tax cut led to increased deficits, he agreed to a dozen tax increases.) The Clinton tax increases raised individual taxes to 8.9 percent of GDP and generated four consecutive budget surpluses for the first time since the 1920s. President Bush cut individual taxes to 7.8 percent of GDP. With the economy mired in its deepest downturn since the Great Depression, individual taxes have declined to 6.2 percent.
Grover Norquist wants even lower taxes. Most of Congress agrees. They want their jobs more than they want to make tough choices.
Is the U.S. tax burden too high? The Organization for Economic Co-operation and Development, an international organization committed to democracy and free markets, has no political agenda. It reports that the average tax burden of its countries is 34 percent of GDP. The U.S. total tax burden is 24 percent. More than 30 countries expect more from their citizens. And none of them carry the cost of defending the planet.
Congress and the White House agree on two budget issues. First, tax cuts are easy, simply a question of who gets how much. Second, they have literally agreed to kick the can down the road for another two years until the next election.
Democracy is messy. It’s messy now, and it’s going to be messy in two years. Our founding fathers gave us a wonderful gift, our Constitution, and with it, they gave us the best advice most parents ever give their children: Figure it out. Compromise. The political center will shift a little this way or that, but neither party is going to gain absolute control over both the White House and the Congress.
Mrs. Dunham, my kindergarten teacher, could fix this mess. She’d go to Washington, sit Congress in a circle, tell them to drink their milk, read a story and say, “OK, boys and girls, let’s figure this out together.” Would she say, “This is too difficult. Another teacher can help you when you’re in the second grade.” Never.
It’s funny how so many answers lie with our children.
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David Post lives in Salisbury and is one of the owners of MedExpress Pharmacy and Salisbury Pharmacy.