Category Archives: federal deficit

Austerity Measures Take Many Forms

Paul Krugman shouldn’t feel it is necessary for him to keep proving that austerity measures are harmfull to the economy. Only the fools, including many conservative Republicans, disagree.
Austerity measures take many forms. The following are all austerity measures:
* the Sequester
* the American Taxpayer Relief Act of 2012
* reduced military and NASA spending
* reduced government employment
* reduced state government spending
The Obama administration which blames the Republicans for everything wrong in the economy, is responsible for the first four and the failure of its stimulus programs is in large part responsible for the fifth.
President Obama proposed the Sequester as a political trick to get the Republicans to extend all of his tax and spending programs until after the presidential election. It backfired on him when the Republicans refused to repeal it after the election and despite his demagoguery and gamesmanship by closing the White House to students and impeding air transportation the public blames him equally for the problems sequestration is causing.
It is promoting congressional gridlock.
The American Taxpayer Relief Act of 2012 raised taxes on the upper middle class in most large cities and is reducing their spending. Its two percent increase in withholding taxes was necessary to preserve the integrity of Social Security. Withholding taxes were reduced two years earllier to grow the economy and promote the president’s re-election. He should have sought a different stimulus at that time. Adding reduced deductions to the tax bill only further increased middle class taxes and will reduce their spending.
Reduced military and NASA spending was planned by the Obama administration independently of the Sequester. It has been enhanced by the Sequester. It has taken many forms and has already cost tens of thousands of jobs and left many returning veterans unemployed.
Postal worker layoffs, failing to find jobs for returning veterans who joined the unemployment rolls and excessively reducing government employee workdays to cause maximum inconvenience to the public to try to get them to blame the Republicans are further austerity measures. The Obama administration could have dealt with the Sequester’s two percent spending reduction in a less disruptive way. He turned down Republican offers to give him flexibility.
Reduced state government spending is being caused by requirements that states balance their budgets. The failure of the Obama administration stimulus programs to promote good tax paying jobs has limited the recovery in state revenues.
Furthermore, Obamacare is causing a response similar to an austerity measure. Businessess are holding back capital spending and hiring and looking for ways to avoid paying increased medial care costs. Many individuals fear loss of their jobs or their medical insurance and are afraid to spend.

Building Bridges Creates Tax Paying Jobs

Paul Krugman is clearly correct that stimulus spending and not austerity measures will return our country to prosperity. However, stimulus spending on food stamps, while it improves the lives of the recipients, merely grows the GDP without any meaningful multiplier effect and generates little tax revenue. Spending to build bridges and improve highways creates meaningful tax paying jobs and has a substantial multiplier effect which will grow the GDP and reduce the federal deficit.

Much too small a portion of the Obama stimulus spending has been spent on creating good taxpaying jobs. The majority of the jobs created generated negative federal income taxes. It is no surprise that we have slow growth and excessive deficits.

Financing the purchase of Jump Start America Bonds

At today’s interest rates America’s corporations can raise billions of dollars from the sale of bonds and use the proceeds at favorable interest rate spreads to purchase state issued Jump Start America Bonds to finance major transportation construction projects.

To open the door for the sale of Jump Start America Bonds, Congress should modify our federal corporate income tax laws to permit the use of Jump start America Bonds, valued at par plus accrued interest, to be used, commencing five years after issuance, in payment of federal corporate income tax obligations. This will eliminate the interest rate risk on the sale of Jump Start America Bonds.

Perpetuating American Greatness After the Fiscal Cliff

March 10, 2013

President Obama insists on a balanced approach to raise taxes and cut spending to reduce the federal deficit. Both raising taxes and reducing spending will hurt our economy. He doesn’t really want to cut spending. He says he is willing to address entitlement problems (which were made worse by Obamacare), but he offers only vague solutions which fail to address the real issues of excessive and growing Medicaid, Medicare and now Obamacare expenses.  Squeezing drug suppliers, doctors, hospitals and insurers to reduce medical care costs is going to reduce the quality and availability of care.

The Republicans were bludgeoned by the president’s misleading demagoguery into raising taxes which they didn’t want to do. They want to cut government spending to reduce the National Debt, but austerity measures are likely to cause a recession and increase, not decrease, the federal deficit. They are using the sequester to cut the rate of growth of government spending. The sequester has been politically successful for the Republicans by exposing President Obama’s demagoguery and scare tactics. However, it requires across the board cuts and, even if modified, will reduce defense spending and result in job losses (as all federal spending cuts do). President Obama will blame everything which may go wrong in our country during the next four years of his presidency on the Republicans even if he has throughout his presidency been weakening our defense and most of the job losses will result from the 2013 income tax increases and the adoption of Obamacare and Dodd-Frank.

Neither party has proposed a plan to promote job creation and economic growth which will come to the aid of the forgotten middle class, increase tax revenues and reduce the federal deficit. Our politicians do not seem to understand that the goal should be to grow the GDP at a faster rate than the the rate of growth of the national debt.

My book entitled Perpetuating Greatness After The Fiscal Cliff examines the economic events after the turn of the century leading to the fiscal cliff and the myriad of problems facing our economy resulting in large part from government failures. It suggests solutions to our economic problems including:

1. Proposed corporate income tax and estate tax law changes to encourage our cash rich corporations and individuals to step up and invest in state transportation infrastructure construction projects to create millions of jobs;

2. A federal mortgage law to eliminate underwater mortgages by enabling homeowners to obtain restructured mortgages and reduce the aggregate of their home mortgages to the fair market value of their home;

3. Ways to modify our entitlements to make them affordable and available to provide quality health care.

4. Modification of the federal income and estate tax laws (including the 2013 tax law changes) to make them fair and to close loopholes to raise revenues without harming economic growth;

5. Changing Dodd-Frank to strengthen bank regulation while eliminating certain provisions which are unnecessarily restricting economic growth;

6. Changing securities regulation to prevent current manipulative practices and the next stock market crash by restricting manipulative short selling practices;

7. limiting interest rates on consumer credit by the adoption of a national usury law;