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Fletcher: More signs we need change

February 21, 2012
Stephen Fletcher , The Alpena News

Finally, a politician appears on the scene who you can vote for. He's taken a firm hand with the press, the House of Representatives, the Senate, the presidency and all the time appears to be placid and in charge.

He pretty much "wowed" everyone he ran into.

It's just unfortunate that he's already got a job as deputy premier of China. One has to wonder what he thought of the folks he met.

To get back to our side of the Pacific, President Barack Obama last week presented his budget to the country and a lot of folks said it wasn't so much a budget as a political statement to help shape the discussion on the presidential campaign. Rather than rehash the numbers, let's just look at the years within this 10-year plan that affect the deficit.

It turns out this document calls for not much change from the previous budgets. The really big promised savings, if any, will come in the last five years or longer after the next president is out of office. Other than the $120 billion each year "saved" by the select committee last summer, nothing happens for five years. Oh, I forgot - tax the middle class, replace the taxes for the lower brackets removed by the Bush tax cuts and raise the death taxes and capital gains. This is strictly Keynesian thinking, but other than that, nothing happens.

FDR did the same thing during his economic depression, then rescinded those changes after a year or two of failed results. Holy Smokes!

Let's go over it again. Saving equals investment (assuming you might know what the tax rates looked like). Government does not "invest" in anything, it merely transfers wealth, some of which is used for the common good. The common good means for all of us, not just for the cronies or the lobbyists.

The economy is growing slowly with continual shedding of public sector jobs and larger additions to the private sector labor force than are being lost in the public sector.

The government's share of GDP has popped up to 22-24 percent from 16-18 percent and our debt is creeping into the same range as that of Greece, Italy, Portugal, Ireland, and Spain. The Senate hasn't passed a budget for more than 1,000 days and, although there are enough Democrat votes to pass a budget, Harry Reid says the Republicans are blocking the vote that requires 50 percent majority to pass.

We covered all of the above in previous columns. My point is nothing of substance is going to come out of Washington until after the election because everyone is so entrenched in their own political position, thus compromise is impossible. The deplorable consequence will be that recovery is now put off at least nine more months.

About 60 percent of federal expenditures are for Social Security, Medicare, and Medicaid. I'm eligible for all three right now. I'm not worried about those of us who are receiving the benefits because no politician is going to take those benefits away from us.

You young punks, that's anyone younger than 65 and 10 months, are the oxen who are going to be gored. If you wait for the fix of these systems until a later date, the medicine has to be stronger to cure the malady. You are the guys who will work longer or pay more. The longer you wait to do the fix, the longer until you retire or the more you pay.

The politicians are saying the 2 percent decease in the employees contribution may become permanent, which means the non-existent Social Security Trust Fund will deplete even faster. The politicians are saying any shortfall can just come out of the general fund. Well, not really, or at least not exactly. Since we are in a deficit situation the general fund will pay the over-runs of distributions over collections, but the Feds will have to borrow the money to fund Social Entitlements.

Last year, I thought the tea party folks were a little extreme in wanting to toss everybody out. Now I'm not too sure. I like the frustration exhibited by some of the newly elected representatives. I share their frustration. I'd like them to stay in office. The guys and gals holding elective office who are trying to blow smoke the wrong way into what is essentially a one-way passage might be better out of office so they can study modern economic theory at their leisure.

When the tax rates were over 70 percent there were wealthy people, and when the tax rates were 15 percent for some, there were still wealthy people. You don't suppose that many of those wealthy people will just "game" the tax code after the rates increase no matter what the rates are, and still be wealthy do you? Man, if that happens, I've lost faith in the Occupiers.

Stephen Fletcher was graduated decades ago from Cornell University with an A.B. in Economics and from Michigan State University with an M.B.A. He has lived and worked in the decades from graduation until now in the Alpena area. He thinks that Economics is fun and interesting.

 
 

 

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