AN ECONOMIC TIME BOMB

Weather-wise it has been a very cold January, and politically the Scott Brown Senate victory has chilled Washington even further Democrats.  But if the Democratic economic policies continue nevertheless, this year will be nothing like the bitter economic January we will be living in a year from now, says Pete du Pont, Chairman of the National Center for Policy Analysis and a former Governor of Delaware.

Government spending has already hugely increased, and so has the size and scope of government, but next year there will also be substantial tax increases for a great many Americans.  The first reason will be the expiration of the Bush tax cuts, explains du Pont:

• The top personal income tax rate will rise next Jan. 1 to 39.6%  from 35%, a hike of nearly one-eighth.
• The dividend tax rate will rise to 39.6%, more than 2½ times the current 15%.
• And the capital gains tax rate will rise by a third, to 20% from 15%.
• If the House health care bill had passed, all three of these rates would have risen to 45%.

The estate tax, which fell to zero this year under the Bush tax cuts, will return in 2011 — or sooner, if Congress acts to restore it.  Another likely tax increase will be on the income of private equity and hedge-fund managers, from the capital gains rate of 15 percent to the new higher income tax rates.  It has already been passed by the House and is supported by the Obama administration, as is an additional 10-year, $90 billion tax on banks aimed at “rolling back bonuses for top earners.”  It would affect some 50 banks, insurance companies, and large broker-dealers.

Meanwhile a number of last year’s tax deductions have disappeared due to the failure of Congress to extend them into this year, says du Pont:

• The tax deduction for state and local sales taxes is one.
• The deduction for college tuition and fees is another.
• The 50% write-off for small businesses for capital purchases–equipment, machinery or building a new plant–has disappeared as well, which will have a negative effect upon the construction of new business operation facilities.

Source: Pete du Pont, “An Economic Time Bomb,” Online Journal, January 26, 2010.

(Editor’s Note: In a faltering economy, with 26 million Americans out of work, we simply CANNOT impose a greater burden on families.  It is impossible to tax and spend our way into prosperity–Dan Blanchard)

For text:

http://online.wsj.com/article/SB10001424052748704375604575023413871397430.html

“To say that voters were not enamored with Republican spending during the Bush administration is an understatement. In a relatively short time the Obama administration, along with a Democratic Congress, has made Bush look like a miser. They have expanded the federal budget by $1 trillion; tripled the deficit; is on track to add $1 trillion per year to the national debt for the foreseeable future; accelerated spending on social entitlement programs and proposed another trillion dollar takeover of the healthcare industry all the while holding a cap and trade tax in its hip pocket. “We are fed up!” is the message voters delivered last November and again in Massachusetts on Tuesday. To put it plainly, Americans are looking for responsible government.”  (Joseph Phillips: full article linked below)

http://townhall.com/columnists/JosephCPhillips/2010/01/25/the_wisdom_of_massachusetts_voters

There is an issue that affects everyone equally and profoundly so.  Whether you are “rich” or “poor” or “middle class” (whatever that means these days.)   It is a frightening reality that doesn’t care if your are black or white or Hispanic.   It touches your life whether you are married or single.  It offers no mercy to men or women.   Not even our children.   Especially not to our children.   It is a multi-tentacled monster with a ravenous and, it seems, an unquenchable appetite.  And we feed it.  Willingly.  Every day.   It is simply–DEBT.

It is THIS gargantuan issue that makes so much of political arguments akin to rearranging the deck furniture on the Titanic so it looks its very best even as it is being submerged.   And it is neither a Democratic or Republican issue.  We’re debating about chairs and umbrellas even as we’re sinking??  Yep.

We’ve spent so many months addressing the question of HOW to accomplish a government mandated healthcare reform package that no one is asking IF we should do it or HOW we would even accomplish it.     America can’t afford it.  She is broke.  As a nation, we have over $107 TRILLION of unfunded liabilities.  (See number on the linked Debt Clock, lower right hand corner.)   What does that mean, you ask?   Simply that the US cannot even afford to do what it’s ALREADY promised to do: for Social Security, Medicare, Medicaid, the Prescription Drug Program (ill-advisedly signed by George W. Bush)  and  other big-price-tag “entitlement” programs.  This is the real issue and the one that transcends and trumps all others.

It’s not unlike the family who discovers it’s $2000 in the red for the umpteenth straight month and decides it needs to book an expensive vacation, buy a new car and purchase a large HD TV as a “stimulus” to turn their “economy” around even as they’re about to lose their house!   And we’re not alarmed?  And this is not just ALL OVER  the major news feeds?

This is the real issue and the one that transcends and trumps all others.   Check it out for yourself.   (It’s the Congressional Budget Office’s own “Clock”)…

http://www.usdebtclock.org/

Our nation’s fourth President James Madison, writing in “The Federalist Papers” (“Federalist 51” to be precise) said:

“If men were angels, no government would be necessary.  If angels were to govern men, neither external nor internal controls on government would be necessary.  In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government……”

This is why there must be “separation of powers,” a sensible and consistent balance between the Legislative branch (Congress), the Executive branch (the Presidency) and the Judicial branch (the courts, especially federal courts) and why those powers must be limited.   The intent of the founders and framers was that the power remain with the People.

FIVE HEALTH CARE REFORM SOLUTIONS THAT MAKE SENSE

Massachusetts, the bluest of states in our union, stunned the nation on Tuesday when it voted to end Washington’s unbridled spending and plan for government-run health care.  Americans still want health care reform, but they are looking for clear, patient-centered, fiscally responsible solutions.  There’s a way to make this work, says Dr. C.L. Gray, president of Physicians for Reform.

Sell insurance across state lines:

• State mandates drive up costs; health insurance for a 25-year-old male in New Jersey costs nearly six times what it does in Kentucky, largely because of state mandates.
• Allowing businesses to purchase insurance across state lines empowers consumers, not Washington, and does not cost a dime.

Let individuals purchase health insurance with pre-tax dollars:

• Insurance companies serve businesses, not patients; businesses purchase employee health insurance with pre-tax dollars while individuals purchase insurance with post-tax dollars making their insurance far more expensive.
• This reform lets patients buy products that meet their needs and makes insurers more accountable to patients.

Encourage Health Care Savings Accounts (HSAs):

• HSAs reduce health care costs without rationing (cutting Medicare); they also let patients control their own money, decreasing health care spending by 13 percent.
• During 2005 and 2006, traditional insurance rose 7.3 percent annually while lower cost / higher deductable plans combined with HSAs rose only 2.7 percent annually.

End abusive medical litigation:

• Frivolous litigation drives physicians out of medicine; bringing tens of millions of new patients into the system requires more physicians, not fewer.
• Frivolous litigation reform lowers cost and improves access to care; Americans spend approximately $124 billion every year because physicians practice defensive medicine.

Cover the uninsured:

• We can insure the uninsured without expanding American debt; approximately 25 percent of patients who visit the emergency rooms do not have health care coverage.
• A system of tax credits can help the uninsured purchase coverage; this would cost approximately $80 billion annually.

Source: Dr. C.L. Gray, “Five Health Care Reform Solutions That Make Sense,” Fox News, January 21, 2010.

So when Washington says, “Open your mouth and say ‘Ahhhh.’  Just trust us.”  They can keep their “medicine.”