Talk of tax increaes ramp up, etc

A few months ago, when VUI noted how the federal deficit and spending were getting hitorically out of hand, we noted that at some point, Democrats would start talking tax increases, or "revenue enhancements" as some big government types like to put such things.

Eight months into the Obama Administration, and such tax increase ideas are bouncing all over the Democratic corridors of Capital Hill. First, there is United States Senate Armed Services Chairman Carl Levin, who stated to Bloomberg, "additional income tax to the upper brackets, folks earning more than $200,000 or $250,000 a year, could fund more troops." Levin was talking about the President's long awaited announcement to increase the number of American troops in Afghanistan.

Levin's tax trial ballon rises in the midst of the "revenue enhancements" found in the so called health care reform package making its way through Congress. Such "revenue enhancements" include taxing people on having better than average health insurance coverage and fining people for not paying insurance companies for coverage. The latter is puzzling. If people are uninsured because they can not pay for insurance, than how is fining them for not having coverage going to help them afford insurance? Such is what happens when big government is ran by big business.

All of the above is happening on the release of several unfavorable factors of economic news. First, after both the Bush and Obama Administrations spent over a trillion dollars bailing out the banks on Wall Street and the automovitve industry, 29 states reported an increase in unemployment rates for the month of October. Further, after that money, plus the trillion dollar stimulus package, and Federal Reserve's activist policies, America's record setting debt is drawing concern from China and Europe according to such reputable sources as the Financial Times of London. There will come a time when those folks, using Levin's language, are just going to say no.

Put plainly, the United States ecnomomy is still in a mess. The Democrats seem to think we can tax and spend our way out of the current crisis. Yet, no nation on Earth has ever thrived for a long time on taxing and spending and centraziled control of its economy.

Think of it personal terms. If you ran your own business thinking only of the short term for a long time, wasting profits on superflous spending to the point in which you could not pay your bills, you would be in crisis. Frankly, more people have been in that situation then known. Now, if in that crisis, you borrow money to cover the bills you can not pay and then add more spending, wouldn't a bigger day of reckoning be just around the corner? Wouldn't there come a point in which there was no more money to collect from your customers or borrow from your lenders? Indeed, eventually, you cripple yourself because, no how valuable you think your services are, you can raise prices to the point in which your consumers can not pay. Further, no matter what your credit, you can borrow to the point in which your creditors are tapped out. Thus, there are you, with big spending commitments and less revenue and credit.

Why is it different for the United States government? Increased taxes on the wealthy and health insurance fines on the poor will lead to less revenue. Extended borrowing will tap out credit. Inefficient spending can only be supported so long by such methods.

Eventually, a day of reckoning comes. In personal days of reckoning, individuals can live with a lesson learned via bankruptcy or judgments from creditors. The federal government has no such luxery. When that day comes for the federal government, chaos and rapid inflation will join double digit unemployment. The United States could become Brazil with a world class military.

Preventing that day requires things that the current leadership seems unwilling to do. First, government regulations and capital gains taxes must be cut. Second, we must forget political correctness and tap our vast oil and natural gas reserves so we begin to stop the bleeding of American treasure to foreign nations for our energy needs. Third, our governments, on all levels, must learn to say no to big lobbyists wanting bailouts for their banks or companies or politically correct special interests wanting this and that tax dollar. We must go back to believing in the free market and get out of the people's way.

The way out is simple, but can it happen? Chances are 50-50 at best. Too many people line their pockets for the short term for taxing and spending not to be attactive to them. But, twenty years for now, when your 401(k) won't buy your grocercies and gas for a week, remember how short sighted we all were in 2009.