Keys To Understanding The Debt Debate

The current debate about the national debt that is ongoing as this is written is hard for most citizens to comprehend. The debt is too high and unsustainable. We all know that much, but what is all this talk about spending cuts and increasing taxes about?

President Obama is a very smart man. His plans to “fundamentally transform America” were well developed and cut into stone well before he ran for the presidency. The America that we had back when we separated ourselves from the King was based upon liberty for every citizen. The America of Obama’s vision is a grand “nanny state” where everyone is taken care of by an all powerful central government.

To get from the liberty state to the nanny state, a monster transfer of power must happen, from the individual to the Federal capital. And, to do that, Federal taxes necessarily have to rise.

Obama knew that most Americans are not yet sold on the Socialist/Marxist way of life, despite the remarkable successes that system has had in the Soviet Union, Eastern Europe, Cuba, and other places. He also knew that most Americans do not want their country to go bankrupt. So, his first major act as President was to borrow a trillion dollars, money that we had no way to repay. He told the people that he was going to use this extra trillion dollars to “stimulate” our economy and create more employment. But, of course, he did not do that. Rather, he gave this trillion dollars away to his friends and supporters in the unions and to his friends in the big Wall Street banks like Goldman Sachs. Unemployment went up as a result of this borrowing, not down. And the Debt, as planned, went up a trillion dollars with the stroke of his pen.

Ever since the so called “stimulus” borrowing, the American economy has been stalled by the impossible debt load. Today, the president is telling the leaders in the congress that we must raise taxes now in order to reduce that same debt that he so deliberately increased!

Obama figures that this argument will work because he knows that the congresses, and the people, do not want the economy to get worse, unemployment to get higher, or the value of our currency to fall. Such action will inevitably bring us into a full-fledged depression. He, on the other hand, has no fear of a depression. In fact, a real good “gut wrenching” depression will only help him towards his ultimate goal of transforming America into the total nanny state.
The congress, on the other hand, would like to reduce the debt by cutting federal spending. It has been well established that the Federal government can “spend” the people’s money faster and more inefficiently than anyone. So far, no congress has ever found a way to slow down the spending. So, it is unlikely that it can happen now, but there are some who will do their best to give it one more try.

Raising taxes, “on the rich” as the democrats say, is possible; but raising revenue for the government is not going to be the end result. The little secret here is that tax revenue to the government is pretty constant as a percentage of the GDP. When a government raises taxes, the economy, as measured by the GDP, contracts. A contracting economy means that tax revenue will also contract.

Bottom line; to solve the very real debt crisis: Raising taxes will not work. Mathematically, it cannot work. Cutting spending could work, but it has never been done before.

Obama is in the cat-bird seat either way. If he gets higher taxes, even though it will not bring any more money into the treasury, it will further shrink the private sector of our economy and bring the federal government more and more power to regulate everything. If spending cuts are promised, but never delivered, the economy will fall into serious depression thus giving Obama reason to grab more power for his “fundamental transformation” of America.

“God bless us, every one.”

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