I’ve been too busy working to read as much as I should about the latest version of the GOP tax bill expected to be passed within days but it should be obvious that all it amounts to is a tax shift from one group to another and an excuse to borrow more money.
As I understand it, under the tax bill the federal government would add somewhere between 1.5 and 1.78 trillion dollars to the existing national debit of 20.244 trillion dollars.
Just as with an individual, I would think for the government it would be preferable to pay as we go than borrow. It takes a lot of worry out of things and avoids financial catastrophe. The idea that you will borrow and catch up later is a fallacy. I does not happen. At some point you get so deep into debt that you cannot borrow any more, and then what? You become beholding to someone. You lose your freedom. You become homeless.
(Yes there is such a thing as prudent borrowing, and it is an integral part of our capitalist system — but too few, whether it be individuals or governments, are prudent.)
But governments and businesses seem to find it necessary and possibly wise to borrow money and can successfully do it if they keep things in bounds. For that matter individuals can too but the risk is much higher and an individual will not likely have the resources to fall back on when things go sour.
The United States has such a large economy that it can get away with simply printing more money, based on nothing — neither gold nor silver — except a promise to pay at some future date. As long as people have faith in the dollar and the government’s ability to stand behind it and the belief that all will honor its value then all is well. However, there is no guarantee that faith will always be there. Maybe people will turn to bitcoin or the Chinese yuan.
The idea that lowering taxes on business will spur production and hiring and a larger pool from which to draw taxes is unproven. If it were proven then we would just have low, low taxes already. But people want things and need things, from roads to missiles to defend ourselves, to health care, to law enforcement and courts, to clean water and the list goes on forever. The only way to provide people what they want without raising taxes to pay the full cost is to borrow money. Much more politically expedient than to make hard decisions. The government acts like a family living beyond its means by living on the float — putting off paying bills till next payday and meanwhile taking on more debt. All it takes is one unexpected event and the world caves in. A large nation as ours can get by longer than a family but is not immune from economic calamities.
You might recall the Great Depression of the 1930s (at least by reading history) and the Great Recession of 2008.
We cannot borrow every dime, so what the congress does is shift the taxes from one group to another — may the group with the best lobbyist win out.
It’s all very complex, but from what I have read so far the big shift in the current tax bill is lifting the burden from corporations and rich people and putting it on those down the economic line by either lessening some deductions or credits and starving social programs, most notably health care.
The justification for favoring the rich is that they are who stokes the boiler of the economic engine, they are the job creators whether through their businesses or their investments in businesses.
But the trickle down theory is unproven. The well to do tend to put their money where it gets the biggest bang for their buck and where it is the safest from inlfation, and yes, taxes. Money saved from lower taxes does not necesarilly go into hiring people for high-end jobs. It might go to a McDonald’s franchise or a self-storage compound or fine pieces of art.
At some level the government has some responsibility to all the populace.
But what is taking place is to be expected. Elections have consequences. If we elect people who favor the upper class then this is what we get.
What they will promise you is that if you are smart or clever you will become one of them and not worry about those who must obviously have no ambition and deserve what they get or do not get.
But I guarantee you when things go bad, even those at the top holler for help from the taxpayers — remember the big bank and insurance company bailouts at the end of the George W. Bush administration?
We are all still paying for that, even though I have read it was all paid back. I don’t think so, unless the national debit is just fake news.
Of course what I wrote is a generalization. As to the specifics in the bill being pushed by President Trump, I know very little. It could well be that on an individual basis it may be very helpful to various people up and down the economic scale — the upping of the child tax credit as an example. Wise people no matter what their economic status will determine how to legally get away with paying the least tax possible and thereby shift the burden to some other sucker. It’s the American way after all. As long as the nation can float between paydays we’ll be okay and won’t be Greece or won’t become a vassal state to China (which holds much of our debt).