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Cliff remedy needs to balanced


How would you resolve the “fiscal cliff” problem?  In the election just ended one party said tax the wealthy and the other said cut social program spending.   Either choice left the deficit increasing.

Sen. Jeff Merkley was in the morning paper making the logical case that, until federal revenues are equal to federal outlays, we will continue to have deficits.  He said the last time the nation had a budget surplus was when both federal spending and tax revenues were at about 20 per cent of GDP.

Now, tax revenues are about 15 percent of Gross Domestic Product (GDP) and spending 23 percent of GDP.  In order to balance the budget, Congress must decide if tax revenues should be increased to 23 percent of GDP to match spending, or if spending should be cut to 15 percent of GDP to match federal revenues.  Both those options seem grim.

About six out of every ten federal dollars spent goes to Social Security, defense, and Medicare/Medicaid.  If you consider this spending sacrosanct, then virtually all other federal spending would be eliminated.  Another dollar of the ten goes to interest payment on the debt and aid to the poor.  Balancing the budget by cutting spending would force you to strangle veteran’s programs, transportation, parks and resources, agriculture, regulatory agencies and everything else.

Simply increasing taxes on the wealthy will not balance the budget.  Since I am not wealthy I am not sure about the pain that might cause.

I join the chorus of people seeking “balance” in fixing the deficit.  Though I’m not sure everyone would accept Sen. Merkley’s benchmark—federal revenues and outlays equalized at 20 percent of GDP—it is certain that expenditures must equal income, regardless of GDP.

One thing that seems overlooked is the declining percentage of federal revenues paid by corporations.  There has even been some movement toward reducing the corporate tax rates, now topped out at 35 percent, to help the economy.  Thirty-five percent would seem high, if anybody paid it.  Since 1955 the corporate share of federal tax revenues has dropped from 27.3 percent to 8.9 percent.  That was paid for by increasing the share of revenues paid by individual/payroll taxes from 58 percent to 81.5 percent.  It is legislation that allowed this shift and it shows who has the ear of Congress.

One more thing that seems more deliberately overlooked is the study by the Congressional Research Service, the non-partisan arm of the Library of Congress, that shows absolutely no correlation between reduction of top tax rates and economic growth.  No increase in “job creation” was evidenced.  The only sure result shown by that study is a shift of the nation’s wealth toward the wealthy, another group with the ear of Congress.

How would you resolve the “fiscal cliff” problem?  Maybe we’re past the point of finding a fix that doesn’t involve all of us.  Maybe we’re out of ways to have “somebody else” pay for the cuts.  I would pay more income tax if I were assured that my government would stop piling up bills for my children.  From where I now sit I can see some things in this house that I didn’t miss before I had them.  If I must choose between my own comfort and the future security of my family, I’ll go with the future. I hope legislators feel the same.

Don Vowell lives in Keizer.