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 At a posh Beverly Hills dinner, reception, and democratic fund raiser, the president painted a very rosy picture of the economy despite the obvious level of debt, but do his words and calm demeanor belie reality?
"When you look at the economy right now I think it's safe to say that we have stepped back from the brink, that there is some calm that didn't exist before," President Obama said. Earlier in the day he stated, "We can't return to a bubble-and-bust, borrow-and-spend economy based on maxed-out credit cards, over-leveraged banks, and financial profits that were only real on paper."
(For the record, the Beverly Hills affair cost $1,000 per person, netting over $3 million, and an after dinner discussion hosted by Steven Spielberg, Jeffrey Katzenberg, and David Geffen for 250 people costed $30,400 a couple — you can do the math. And yes, President Obama flew out to California on Air Force One, switching over to Marine One helicopter for local travel.)
This from the man who is at least partly if not greatly responsible for a budget deficit of between $1.3 and $1.8 trillion dollars. It’s time for a reality check.
General Motors is on its last leg, Chrysler not much better, with Citigroup and Bank of America being almost broke. The Dow Jones continues to languish. Orders for non-defense capital goods fell, unemployment is on the rise, and still the president wants to expand spending for health care, and on and on it goes.
USAToday reports that federal revenues are down due to six million people losing their jobs in the last 12 months alone. That’s a plunge in tax revenue of $138 billion from the previous year. Which in turn means the budget deficit will be larger this year and in future years, something the economic wizards either didn’t take into account, or won’t admit to.
Who is going to make up these deficits, because the current borrow and spend and spend and spend method certainly cannot continue? Look to House democrats for the answer: more taxation. They may hide behind the banner of reforming taxes, but it is not real reform they are after, instead they are looking for various ways to as painlessly as possible — or as quietly as possible — increase income.
One way under discussion is the value added tax (VAT) which is a hidden tax on goods and services that amounts to a national sales tax. It’s a consumption-based levy wherein taxes are imposed at every stage of production. It’s popular in European countries, but increased the burden of taxation on the people by 50 percent since its introduction in the late ‘60s. The VAT may also increase income tax rates because often times governments see the VAT as an unequal taxation method, so they increase everyone's taxes in order to maintain a false sense of equalizing the burden.
A more serious side effect of a VAT is that it reduces incentives for productivity, facilitating the transfer of resources from the private sector to the public sector of the economy, thereby reducing efficiency. Also the final burden usually falls to the poor. Politicians who are known for tax evasion like it because it’s a surer way of collecting taxes from the proletariat.
Historically the VAT contributes to expanded government spending, stagnating economies, higher deficits and fewer jobs, exactly what we have now. The VAT could for all intents and purposes be the last nail in the economic coffin. And once adopted, like all government programs, would be nearly impossible to get rescinded.
None the less, here come the VATers. Sen. Kent Conrad (D-N.D.) said, "There is a growing awareness of the need for fundamental tax reform. I think a VAT and a high-end income tax have got to be on the table."
Budget Director Peter Orszag has hired VAT advocate Ezekiel Emanuel to look into the matter; he’s brother of White House chief of staff Rahm Emanuel — nothing like keeping it all in the family. And former Federal Reserve chairman Paul A. Volcker is now chairman of a task force Obama assigned to study the tax system; Volcker too is bit of a VAT supporter.
Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, added his two cents at a Capitol Hill hearing: "Everybody who understands our long-term budget problems understands we're going to need a new source of revenue, and a VAT is an obvious candidate," and "It's common to the rest of the world, and we don't have it."
And look at his reasoning: even though it would further increase an already great financial burden on the working class, Burman insists that a 25 percent VAT is the answer. He says it could cover health-care reform, balance the federal budget and exempt millions of families from the income tax (highly unlikely historically speaking, but clever selling point for dems) while slashing the top rate to 25 percent. A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation's debt would stabilize and everybody could see a doctor.
Stability and safety at any cost, as long as we can see the doctor! Milk for the kids — forget it. Burman's method of balancing the budget defies all logic.
The glitterati, the jet setters, and the new unelected nobility don’t live in working America’s reality, but they are more than happy to play footloose and fancyfree with other people’s money and lives.
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