By: Jim Clifton
The drama over the $85 billion sequester cuts to the federal budget illustrates how there is little hope for progress in the ongoing fight for America’s economic future. The cuts themselves are a drop in the bucket, amounting to less than a ten percent reduction in the enormous $900 billion deficit for 2013, yet many critics believe the effects on society will be immediately profound. The politicians are divided into the usual camps, with President Obama and the Democrats wanting to offset reductions in spending with tax increases on the wealthy, while Republicans support cutbacks only.
If the situation continues as is, Washington will simply keep the government going with more borrowing over the next four years, and the national debt will rise to around $20 trillion, while sequestration trims a modest $400 billion or so, but not enough to bring about the apocalypse that everyone fears. But true recovery will not occur, as job growth will be stymied and the wealthy will escape significant tax hikes.
The liberal analysts have it right though, as most of the debt problem has been caused by the alarming loss of revenue over the past two decades. Today the federal government collects about 40% less in taxes than it did in the 1970’s. A whopping 45% of Americans do not pay any federal income tax at all. This all started with the downsizing of the middle class through such schemes as globalism, in which millions of good paying manufacturing jobs were sent overseas, and replaced with low wage service-oriented ones. But it didn’t stop there, as the wealthy managed to convince Congress to de-regulate and enlarge the financial industry in the 90’s, and subverting Main Street with Wall Street. The subsequent bubbles were paid for with bailouts. Added to this were the controversial Bush tax cuts (now finally terminated), and enormous war and defense spending (still ongoing).
The truth sadly is that, the rich have manipulated both fiscal and economic policy tremendously to their advantage over the past twenty years, we now have the worst wealth inequality in a century, and a huge welfare state based on debt at every level. And that will become apocalyptic, sooner or later.