The debt panel is going public on the proposed cuts and tax increases. On the issue of debt, Zero Hedge talks about the debt crisis in European countries and Ireland. The debt crisis in other countries show that the US is not the only country that spent taxes beyond its means, but it also illustrates the failure of central banking was not limited to American shores. This wasn’t just an American housing crisis we suffered, it was global. The European countries will soon be bailed out by BIS (Bank for International Settlements, the central bank of the central bank), spurning more inflation in couple years and erasing the Euro’s value just a little bit more, and the governments will start up their austerity measures cutting out programs, subsidies and so on. Will we follow suit? George Mason University Professsor and leading researcher Veronique De Rugy writes an informative article on how to balance the budget without raising taxes, calling it the “19% solution”, keeping spending per GDP no higher than that amount.
Raising government revenue – taxes – substantially is not only bad policy, it has proven difficult and ultimately unsustainable for any length of time in the past 60 years. Since 1950, annual government revenue, as a percentage of Gross Domestic Product (GDP), has averaged just below 18 percent despite every attempt to jack it up or tamp it down. Our post-World War II experience shows that if the government is going to live within its means, it can’t spend much more than 18 percent of GDP. Period.
What else is worth noting:
A balanced budget in 2020 based on 19 percent of GDP would mean $1.3 trillion in cuts over the next decade, or about $129 billion annually out of ever-increasing budgets averaging around $4.1 trillion. Note that these are not even absolute cuts, but trims from expected increases in spending.
As Congress and the Senate struggle to agree on what tax cuts to expire and what spending to cut (if they actually agree on that at all), Investopedia and Yahoo! Finance recently wrote about how today’s millionaires mean much less then they did ten to twenty years ago.
As they say, thirty is the new twenty, and thanks to forced inflation by both our government’s overspending and the Federal Reserve’s money printing practices, billionaire is the new millionaire. I guess it’s nice to know in twenty years everybody can be a millionaire. The downside is a loaf of bread might cost you $300.