Keep this little factoid in mind when you consider debt, government spending, and the size and scope of government: the income tax represents 40% of total government revenue. The last time the government was 40% smaller was around 1997. Can you think of anything that the government has done for you since 1997 that you couldn't live without?
I can't either. In fact, I wish the government would just go away completely. We'd have to figure out how to maintain the roads and bridges - which are crumbling anyway - but I think we'd survive.
- Reuters -
The United States must soon raise taxes or cut government spending to curb its debt, and failure to act will risk a crippling dollar crisis as investor confidence ebbs, a panel of experts said on Wednesday.
"It has got to be done. It will be done some day. It may be done with enormous pain. Or it may be done more rationally," said Rudolph Penner, a former head of the nonpartisan Congressional Budget office who co-chaired the 24-strong Committee on the Fiscal Future of the United States.
President Barack Obama's administration will present his budget for fiscal 2011 early next month amid intense pressure to live up to election campaign promises not to raise taxes on middle class Americans, while confronting a record deficit.
As a result, Obama is expected to focus on long-term fiscal discipline, while maintaining policy support for an economic recovery in the near-term as the country rebuilds after its worst recession since the Great Depression.
The two-year study by the panel, assembled by the highly respected National Research Council and the National Academy of Public Administration, said that the White House had some time on its side to restore growth, but must then act.
"In the next year or two, large deficits and more borrowing are unavoidable given the severity of the economic downturn. However, action ought to begin soon thereafter," they said.
Mounting debt could sap investor confidence in the economy, and the nation's ability to honor its obligations, pushing up interest rates and causing a steep fall in the value of the dollar as international creditors seek safer returns elsewhere.
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