After weeks of heated debate on the debt ceiling, the drama finally ended with a compromise that basically cut spending, created a “super Congress” to recommend other actions to reduce the debt, but it did not include additional tax revenue. Many in the Republican/Tea Party caucus in Congress justified their opposition to increased tax revenue on the rich because they said that the rich paid the most in personal taxes. However, according to the Internal Revenue Service for the 2008 tax year, the top 1% with an Adjusted Gross Income (AGI) of $380,354 and above paid 38.02%; the top 5% with AGI of $159,619 or more paid 68.72%; top 10% with AGI of $113,799 or more paid 69.94%; top 25% with AGI of $67,280 paid 86.34%; top 50% with AGI of $33,048 paid 97.30%; and the bottom 50% with AGI less than $33,048 paid 2.7%. Thus according to what the IRS says, persons with AGI less than $159,619 are paying a much higher percentage of Federal Personal Income Tax than those with higher incomes.
The Republican/Tea Party faction of Congress also insists that the US has a severe spending problem and to get out of our current economic situation, they suggest cutting the size of government, placing a moratorium on all regulations, reducing taxes, and several other “radical” ideas. Remember, these folks, along with several of their Republican Presidential candidates, would have allowed the country to default on its obligations. I believe that the overall problem is much more extensive and their proposed solutions are misplaced.
Republican Herbert Hoover got us in the first depression and Democrat Franklin Roosevelt got us out through a massive stimulus program primarily rebuilding the US infrastructure. While reducing government spending should be the ultimate goal, it should not be the priority at this time and we should be taking the same kind of action that Roosevelt implemented. But because of our dysfunctional government heavy influenced by the Tea Party Republicans, this won’t happen. Prior to the 2010 elections, the Republicans in Congress offered a “no” mentality on almost every initiative proposed by Democrats and they filibustered an unprecedented number of times. But they were willing to compromise. However, after the 2010 elections with the installation of the Tea Party candidates, the new Republican mentality led by the Tea Party is “hell no,” “we won’t compromise” and the established Republican conservatives “better not give in or else.” This radical group in Congress, many of whom have never held office and don’t understand that after the campaign governing must begin, compounded the dysfunctional problem. I would be very surprised if many of them are re-elected in 2012 because of their extreme radicalism. These are the measures I believe should be taken to resolve our economic and dysfunctional problem.
(1) Pass an extremely large stimulus package to create at least 2 million jobs in repairing, rebuilding and modernizing our infrastructure. When people have jobs, they pay taxes and increased tax revenue helps decrease deficits. (The President may be considering something similar when he unveils his plan in September.)
(2) Allow all of the Bush tax cuts to expire. If they could be retained for the middle class, that would be good, but if not, I believe most middle-Americans would be willing to give up that cut if it would mean getting a handle on the debt by saving 650 Billion Dollars.
(3) Revamp the Tax Code and close all loop holes including providing subsidies to oil companies, jet owners, ethanol fuel subsidies, etc. A “flat tax” should also be considered (e.g., 10%) on all personal, corporate and business income with no deductions. People making the most should pay the most.
(4) Pass “Term Limit” legislation. If the President can only serve two terms, members of Congress should also be limited to two terms. This would seriously reduce the constant re-election politics and create more incentive for members of Congress to do the right thing for their constituency.
(5) Once the economy stabilizes and unemployment drops below 6%, the Congress and the President should focus on ensuring an effective long-term deficit reduction plan is in place and the budget is balanced.
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