Illegal immigration is one of the most complex problems facing Americans. Since the onset of the current “Great Recession,” the financial impact of the issue on federal, state and local budgets, and the implications for the job market, have made the topic more crucial than ever.
Undisputedly, America’s maritime interests and those of its allies are clearly endangered by China’s dynamic new naval might. The White House publicly recognizes the threat, but has failed to fulfill its commitment to counter it with adequate resources.
- 1. Keep taxes low. The evidence is clear and has been for many years: High taxes hinder economic growth and prosperity.
- 2. Don’t penalize earnings and investment. Taxes on earnings and investment income are particularly harmful to economic growth.
- 3. Avoid ‘sin’ taxes. Taxes on specific goods and services are often unfair, unreliable and regressive.
- 4. Create a transparent and accountable budget. Focus attention and resources on providing those services that are the core function of state government.
- 5. Privatize public services. Privatization is a proven way to reduce government spending while preserving or improving the quality of core public services.
- 6. Avoid corporate subsidies. Subsidies to corporations and selective tax abatement are questionable politics and bad economics.
- 7. Cap taxes and expenditures. A tax and expenditure limitation protects elected officials from public pressure to spend surplus tax revenues during good economic times.
- 8. Fund students, not schools. States and cities that have experimented with school choice have seen gains in academic achievement.
- 9. Reform Medicaid programs. Spending on Medicaid can be brought under control without lowering the quality of care received by Medicaid patients.
- 10. Protect state employees from politics. State and local government employees should be prohibited from deducting funds used for political purposes from the paychecks of public workers.
There is one figure that can’t be denied by either side: America is in a deep fiscal crisis. Overspending has produced an almost unimaginable $15.566 trillion dollar deficit that continues to grow by leaps and bounds. As noted in the Heritage Foundation Report, Saving The American Dream, “We have come to a time of decision…Our nation is going broke, and we are passing the costs of these misguided policies to our children and their children.”
Over the first three years of the Obama administration, the deficit grew more than it did during the entire eight years when Bush occupied the White House. As noted by the Center for Fiscal Accountability, “Almost immediately upon his inauguration, President Obama signed into law the $787 billion American Recovery and reinvestment Act that-along with TARP-totals nearly $1.5 trillion in government growth for taxpayers…in 2009, the [federal] government spent $3.9 trillion dollars, and took in $2.1 trillion dollars in taxes. That is, the government spent beyond its means by $1.8 trillion-almost as much as it takes in on a yearly basis.” Further White House proposals continued the trend, which will double the size of the already deficit-laden federal budget within ten years.
The nation now faces a perilous reality in which the debt is greater than the Gross Domestic Product. That’s a classic definition of bankruptcy.
There is almost nothing to show for the great national spending spree over the past three years. Unemployment and underemployment remain at crisis levels. The economy is barely progressing. Inflation has become a significant problem. Infrastructure needs remain largely unaddressed (unlike the Great Depression, when programs such as the WPA and the CCC’s engaged in massive public works.) Our armed forces haven’t received badly needed equipment. Even the vaunted American Space Program has been mothballed.
American families have suffered. Homes have lost unprecedented amounts of value. According to an ABC News report, “The S&P/Case-Shiller 20-city index through November showed home values fell 3.7 percent from the previous year. The 20-city home price index dropped slightly more than the 3.3 percent economists surveyed by Bloomberg had expected, weighed down by foreclosed properties.” Here too, the President and Congress diverge sharply on the reasons. The White House concentrates on the mortgage crash; the Republicans emphasize the depressed economy.
President Obama’s proposed 2013 budget includes tax hikes that range from $1.5 trillion to $1.9 trillion (depending on whose estimates you use) over the next decade. (This would produce tax revenues above the historical average of 18.3% of GDP, according to Heritage.) The Bush tax cuts would expire for upper income earners, and the US corporate tax rate would remain as the highest in the world, although the White House has said it may introduce a measure to lower the rate (to a figure”in the high 20s,” according to a Reuters report) at a future date. The additional revenue would provide a 17.5% increase in revenue during the coming year. The additional funds would not be mainly devoted to reducing the deficit. They would be used for $2.7 trillion in increased spending, but at least one key area, defense, would still endure budget cuts. Under the President’s plan, the annual deficit would be about $900 billion.
Rep. Paul Ryan (R-WI) has introduced a radically different budget, which he calls a “Path to Prosperity.” The core of his proposal is a return to 2008 levels of non-security discretionary spending, producing a “primary balance” (spending-interest payments=revenue) by 2015. The savings are achieved by repealing “Obamacare,” and ending what it identifies as duplicative or useless government programs, and stoping “corporate welfare” to politically-connected private companies. The proposal locks in spending caps and budget process reforms, and converts Medicaid spending into a block grant to the states.
Rather than administer drastic cuts to national security funding as is currently planned, Ryan would slightly increase spending on military needs. (Defense spending as a percentage of the budget has dropped from 25% thirty years ago to 20% currently.) In contrast, the President’s budget would get rid of what he describes as “outdated Cold War era systems.” This is largely a code phrase for furthering the White House push to unilaterally slash America’s nuclear deterrent, end the capability to fight on two fronts, and sharply reduce acquisition of replacements for worn out and outdated equipment, as well as reducing health benefits for active duty servicemembers.
According to Ryan, the individual tax code would be simplified by attacking loopholes, lowering rates, and broadening the base of those who pay. The alternative minimum tax, originally designed for wealthy taxpayers but now a major problem for many middle class taxpayers, would be eliminated. America’s highest-in-the world 35% corporate tax rate would be reduced to 25%. Investment in our military would not be slashed, as is currently planned.
Republicans emphasize that Ryan’s plan would reduce the 2013 deficit by $20 billion, and save up to $3.3 trillion over the next decade. They estimate that federal spending would be reduced from 23% of the economy down to 20%. They note that the White House’s “stimulus” spending did little more than reward politically-connected corporations.
The dueling budget proposals reflect diametrically opposed political beliefs. The President continues to adhere to a plan that would use increased tax revenues and increased federal spending to address domestic needs and entitlement programs. Human Events chides many of the President’s initiatives as “frivolous projects.” The House of Representatives believes that growing the economy, promoting employment, lowering taxes and allowing more discretion to the individual states will allow the U.S. to emerge from the “Great Recession.”
The fate of the nation hangs on which side is correct, and which side wins this battle of the budgets. But total victory for either side before the 2012 elections remains completely unlikely.
Historians remind us that it was the pre-World War Two defense buildup that actually began to end the Great Depression. Gambling with our national safety is a poor bet at any time; doing so in an era of economic crisis is even worse.