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U.S. economy hampered by wrong priorities

While U.S. taxes soar, the American taxpayer is enduring a weakened economy and neglected national needs.

U.S. citizens and their businesses are paying increased amounts of taxes. Over the past year, reports the Wall Street Journal, corporate taxes rose 10%, individual income taxes 15%, and payroll taxes, 6%.  Despite that, Washington still runs vast annual deficits. Government spending overall increased 5% in fiscal year 2015, commanding a higher level of gross domestic product “than at any level seen between 1993 and 2008.”

The federal government has a debt of $18 and a half trillion, Social Security is heading towards insolvency, the nation’s infrastructure remains in poor condition, and the military is significantly underfunded.

While Washington’s spending concentrates on failed poverty programs, (spending on poverty programs has reached its highest level under President Obama) real median income of working Americans has declined. The Heritage Foundation notes that Eighty-five percent of the projected growth in spending over the next decade is due to entitlement spending and interest on the debt.

The Washington Times reported in 2014:  “Last year, government spent $943 billion providing cash, food, housing and medical care to poor and low-income Americans. (That figure doesn’t include Social Security or Medicare.) More than 100 million people, or one third of Americans, received some type of welfare aid, at an average cost of $9,000 per recipient. If converted into cash, this spending was five times what was needed to eliminate all poverty in the United States. [in 2014] The U.S. Census Bureau … released its annual poverty report. The report claims that in 2013, 14.5 percent of Americans were poor. Remarkably, that’s almost the same poverty rate as in 1967, three years after the War on Poverty started. How can that be? How can government spend $9,000 per recipient and have no effect on poverty?”

The U.S. Census Bureau reveals that “In 2014, real median household income was 6.5 percent lower than in 2007, the year before the most recent recession. The real median income of non-Hispanic White households declined 1.7 percent between 2013 and 2014. For Black, Asian, and Hispanic-origin households, the 2013-2014 percentage changes in real median income were not statistically significant.”

A 2014 report by the Washington Post  notes that Median inflation-adjusted income in 2013 was still $2,100 lower than when President Obama took office in 2009 — and $3,600 lower than when President George W. Bush took office in 2001. …  “In 2013, most Americans had a good bit less money, after adjusting for taxes, than the year before. That’s because in 2013, a huge tax increase affecting ordinary workers took effect, raising the employee payroll tax from 4.2 percent to 6.2 percent. A worker earning $50,000 a year saw disposable income decline by $1,000.It was the first time the payroll tax had increased since 1990, and previous payroll tax hikes had been smaller.”

Those increased taxes provided  a significant boost in funds to the federal government. A CNS study  discloses “that taxes in fiscal 2015 (which ended on Sept. 30), according to the Monthly Treasury Statement, equaled approximately $21,833 for every person in the country who had either a full-time or part-time job in September. It is also up about $212,927,100,000 in constant 2015 dollars from the $3,035,795,900,000 in revenue (in 2015 dollars) that the Treasury raked in during fiscal 2014. Even as the Treasury was hauling in a record $3,248,723,000,000 in tax revenues in fiscal 2015, the federal government was spending $3,687,622,000,000. So, the federal government ran a deficit of $438,899,000,000 for the fiscal year. According to the Bureau of Labor Statistics, total seasonally adjusted employment in the United States in September (including both full and part-time workers) was 148,800,000. That means that the federal tax haul for fiscal 2015 equaled about $21,832.82 for every person in the United States with a job.”

According to the Office of Management and Budget, in 2014, 24% of federal dollars went to Social Security, 24% went to Medicare, Medicaid, CHIP, and related subsidies, 18% went to defense, 11% to safety net programs, 8% went to government retirees, 7% paid for interest on the national debt, 3% for transportation infrastructure, 2% for education, 2% for science and medical research, 1% for foreign aid, and 2% distributed for miscellaneous purposes.

The problems facing the U.S. have become structural.  To win elections, candidates continue to promise “free stuff,” which the economy cannot possibly provide. (This election year cycle’s big giveaway promise is free college tuition.) To then fulfill the unaffordable campaign promise, vital needs—keeping Social Security solvent, keeping the armed forces adequately equipped, maintaining infrastructure, are stripped of resources to pay for the latest set of “vote for me” promises.

A more rational approach to budgeting must include:

  • a level of taxes that keep U.S. enterprises competitive with global competition (America has the highest corporate tax rate of any of its trading partners) and reduces the tax burden on the middle class;
  • The funding of essential needs, such as providing a powerful defense, maintaining the solvency of Social Security, and keeping the national infrastructure intact, before commiting dollars to entitlements;
  • A commitment to providing a regulatory environment that encourages, rather than inhibits, the development of more job-producing activities;
  • A firm resolve to end deficit spending.

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