Thursday, July 7, 2011

We Have a Spending Problem

The debt was merely a problem back in 2003-8. The debt has become a crisis now.

What has made the difference?

Tax rates haven't changed in the last eight years. Only spending rates have, leaping upward since 2008.

We don't have a revenue problem. We have a spending problem.


With the current tax rates, tax collections increased rapidly from 2003 through 2007. That only changed when the economy went into the toilet in 2008, thanks to the bursting of the housing sub-prime mortgage bubble. With tax collections increasing, and some (though not much) spending restraint, the deficit came down from 2004 through 2007, before the bad economy started it rising again.

Barack Obama became president in 2009, and immediately started making things worse. With him in the White House, there was no longer any restraint on the profligacy of the Pelosi-Reid Congress — indeed, Obama's spending demands made things worse.

Tax rates did not change, but spending rates did. The deficit exploded, tripling from what it had been before. And the reason was the spending increases, since there were no tax cuts.

The problem we now have with the deficit and the debt ceiling has been created by out of control spending, not by insufficient taxes. The solution to the problem is to roll back the spending increases that created the problem.

Get the spending cuts now. We can discuss tax hikes later, if we think they're really needed.

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