Tuesday, December 14, 2010

Government Doesn't Need A Raise

Imagine this exchange in your boss’s office:
You: I need a raise.

Boss: (holding in laughter) Well, we’ve had two very difficult years in a row, I just don’t think there is enough money in the pot for anyone to get a raise right now.

You: But I’ve racked up some major credit card bills, my teaser rate mortgage is about to reset, any I can barely afford the gas for my new Mercedes SUV, much less the monthly payment - I really need the money.

Boss: I understand your concern, but we can’t just hand out raises to everyone with financial difficulties – especially when we’re struggling to make payroll as it is! Why don’t you just cut down on your spending?

You: Why would I do that?

Boss: Because that’s what rational human beings would do if they were in your situation. If your income can’t rise, you need to cut spending. It’s called “Finance for Idiots.”

You: But, I really can’t live without my 60” flat screen TV with the Platinum Satellite Cable package, my gas-guzzling Mercedes SUV, or my monthly trips to Vegas!!!

Boss: Dude, you have issues…
Is there really a difference between the exchange above and the ranting and ravings of the Democratic left who are going berserk over Obama’s deal to extend the Bush Tax Cuts, including those for “the rich.”

Replace “You” with “Government” and “Boss” with “Taxpayers” and it’s being played out on new channels everywhere – politicians arguing that the Government needs a raise (i.e. higher tax revenue) to help lower its debt.

Just like the average consumer, Government need to spend less, not earn more. The omni-present “Deficit” is nothing more than Total Spending – Total Revenue. We have such a large deficit because we spend more than we collect in taxes, not because we don’t tax enough. Somehow the Total Revenue side of this equation is dominating the discussion in the media and in Washington, while the Total Spending side sails along in the bliss of ignorance (entitlement spending in particular).

Give credit to President Obama for understanding this equation, or at least understanding that raising taxes is the wrong answer, especially when the green shoots of recovery are finally starting to pop out of the ground. Let’s hope this signals a move in the direction of economic sanity for the Obama administration and Congress. After all, the only thing that keeps President Obama and the current Congress in office is an improved economy – too bad it took them two years and a “shellacking” in the midterms to finally appreciate this reality.


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