December 7, 2012
There Is No Party of PrincipleBy Steve McCann
The 2008 and 2012 elections have revealed that an escalating number, perhaps a majority, of Americans are comfortable with the concept of transforming the United States into a Euro-Socialist democracy. While this may be easily sold to an increasingly ill-educated populace by those desirous of capturing political power, the reality is far different when it comes to the price to be paid. A price that is not only monetary but societal as well. Yet there is no party in this nation willing, regardless of the political cost, to confront reality, be brutally honest with the citizenry and stand on principle.
The American people have, thus far, been immune from the financial consequences of a society already well on its way to this transformation. The United States, thanks to its status as the world's largest economy and whose dollar is, for the time being, the global reserve currency, can paper over the cost and long-term impact -- as the nation can continue to create fiat money to cover its massive budget deficits. However, this cannot, and will not, continue for any extended period of time.
Today the federal government spends in excess of $3,500 Billion per year, yet it collects only $2,300 Billion in taxes. Thus the deficits which have averaged in excess of $1,200+Billion per year over the past four years. In 2010 the revenues forwarded to Washington were as follows:
$1,091 Billion or 47.5% Personal Income taxes
$818 Billion or 35.6% Social Security & Medicare
$181 Billion or 7.9% Corporate taxes
$130 Billion or 5.7% Customs, duties, etc
$73 Billion or 3.1% Excise taxes
$7 Billion or 0.3% Estate and Gift taxes
What if the governing class in America were honest with the citizenry and relayed to them what it would actually cost the taxpayers to pay for the current manifestation of the entitlement society without the ability to borrow and print money?
In order to make up for the deficit, virtually the entire amount would have to be derived from personal income taxes, Social Security and Medicare -- as the United States already has the highest corporate tax rate in the world. However, payroll taxes fall most heavily on the lowest income strata and political considerations would thus minimize any additional income from those sources. Therefore, if this nation had to pay for the society it apparently desires, income tax revenue would have to increase from $1,091 Billion to at least $2,200 Billion.
Assuming the current code stays in place, and there is no change in economic behavior, the rates paid by all income tax brackets would have to double. The top bracket would become 70% and income tax filers with adjusted gross incomes (AGI) between $34,500 and $83,500 would see their marginal rates increase to 50%. Even those with an AGI between $8,500 and $34,500 would have to pay a rate of 30%.
[To all those class warfare proponents: by doubling the tax rate of the top 1% of income earners the additional income realized by the government in 2010 would only have been $354 Billion or less than 26% of the annual deficit in that year.]
However, there is another train coming down the tracks: ObamaCare. A recent Congressional Budget Office estimate reveals that ObamaCare will average a cost of at least $200 Billion+ a year, thus adding to the deficit. To pay for this additional cost overall effective federal income tax rates would have to be increased to 77% for the top bracket, 55% for the middle class bracket and 33% for the lowest income group.
To the above rates add an average of 5.5% for state income taxes and 7.6% for payroll taxes. The effective income taxation rate increases by another 13 percentage points. So the middle class would pay an overall rate of 68% and the lowest income bracket: 46%.
Any political party, whose leadership interests extends beyond aggregating power and accumulating personal wealth, would ask the American citizens: are you willingly prepared to pay these tax rates, without any changes in economic behavior, for the current manifestation of the American society?
The answer would be an emphatic no. Nonetheless, a near majority of the populace, many of whom pay no income tax, would still expect the benefits without the cost as they are already living in a society that is effectively spending this level of taxation without collecting the revenue. This mindset is not only destructive for a nation but unconscionable. Only a self-centered and ill-educated society increasingly devoid of honor and integrity would place their country in such a predicament.
Yet there is no sense of urgency or desire on the part of the American governing class to level with the people as to where this nation is headed and why. Instead, the message being conveyed to an ever larger portion of a willing and susceptible population is: by the mere circumstance of living in the United States one is entitled to a "decent" livelihood regardless of cost.
In Europe, in order to satisfy these same unleashed expectations and fulfill unsustainable promises, the governing class has spent, borrowed and printed money at an ever increasing rate. Soon they will no longer be able to borrow on the open market, their currency will become essentially worthless, their tax revenues precipitously declining as there is a diminishing and dispirited producer class. This reality is already casting its shadow in Greece, Spain, Portugal, Italy and France and will soon engulf the entire continent.
If the American people desire to emulate the social-democratic polices of Europe, then they must either pay for it or follow these same nations over the fiscal cliff into financial and societal chaos. It is a stark choice, but the reality of the situation in which the nation finds itself.
The other option is to educate the public why cutting spending, enacting policies to grow the economy, and being honest with the people will save the country. This requires a political party willing to not only put these steps in motion but to purge the education and political establishments of the socialist mindset that dominates those sectors of society. There is no party, today, willing to take on that challenge. The only possibility is the Republican Party, but only if its current leadership is evicted and replaced from the grass roots up by those who believe in and live by the nation's founding principles. If not, then the Republican Party will eventually become a foot note in American history as it is replaced by a new Conservative Party the people can turn to when America's day of reckoning looming over the horizon arrives.
One of the most perceptive visitors ever to set foot in this nation, Alexis de Tocqueville, wrote in the 1830's: "There are many men of principle in both parties in America, but there is no party of principle." Now more than ever this nation requires such a party for until there is the United States will flounder and its citizens will continue to be lied to and deceived.
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