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The Deficit Reduction Trap

June 27, 2010

Years ago, Cong. Newt Gingrich called Sen. Bob Dole, a “tax collector for the welfare state.” That phrase resonated with the Republican faithful and ultimately led to GOP control of the House of Representatives.

The “Contract for America” was the culmination of more than fifteen years of labor by Supply-side advocates who argued that dropping tax rates would lead to economic growth. The Supply-side movement had its day and now the U.S. faces budget deficits that threaten to destabilize the American economy, reduce employment and increase inflation to levels that led to the collapse of the Weimar Republic and launched Adolph Hitler’s murderous career.

The logical and moral response is to call for higher taxes to reduce the deficit and the moral appeal of living within our budget is very attractive to those who are likely to control the U.S. House of Representatives in 2011 and the U.S. Senate after the presidential election of 2012. But that would be a disaster that literally would make the GOP the “tax collector” for the Obama administration.

It’s important to keep in mind that Entitlements contribute the most to the enormous deficits that promise to destroy the American economy, and with Marco Rubio it is necessary for younger Americans to vote their economic interests. It is not in the interest of 30-somethings to vote for politicians whose policies will assure that withholding income for Medicare and Social Security is never returned to them in benefits when they retire. It is necessary to look at federal tuition assistance (direct student loans and Pell Grants), Medicare, Social Security and begin to cut back benefits by 5% a year for five years. It is also necessary to conduct a review of American foreign policy which has been in decline since the election of President Jimmy Carter and reevaluate the value of NATO, the United Nations, and, of course, our military engagement in Iraq and Afghanistan.

On top of that it is necessary to engage the American people in a discussion about the limits of government.

A state of mind has been created that appears to encourage normal American citizens to believe that the federal government can and should do everything and anything. If there is a hurricane, an earthquake, in addition to saving lives Americans apparently believe it is the proper role of government to make things right by rebuilding what was destroyed. Well, there is no obligation of the federal government to rebuild all those homes that have been built on waterfront in the past forty years and all those homes built on the San Andreas fault. Nor is it the responsibility of the federal government to guarantee corporate pension plans of defunct corporations or to subsidize all the mortgages guaranteed by Fannie Mae and Freddie Mac. Cut them loose and let the mortgages die a natural death.

But, do not raise taxes to reduce the federal deficit!

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