Monday, April 20, 2009

Maybe I missed something about the tea parties

I saw this item in Robert Reich's blog. I was shocked because clearly he knows this can't be true. Its at the heart of the Tea Party protests.

""The huge debts we're wracking up will cause your taxes to rise!" Wrong again. When it comes to the national debt, as I've said before, the relevant statistic is the ratio of debt to the gross domestic product. The only sure way to bring that debt down and make it manageable in future years is to get the economy growing again -- which requires that, in the short term, the government spend a lot of money (because consumers and businesses won't). In the long term, the biggest source of concern is rising health-care costs. And that's something Obama and Congress are aiming to tackle."

This is clearly a lie for the following reason:
1 We built this decade long bubble economy on leverage. The leverage is now gone. We will not be able to borrow and spend at a rate near we did before, this means economic activity will be lower than in the past as we are deleveraging now. If we have massively higher national debt and modestly lower growth how will we be able to balance the budget without tax increases? Answer we won't.
2 The numbers that the Obama is useing for the growth of GDP are silly numbers that no one thinks will be achieved. We were not able to get that kind of growth before the bank crisis. Now that we have been damaged by the bank crisis we will come no where near the targeted 4% growth in GDP. This small point will cause our debt to GDP to surge as federal tax revenue falls far short of target. This will create a situation where we borrow to pay the INTEREST on the debt and will be unable to pay it down without higher taxes.

Then if you add the health care proposals that the Obama has slated for in his social engineering experiments, it becomes clear that we will be swallowed under a mountain of National debt and spending. The spending by the way is not one time spending. These spending plans are expected to go on forever. They will most likely go up every year as all other government spending does. Where will we get the funds to pay for this? Taxes!
So to suggest that we are keeping the national debt at a manageable level is clearly a lie and that was the basis for the tea party protests.
On a side note I'd like to point out that here in Massachusetts where I live most participants were not Republicans if informal surveys are correct. Most claimed to be independents.
DJH

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