A Nation Challenged

As Both Parties Become More Firmly Polarized, Our Prospects of Renewed Prosperity Dwindle

It would be comforting to believe that Democrats and Republicans will accept that we are a nation ideologically split right down the middle, using the election results as a mandate to work together to strike a grand bargain which will finally rein in runaway spending through enacting the entitlement program reforms demanded by the Republicans and revenue enhancements insisted upon by the Democrats, much of which would come from increasing the tax burden of higher income Americans. In close observation of the current crop of political and media figures, there is every reason to be pessimistic.

On a recent installment of Fox News Channel's "Hannity," conservative icon Sean Hannity stated that he has not quite forgiven New Jersey Governor Chris Christie for burnishing the president's credentials when Christie praised him for his response to aid New Jerseyans suffering from the effects of devastating Hurricane Sandy. I suppose in Sean Hannity's eyes, Christie should have told the president that he is not welcome in the state immediately preceding an election or that Christie should not have acknowledged Mr. Obama's relief efforts or thanked him for it.  I applaud Governor Christie for doing what was right for his beleaguered and suffering constituents: asking the president for help, welcoming him to New Jersey to accept it, touring the devastated state with him, and acknowledging his fine efforts.

Newly-elected Kansas U. S. House Republican Tim Huelskamp has indicated that he will not compromise because compromise is not possible when the parties are so far apart. In turn, a number of Congressional Democrats, asserting that they have the upper hand by virtue of President Obama's re-election, are backing away from their prior willingness to consider reform of entitlement programs, this notwithstanding the fact that the president's victory in the popular vote was slim, that the heartland and the South are solidly red/Republican states, and despite the fact that opponent Mitt Romney won twenty-four states, hardly a landslide for the Democrats.

Americans for Tax Reform Founder Grover Norquist continues to loom large on the political stage as many current members of Congress have signed his pledge that they will never vote to increase taxes. I support a general credo of tax restraint and always seeking tax reduction, but one should "never say never", boxing themselves in to what can turn out to be an unrealistic promise as circumstances change.

If the Democrats hold to what appears to be their current position of no entitlement reform, Social Security, Medicare, and Medicaid will run out of money sooner rather than later.  If the Republicans hold to their position of "tax cuts for all or tax cuts for no one," then taxes will increase markedly and a recession would be likely to ensue next year.  I believe that on the issue of whether to extend the George W. Bush tax cuts for some or for all, the Republicans hold a losing hand.  Just as they were blamed for the government shutdowns that occurred under President Bill Clinton in 1995 and 1996 and forced to retreat, they are likely to be blamed for standing in the way of preserving middle class tax relief for what President Obama classifies as "the 98%".

It appears that the positions of Republicans and Democrats have hardened to an extent that neither side retains a level of flexibility which would enable landmark legislation to be enacted.  If this remains true, then we are in a great deal of trouble.

When we assess who is to blame for the dire state of the nation, we must look to ourselves. We placed into office and returned to office largely the same individuals who have fiddled as the nation sinks.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

DanielBosh November 21, 2012 at 03:42 AM
Dire state? The recession certainly brought a sort of time of reckoning onto the country, but the swiftness and extent of the changes we've seen in the past four years is daunting. Fiscal reform still needs to be taken care of but if we do nothing before January 1st then our fiscal problems will be largely solved. That isn't to say we shouldn't do anything, but only to say that we are likely to be in a much better fiscal situation in a few months than we are now. You may disagree with with the direction this country has taken, but is is difficult argue that this country hasn't taken a very distinct course after meandering through 8 years of war and anemic economic growth. We have addressed many of the questions that were put off for so long when we had the luxury of doing so. I am actually quite optimistic about our country's future. I think the recession forced some tough decisions, but we made those decisions more quickly and more effectively than any other country. We've gone through the painful process of dropping economic deadweight, but in doing so we've built a strong platform for future growth. After all, the strength of America lies in "her ability to correct her faults."
Oren Spiegler November 21, 2012 at 09:37 AM
Mr. Bosh, I am pleased that someone as intelligent and aware as you is optimistic about our nation's fiscal future, and I hope I am wrong, but I do not believe I am. I cannot wait to see how we will pay just the interest on our $16.4 trillion (and quickly rising) debt when interest rates are no longer artificially restrained near zero by the Federal Reserve Board. In the near future, interest alone could sap a whopping $1 trillion per year out of our economy. $1 trillion is almost half of current annual revenues! I fear that we are going to try to get out of our self-created mess by printing money, thereby devaluing our debt and unleashing a vicious inflationary cycle that will be difficult to recapture once let out of the bag. No one will be happier than me if the day comes that I must tell you that you were right and I was wrong. I shall hope for the best, but I see no reason to anticipate it.
Ernie November 21, 2012 at 12:26 PM
Mr. Bosh, I find your statement: "Fiscal reform still needs to be taken care of but if we do nothing before January 1st then our fiscal problems will be largely solved." to be extremely disturbing. It appears that you think that if the so-called "fiscal cliff" is allowed to happen, all of our fiscal problems will be solved? That is utter nonsense, but I completely understand how a large portion of our population has been brainwashed in to thinking that way. The Fiscal Cliff, is made up of two major parts, taxes on individuals will rise. Second, Spending will be cut across the board. While that may sound like some sort of Budget-Fixing thing, you need to get educated on what would really happen. The "spending cuts" are not cuts at all. They are a reduction in the rate of growth. The tax rate increases are miniscule at best. In total, the Fiscal Cliff is NOT aimed at fixing anything fiscally in the Government. It will have ZERO impact on our National Debt and the Debt Service Payments that will drag this economy down for many years to come. The Big Picture fiscal fix of our problems is unpopular. It consists of: 1. Broadening the tax base so that the vast majority of Americans pay Federal Income Taxes. 2. Cutting Federal Spending to no more than 18% of GDP. 3. A Balanced Budget Amendment to guarantee no more staggering National Debt. Until the time comes when Americans are willing to face the pain of those actions, NOTHING will change.
JS November 21, 2012 at 02:25 PM
I am largely pessimistic about our fiscal future for many reasons. Divisiveness is only one of them. How a system based on growth can be viable for the long term on a finite planet has always been a mystery to me, but that's a long discussion for another time. I'll buy into the supposition that we have to bring down the deficit and bring it down quickly, for sake of argument. For that to happen, both sides need to give in. Entitlements and safety net programs would have to be cut. The people in the red states that are supposedly calling for this will be the most affected, as they are the states that use the most entitlement money compared to what they contribute in taxes. I think it's kind of fitting that they will get exactly what they are asking for by putting Republicans into office. Cut away. Republicans will have to give in on taxes, as entitlement cuts alone won't bring down the deficit enough. Letting the Bush tax cuts expire will bring the rates back to where they were when Clinton was in office, but no where near where they were in other booming economic times. Bringing rates up to the levels of the 50's and 60's won't fly, even though those were some of the most economically successful times in history. History generally flies in the face of right-wing economic theory anyways, so modest tax increases will once again be a half-assed step to balance. Defense spending cuts? Republicans don't have the guts.
Ernie November 21, 2012 at 03:22 PM
Do yourself a favor and research Hauser's Law. There is a very interesting economic reality involved, and that Law clearly uses the actual data to show that the individual Tax Rate has ZERO impact on the amount of Tax Revenue coming in to the Federal coffers as a percentage of GDP. Simply stated, since the 1930's, no matter what the individual tax rates have been, the money coming in to the Feds has been almost flat steady at about 18.5% of GDP. If the Federal Government cannot be limited in size and activity to that figure, things will not change. You can bring all the stuff up about Red States and Republicans, or entitlement reform....but it doesn't mean ANYTHING unless the federal spending is limited to something around 18.5% of GDP. Anything over the magic number leaves us with a fiscal year Deficit, and those all add up to National Debt. As you said, Tax Rates will never go back to the 70% and higher rates on the largest earners, and econimically, they never should. If the current POTUS would just follow the recommendations of his very own Debt Committee, he might have some chance of showing a real desire for fiscal responsibility and reform. Unfortunately, he doesn't have the guts. He elevated class warfare to a level over his administration, and a large portion of his base constituency loves that sort of nonsense. He has to keep them happy now, so he will not list to his own Commission at all.
DanielBosh November 21, 2012 at 05:40 PM
I understand the fiscal cliff. I wrote that we should not try to go over the cliff. But if we did, our deficit would be reduced to a much more sustainable level while also causing another brief recession, according to the CBO. So if I'm "brainwashed" then so is the Congressional Budget Office. As for the balanced budget amendment -- I think that, frankly, it's an idea that isn't really practical or necessary. We have been in debt for virtually the entire existence of our country. We have run deficits for the vast majority of our existence as well. We need to reduce spending so that our debt is more in line with the economic rate of growth, but it's just kind of silly to think that we should always balance our budget.
DanielBosh November 21, 2012 at 06:15 PM
Ernie, Use your head for a minute. Of course the tax rate affects tax receipts. Hauser's Law is not just complete nonsense as an actual economic law, but even as a general observation it's nonsense -- its's just not true. You say tax receipts have been steady at 18.5%. Hauser said 19.5%. And the actual historical average has been 17.5%. So this magical percentage is already all over the map. Not to mention that the actual tax receipts have varied from 14.5-20.5 percent in post-WWII America. This is just another conservative argument for why we should keep taxes low. First they said the government would actually collect more money if we lowered taxes. Now they're saying it doesn't even matter what the tax rates are, so we might as well make 'em low! As George Bush would say: "Fool me once, shame on — shame on you. Fool me — You can't get fooled again." This kind of Laffer Curve, Voodoo Economics has contributed to the deficit, not made it go away.
Ernie November 21, 2012 at 07:01 PM
@DanielBosh. Where do you get the idea that the deficit will be reduced ONE RED CENT if we go over the "fiscal cliff"???? Could you please cite ANY reference or source for your misinformation?? And, the CBO DOES NOT state that the defiicit will be reduced by the cliff, so please cite an actual document or source. Why on Earth do you find it "silly" to think the Federal Budget should be balanced???? LOL! I find it ABSURD that you think it should not be balanced!!!!
Ernie November 21, 2012 at 07:09 PM
@DanielBosh. I am amazed at your unwillingness to deal with actual facts and data. Hauser's Law is valid. I did not say that Tax Revenues were unaffected by Tax Rates, I said, as the Law states, that the reciepts as a percentage of GDP do NOT change to any statistically relevent amount with a drastic change in Rates. Hauser's Law is valid, your need to classify it as nonsense says just about all that needs said about your williingness to discuss actual facts ad data. Yes, receipts have varied in the range you cite, but the Tax Rates during those same periods have varied from north of 70% to the 36% Rate on top earners we now have. Hauser's Law is a perfect illustration that Tax Receipts are dependent on Economic Activity. And, if you look at the income Tax Revenues to the Feds when marginal Tax Rates were dropped throughout modern history, the REVENUES did go up. Again, that is just data you seem unwilling to accept. These are NOT "conservative ideas" as you need to claim. They are Economic Realities. But, as usual, folks like you just want to play the "us vs. them" game and sit back and wonder why the Economy sucks.
DanielBosh November 22, 2012 at 07:18 AM
@ernie http://www.cbo.gov/sites/default/files/cbofiles/attachments/FiscalRestraint_0.pdf "Under current law, the federal budget deficit will fall dramatically between 2012 and 2013 owing to scheduled increases in taxes and, to a lesser extent, scheduled reductions in spending—a development that some observers have referred to as a “fiscal cliff.”" That's from the Congressional Budget Office. I would suggest -- in the absence of any official legal opinion -- that if you were not aware of these facts already, you should not comment, criticize, converse upon, or otherwise deliberate on matters concerning fiscal issues relating to the federal government of the United States or any other fiscal issues pertaining to a government, private enterprise, or any other entity that in the course of its business may come upon issues which may, or may evenly remotely be related to something that could, in good judgement, be called fiscal. Without giving further pertinent advice in the absence of dual compensation, I would go no further than to say you should give no opinion -- public nor private -- in light of the facts at hand. And you should further abstain from participating in our republic in any way which we will call -- for our purposes -- extra-communicative, e.g. voting.
DanielBosh November 22, 2012 at 07:33 AM
@ernie I do not wish to give the impression that the rest of your comment warrants any sort of serious response, but for your own educational purposes and -- dare I be so bold as to say -- for the educational purposes and future of our country, I will respond. Our country has been in debt almost continuously for its entire existence. Due to the growth of its economy, though, it has been able to quite easily service this debt. Because a government is not a person or a household in any number of respects (it will not die, it can print unlimited money, it can easily augment its revenue, etc.) it does not need to balance a budget like a human being would need to. Indeed, some economists would say that it is beneficial for a government to stay continuously in deficit in order to invest in and grow its economy. The six short periods that the United States ran budget surpluses (the last being under Clinton in the late 1990s) all ended in recessions. That is not to say that surpluses are bad for the economy, but rather that they are not necessarily good for the economy. Beyond that, I do not have the economic knowledge to give a further substantiated opinion. But what is clear, is that almost every industrialized country to date has continuously accumulated debt since its existence, without any expectation from the public that that debt would be paid off in full at any given time. So now I ask you, why is it such a good idea to always balance our budget if history says otherwise?
DanielBosh November 22, 2012 at 07:50 AM
@ernie " I did not say that Tax Revenues were unaffected by Tax Rates" But before you said: "the individual Tax Rate has ZERO impact on the amount of Tax Revenue coming in to the Federal coffers" And 3-4% is statistically significant! It's based on %GDP so anything is statistically significant! " Yes, receipts have varied in the range you cite, but the Tax Rates during those same periods have varied from north of 70% to the 36% Rate on top earners we now have." If you understood our tax system, you would understand that tax brackets can change the progressiveness of our tax system without changing the revenue. That 70 percent tax was levied on a much smaller percentage of people than the current top rate. In fact, there was a time when there was only one person in the entire United States -- John D Rockefeller -- who was known to be taxed in the top bracket. "And, if you look at the income Tax Revenues to the Feds when marginal Tax Rates were dropped throughout modern history, the REVENUES did go up. Again, that is just data you seem unwilling to accept." That's just not true. The fact that you think it is true is just further evidence that nobody should ever believe anything you have to say on fiscal policy. There is a "optimal effective tax rate," but studies have shown that that rate is about 3-4 times the effective rate most people pay today. There has been no empirical example in the United States where lowering taxes has raised revenue. Not one.


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