The
insatiable thrust for federal spending continues. The will to correct our fiscal black hole is absent. Even the Tea Party
Republicans lack the strength of determination and votes to reverse the ship of state. No matter which party wins the next
elections, the deficits facing the budget are huge. Until a total reformation of the way the central government functions,
no solution is possible to balance the books. There is no way to escape this stark reality. Expect more gimmicks, additional
devaluation of the currency and the inevitable imposition of new forms of taxes.
The
Bear's Lair by Martin Hutchinson offers an assessment on the addition of a VAT Tax.
"The introduction of a VAT, perhaps
at a low initial rate of say 5%, will solve Obama’s problems. It is likely to be unpopular, but if it is passed under
a cover of bipartisanship Obama and the Democrats should avoid most of the electoral blowback. Most important, once a VAT
is in place, Obama’s healthcare plan will be funded and further Obama spending schemes will be possible without inflating
budget deficits. Outlays, currently 23.8% of GDP and projected (unrealistically) by the Congressional Budget Office to decline
to a low of 22% of GDP by 2015 before increasing thereafter, will with a VAT be able to increase further, to perhaps 27% of
GDP by the end of Obama’s second term. Revenues will trail outlays, but instead of 20% of GDP in 2015 (including repeal
of the 2001/2003 tax cuts) will rise to perhaps 24% of GDP, leaving the deficit at 3% of GDP, or about $500 billion in today’s
money. Of course, were a further spending-prone President elected in 2016, outlays would rise further, as entitlement spending
spiraled upwards, but that problem could be solved, at least in the short term, by increasing the VAT rate towards European
levels."
A simple and elegant method to steal more
from the public is an attractive alternative for the corrupt political class. The political capital needed to approve a quasi-national
sales tax would be ugly, but the intensity of a financial meltdown disaster would provide another excuse for extreme measures.
As long as the Federal Reserve monetizes the debt by buying Treasury obligations, the purchasing value of the dollar sinks.
Larger deficits could provide cover for "so called" fiscal conservatives to abandon principle and jump on the destructive
revenue enhancement deception.
"While there have been no formal VAT proposals yet and it is by no means a certainty,
"it is probable," says Rudolf G. Penner, a fellow and economist at the Urban Institute. "It will be fought
over vigorously, but a VAT is easy. It’s an efficient tax. And it could be implemented fairly quickly."
Penner predicts that the next fiscal crisis could prompt lawmakers to adopt the VAT. "It
could be a failed Treasury auction, it could be S&P and Moody’s downgrading out debt or passing some psychological
barrier with the debt to GDP ratio," he says. "In many other countries you have had to have a crisis that demanded
a fiscal policy response to it."
The straightforward implementation
of a VAT is a prime reason why it is attractive to the central government. Abolishing the entire tax code and starting over
would be a sound start, but that option is impossible within the political structure of the depraved federal system. More
taxation and increased sources is the only way the political elite have to service the interest on the national debt.
At What Cost? Basic Economics
of a Value Added Tax video is an overview lecture of the rudiments of adding a VAT to an already
disserted economy. Yet, when did a defective tax plan ever stop Washington from enacting higher confiscation. When the big
push comes to bail out the excessive spending entitlement apparatus and the printing money ATM falters, Middle America is
targeted as the last resort. Never underestimate the creative legal exploitation to plunder the taxpayer.
Pushing America into the socialist slavery that is European governance is the
plan. Merging the economic burden into a global debtor obligation requires improvising our own people. If the passage of a
VAT Tax requires voting out of office the last stalwart of domestic independence, the financial powers will double their efforts.
"In
a rush for additional revenues, the Federal Government is poised to slam another stick up the derrière of the public.
Don’t be fooled with the claims that a VAT Tax will replace the oppression of the income tax. When interest rates inevitably
rise because government bonds will not sell without a higher return, the cries will become deafening that only additional
revenue will forestall default. The Socialism of Europe becomes complete with the integration of America into the central
controlled managed economy."
Plainly, a VAT is no
resolution to the deficit spending problem. All the same, the beltway culture has never been in the solution business. Thinking
that a Republican victory in the 2012 election will remove the peril of a national tax is shortsighted. Politicians are spending
addicts and any revenue increase that collects higher sums of money to feed the appetites of government careerists is wishful
thinking.
Short of a total collapse of the world financial system, the
domestic economy will continue to struggle, while losing ground in real terms. This fact cannot be said about the growth on
the federal bureaucracy or unfunded programs. Because of this inevitability, new punitive and destructive taxation is in play.
Balancing expenditures by growing taxes from strong economic performance is a pipedream. Budget cuts and elimination of entire
programs is core to any public fiscal sanity.
