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The Washington Post published an article on a group of wealthy liberals who are asking for the government to raise taxes on them. They hope to “send the message to Congress and President Obama that it's time to roll back the tax cuts on upper-income taxpayers”. Mark J. Perry has a few suggestions on how to increases taxes on yourself without the government having to raise taxes for all wealthy individuals.

However, have these millionaires thought about the option to donate to private charities? I wonder what makes them believe giving more money to the government is the best way to improve society. I would think they would recognize the inherent inefficiency the government exudes, and would turn toward non-profits as the best way to improve society. Private charities aren’t surrounded by red tape and slow moving bureaucracies like the government is—non-profits can more effectively use their resources. All wealthy people should not be coerced to pay higher taxes due to a few irrational millionaires.

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A recent poll done by Quinnipiac indicates that more Americans believe the huge federal budget deficit should be remedied through spending cuts over just using tax hikes and over a combination of tax increases and spending cuts. Forty-nine percent believe spending cuts alone are the best approach, while only four percent believe tax hikes alone should be the way to reduce the deficit. Forty-two percent preferred a combination of tax hikes and spending cuts as the means of decreasing the budget deficit.

If we dig one step further, we will find that of those who prefer the combination, over half of them prefer more spending cuts than tax increases. About a third desired an equal amount of spending cuts and tax hikes and only twelve percent wanted more tax increases than spending cuts.

These results point toward the public valuing spending decreases over tax increases to move America back toward a balanced budget. With almost half of Americans in support of only cutting government spending, Congress should understand what the public desires—reducing spending and keeping taxes down. This seems to be the sensible action to take; increasing taxes even more will lead to less production and investment in the economy and more people relying on the government. This system is unsustainable—moving toward relying on the government for more and more will shift incentives toward less work. With less work, less revenue from taxes will be collected, which means supporting the public will not be feasible (unless we keep increasing the debt, which would lead to disaster as well). The forty-nine percent of Americans saying the budget must be balanced through spending cuts alone understand this. Curbing government spending is the best way to fight growing federal deficits.

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As the Obama administration keeps passing tax hikes, financial advisors begin preparing advice for investors to make tax efficient investments. With the tax cuts from 2001 and 2003 expiring, the individual mandate tax from healthcare reform instated, and the 3.8 % surtax on investment income (and more), advisors have been coming up with innovative alternatives for investment opportunities such as unified managed accounts (UMA).

What Congress must recognize is that tax hikes do deter investment and competition. This fact is clearly illuminated by the behavior of financial advisors. If Congress continues passing bills with tax increases embedded within them and doesn’t renew the tax cuts set to expire this year, investment will likely fall, prolonging the recovery from the past recession.

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The fluctuations in public versus private sector jobs over the past two years indicate a trend of increased government jobs and decreased private sector jobs. The only question I have is how will the government pay for the salaries of their newly hired employees? Perhaps, they will by taxing the private sector—which has already experienced a loss of over 8 million jobs in the past two years. The expansion of the public job sector conveys the expansion of government over the past two years. The public sector is not self-sustainable, but rather, it relies on the diminishing private sector. Instead of taking on new employees, the government should encourage growth in private employment by lowering taxes and reducing barriers to economic growth.

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President Obama met with Chris Dodd and Barney Frank this morning to revisit the issue of financial regulation. Dodd reported that a bill containing financial reform would pass sometime this year, perhaps even before Memorial Day. One of the most controversial sections of the upcoming bill is the Consumer Financial Protection Agency, which Republicans vehemently oppose. Some of the provisions laid out in the draft legislation include the following:

Giving the agency broad authority to write rules about services or products including:

a. Deposit-taking activities
b. Extending credit and servicing loans (this could include mortgages, credit cards, etc.)
c. Check-guaranty services
d. Collecting, providing, or analyzing consumer report information
e. Providing real estate settlement services, including title insurance.

 (read more here)

Everyone is so worried about the banking industry having too much power, but wouldn’t the creation of a Consumer Financial Protection Agency just transfer that power to a government agency? This begs the question of how this agency will assure us of protection from the risky investments made in the financial industry. According to the legislation, by having the power to “write rules about services and products” they will help stop the next big financial crisis. How can the government guarantee this agency will have the knowledge necessary to hinder another financial melt down? Letting the government take control of the banking industry will simply lead to the micromanagement of financial institutions rather than having any extra foresight on future crises. By placing restrictions on banks, the agency will slow down investment for small businesses and put the brakes on economic growth. America does not need big brother to step in to the financial sector in the form of a Consumer Financial Protection Agency.

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Reps. Mike Pence (R-IN) and Jeb Hensarling (R-TX) have proposed a Constitutional amendment that would keep Congress in check—the Spending Limit Amendment. The provisions in this amendment are as follows:

• Spending would be limited to 1/5 of the GDP, except for what would go toward paying back our debt.
• This limit can only be waived if there is a formal declaration of war or if more than 2/3 of both the House and the Senate vote on it.

By imposing a ceiling on spending, the government will be forced to scale back its influence in several sectors of the economy. Every American has a cap on how much they can spend—an income. If someone is in debt, they are subjected to a budget constraint and must reform their habits before they go bankrupt. Shouldn’t the government be held to the same standards each citizen is accountable for?  

A cap on spending would push many of the entitlement programs to be accounted for in states’ budgets and even push for a move toward privatization of many of these programs. It would drive the government to single out the inefficient agencies and programs and re-allocate money toward the more effective ones. A limit on spending would lead to the downsizing of government and promote stability and growith in our economy.

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America’s healthcare system is so complex it needs its own dictionary just to define the verbose terminology. So how did it get this way? More specifically, why did we start obtaining health insurance through our employers instead of directly purchasing it on our own?

The answer stretches back to WWII when the government imposed wage controls on firms. Employers, in order to attract workers, began offering non-monetary compensation to weasel their way around these controls. After the controls were lifted, the practice stuck and now we have an outdated tradition that needs to be remedied.

The negative consequences of employer-based insurance range from a loss of efficiency due to people staying in a job because of better coverage to the lack of transparency from the insured not directly paying for medical services. We need a system that eradicates the complications stemming from employer-based insurance.

John Mackey, the CEO of Whole Foods, seems to have it figured out—he has implemented a system where employees receive supplemental healthcare dollars, which they can spend and control on their own.  Employees have high deductibles, which incentivizes them to “shop around” for healthcare and spend their money wisely. The money they don’t use on healthcare can be put to other uses from which they derive more utility. This seems to be a logical alternative to Obama’s proposed healthcare reform that has already worked well on a smaller scale.

We should look to Mackey’s model and other similar proposals before the healthcare costs for employers spiral out of control. At the rate we are heading right now, we will no longer be paying primarily for the good we are purchasing, but rather, a majority of everything we purchase will have embedded costs for health insurance. In fact, Starbucks paid more for health insurance for its employees than it spent on coffee beans in 2005 and GM spent more for health insurance than it did for steel, which leaves me to wonder how much of the money we spend actually goes toward paying for people’s healthcare costs rather than the good or service we are consuming.

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One of the central issues in politics is how to fix the broken healthcare system. Costs are exorbitantly high and quality is lagging. Despite whether you believe the government should intervene in the market for healthcare or not, we must ask the essential question of whether the government can afford to provide healthcare for Americans.

The answer, of course, is no. No because the government has already stacked up a debt high enough to stir panic. The other option is to pay for it via tax hikes. But raising taxes to levels this country has not seen in several years will only deter investment and economic growth and distort incentives to work, leaving the government with even less money to pay for rising costs of healthcare.

Let’s take a look at Medicare as an example. The 1967 estimates for Medicare totaled to $12 billion by 1990. The actual spending came to $110 billion in 1990—over 10 times as much as was planned. This staggering difference provides us with just a glimpse of what the Healthcare Bill might involve. The latest CBO score for the Senate Healthcare Bill amounted to $875 billion for the next 10 years. Using Medicare as a benchmark, one can only imagine what the actual costs will come to 10 years down the line.

The implications of the government reaching its hand into the healthcare market stretch far and wide. We must use hindsight as a basis for judging the accuracy of cost estimates in Congress. As far as I can see, the price tag on government run healthcare is not something we can afford.

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The United States should learn a lesson from Greece’s economic downturn. Their ballooning deficits are not too different from our very own. U.S. federal debt as a percentage of GDP came out to an astounding 94%, not too far behind Greece with a debt that has reached over 112% of GDP. Greece has been engaging in massive spending cuts and enormous tax hikes for sales, tobacco, luxury autos, fuel, a VAT, and any other feasible manner they can pinch money out of their citizens' pockets to pay for their irresponsible policies. These taxes will halt investment and prolong the stunted growth of the nation.

The United States will likely face these same consequences if spending isn’t curbed by the federal government. Passing healthcare would be one step in the wrong direction toward a Greek fiasco in the U.S. Paying for massive bailouts doesn’t assist in diminishing public debt. Spending billions on stimulus bills that have no proven record to pull the economy out of a recession only serves to increase the deficit and to push us closer toward the collapse of our economy. We must curtail spending increases soon, before we end up selling our states to Canada to pay off the debt (Greece thinks it’s a viable option).

(Image by Chip Bok at reason.com)

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