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November 08, 2010

We Need a Confrontation and a Resolution on the Issue of the Socialist State, No Matter How Much Independents May Wish to Avoid It

Political parties profit by telling swing voters they don't have to make binary decisions, that they can have it all, both guns and butter, both increased spending and reduced taxes, and all with a balanced budget.

They can't be permitted to live in this fantasy world any longer. The Democrats will continue to lie to them (lying hasn't hurt them yet), but Republicans must give it to them straight.

Here's how deficits are created:

The Republican Party has the following priorities, in descending order, as regards spending, taxes, and balanced budgets:

1. Taxes must be lowered, or, if that is impossible, at least kept at current rates and not raised.

2. The budget should be balanced.

The Democrat Party, meanwhile, has these priorities, again in descending order:

1. Social spending must always be increased, or, if that is impossible, at least kept at current levels and not reduced.

2. The budget should be balanced.

The deficit grows because each party is willing to champion its number one priority -- lowered taxes for the Republicans, increased spending for the Democrats -- by giving up on their number 2 priority (balancing the budget).

Republicans will agree to not make any real cuts in spending if they can have their tax cuts. See Bush 43. This results in a deficit.

Democrats will agree to not raise taxes if they can continue spending like government spending. See Barack Obama and every other Democratic president apart from Clinton in his Republican-influenced send term. This results in a deficit.

What happened in the early nineties with the rise of Perot and the Reform Party is happening again-- the public is asserting that balancing the budget must be pushed up to the top of the list of public priorities.

This means that one or both of the usual priorities -- increasing spending, reducing taxes -- will have to give way.

We can balance the budget (or at least come close to that, over several years). But the parties cannot keep agreeing to honor each other's top priority at the expense of ballooning the budget. It doesn't work. Cut taxes, increase spending, balance the budget: Select any two.

The public will not make this choice until and unless political leaders insist that they make it. One of three popular public goods will have to be abandoned. They will have to finally choose if they wish to continue putting off such decisions and shellacking their children with huge debt due to their failure to make serious decisions (an option, by the way, that is no longer economically viable); or if they wish to pay another 10-15% of their wages to the government; or if they are willing to see government spending, including spending on popular subsidies for the middle class, cut dramatically.

And on that last point, the middle class must be made to realize there is no such thing as a "subsidy for the middle class." They cannot come out of this transaction as net-winners -- the middle class is too big for the rich to subsidize them. There are 1000s of middle class households for every truly rich household.

Therefore, all "subsidies" for the middle class come out of their own hides. The government takes their money, bleeds a lot of it off in inefficiency, waste, and salaries for do-nothing federal employees, and then gives them back 65% of it in the form of a supposed "subsidy."

There is no subsidy. All that happened in the exchange is that the middle class lost 35% of its tax money to subsidize the poor and to further balloon the size of the federal bureaucracy.

These cuts must be made, and they will seem painful to the middle class: Until and unless they are made to understand that the middle class can never come out as net-winners in any subsidy deal with the government, because the middle class is where 90% of the taxpayers are (and therefore where the money is).

Every time the Democrats propose to "help" the middle class all they're proposing to do is take money from the middle class, subsidize the poor a bit, waste a bunch of it on pork and cross-subsidies for other members of the middle class, and then return a much-diminished amount to them. And call themselves heroes and champions of the middle class for doing so.

The middle class cannot win its dealings with the government. The mathematical deck is too stacked against them-- the numbers can never work out in their favor, even in principle. The government can never do more for the middle class than take its money, take a huge cut of it, and return a smaller portion of it back to them in the form of a government "grant."

The middle class' only path to victory in dealing with the US Government is to keep it as small and cheap as possible so that the smallest amount possible is coming out of their hides.

The public must be made to realize this. Or else the public must agree to raise taxes on themselves by significant margins. Either way, they must choose.

On ObamaCare: At least with this legislation, the middle class figured out the game, that they were being asked to give up some of their health care (and pay more for the diminished care they would have going forward) in order to subsidize the poor.

That may or may not be a virtuous transaction, but it is in no ways an advantageous one.

Every program "for the middle class" is rigged like this. They wind up subsidizing the poor. There is no such thing as a subsidy for the middle class. Middle class taxpayer A may receive Stafford loans for his college aged kids, but those are being subsidized by Middle class taxpayer B, who in turn takes money from A to pay for special education for his kid.

Neither party wins out (or at least net winners are so rare as to constitute a small special interest voting bloc, those few middle class taxpayers that do in fact come out ahead in the deal by qualifying for more subsidies than they're paying for).

ObamaCare may be useful in this regard: To instruct the middle class as to the fundamentally bad deals all government programs are to their bottom lines.

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posted by Ace at 02:53 PM

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