Friday, December 30, 2005

Fiscal irresponsibility

Let's say a man makes $50,000, and he spends $50,000. That's a balanced budget. Let's say he buys a house. He has to borrow money, so he is running a deficit, but he is paying down the principal every month. He is getting himself out of debt. He is still fiscally responsible.

Then let's say he refinances his home at a higher amount every year, going further into debt every year. He is no longer getting out of debt. In fact, he is getting so far in debt, he runs the risk of not being able to repay it. Then let's say the man decides to cut back on his income to $40,000, while still refinancing a higher loan amount every year and going on vacation more often. He has become fiscally irresponsible. This is what the federal government is doing right now: reducing revenue and increasing debt load.

I might want to save the following excerpts from an editorial so I can read it to my grandkids. They will wonder, I'm sure, why the American economy, once so robust, went downhill, and why nobody did anything about it.

A surprise awaits the nation's highest earners when they file their 2006 tax returns. Their taxes are going down again - whether or not Congress passes the investor tax cuts the lawmakers have been promising. On New Year's Day, two additional tax cuts will kick in, allowing people who earn upward of $200,000 a year to claim bigger write-offs for a spouse, their children and other expenses, like mortgage interest on a vacation home.
The bolstered write-offs were enacted in 2001, but with a delayed start date because of their high cost: according to Congressional estimates, the new breaks will cost $27 billion over the short term, exploding to $146 billion from 2010 through 2019. By then, most of the benefits would flow to taxpayers who make more than $1 million a year.
With the nation deep in debt, at war in Afghanistan and Iraq, with Congress voting last month to slash programs for health care and student loans, and with a debilitating shortfall building in Medicare - the decision by Congress to let these particular tax breaks take effect now is flabbergasting.

The tax cuts of 2001, followed by those of 2002 and 2003, have busted the budget. The surplus - the original rationale for the tax cuts - is long gone, replaced by a deficit projected to reach $530 billion by 2015, if the cuts are made permanent.
And yet Mr. Bush and Congress persist with tax cuts - for people who don't need the extra help and for purposes that have nothing to do with the country's obvious problems.

Read the entire article here.

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