In the current debate over the lame duck deal, the focus seems to be solely on the issue of taxes. Raising rates or closing loopholes: which will it be? After all it’s essential that the federal government increase its revenues, right? Everyone knows the government has run out of money, and talk of another debt limit debacle is already surfacing.
Is the cause of the deficit declining federal revenues? Perhaps it's those pesky billionaires moving jobs and profits overseas? Or, there's always some way to blame oil companies or George W. Bush.
The reality is far less flattering for liberals like President Obama. In the last decade federal revenues from capital gains taxes have steadily increased thanks to lower rates. Because investors have a greater incentive to realize gains when faced with lower tax penalties, capital gains revenues jumped from $56.3 billion in 2003 to $110 billion in 2006. Those Bush tax cuts of 2001 and 2003 - as usual with tax cuts - resulted in INCREASED tax revenues.
The problem is not that Americans aren’t paying their “fair share” to the government. Of the $2.3 trillion in revenue collected in 2011, approximately 46% came from individual income taxes. The uncomfortable truth for liberals: the federal government has a compulsive spending disorder. While revenues have remained steady, government spending has ballooned. Federal Government spending accounted for over 24% of the United States economy in 2011. To put that into perspective, in 2000 that percentage was only 18. Since 2000, the federal budget has grown by more than 53%, even after factoring for inflation. Since 2007 alone, federal baseline spending has increased by $1 trillion.
Now Uncle Sam must do what the rest of us do in lean economic times: cut back on spending. And we’re not talking about just Big Bird, although the government spent $10 million for a Pakistani “Sesame Street” according to Senator Tom Coburn’s Wastebook 2011 oversight report.
In last year’s deficit deal, Congress agreed to $109 billion in automatic cuts in January 2013. Now the President and the Leadership in both parties are backpeddling even from these modest spending cuts. Remember, we had a budget deficit of over $1 trillion this past fiscal year. Congress should keep its word to the American people and cut the $109 billion as promised. If the across-the-board cuts that affect defense are deemed to draconian for America’s security, equivalent spending cuts from elsewhere in the federal budget should be made.