Dunkelberg: Washington's Promises and Distortions

“PAYGO? Gone. No increase in the deficit? Right! An unemployment rate no higher than 8%? How about 10%. Keep your doctor and health insurance? No increase in taxes?

The list of promises made by President Obama is long but the list of promises kept very short. But the size of government and the deficits that result from implementing programs that are supposed to keep promises but are not paid for or are poorly constructed continues to grow.

And, the “devil is in the details” as always. A promise to “reform healthcare” can leave the system in worse shape if it is not properly thought out and implemented. “Tax reform” has become a joke that no one takes seriously when promised by a politician.

Promises by government to “create jobs” may sound good, but who can create jobs better, government pursuing the goals of politicians, most of whom had little or no real world experience, or private firms who seek to produce goods and services that consumers want? As government takes more (in taxes and borrowing), the private sector has less to work with.

The “Bush Tax CUTS” debate is a clear example of the obfuscation of the issues.

We have politicians saying we must raise taxes to support what government is doing but not asking if what government is doing is appropriate or helpful. The tax rates currently in place have been there for 10 years. Now, continuing these is labeled as a "tax cut" for the rich, giving billions those who don’t “need” it (as if their incomes were not theirs to begin with!) .

We are told how much larger the deficit will be if we “give the rich a tax cut”, but Democrats have been able to raise taxes on the rich for two years now with their super majorities, why didn’t they act if that was the best way to lower the deficit?


Why is NOT increasing taxes a “tax cut”?

How about “for every dollar we give the rich (give??, didn't those "richies" earn it?) they only give back 30 cents” meaning of course that they save a lot.

So, the only good citizens are ones that spend all their money and save none (like for retirement or make funds available for investment)? Ever get a loan from a bank with no savings deposits?)? We save so little now that we have to borrow trillions of savings from other countries and run huge fiscal and trade deficits. Is that good?

How about ethanol. Because of the government mandates, we over-invested in corn-ethanol production capacity and distorted corn prices and crop planting decisions. Now, ethanol companies are going bankrupt. Congressional response? Mandate higher ethanol mixtures for our gas to save failing firms, even though this is not the best for our engines.

And we now know it takes a “gallon” of fossil fuel to make a gallon of ethanol, a losing proposition for air quality. Of course we have an import tax on cheaper South American ethanol to protect our less efficient producers and we have a subsidy for domestic production. As a result, our trading partners are complaining about the growing volume of exports of ethanol from the U.S., subsidized by taxpayers to the tune of 45 cents a gallon.

How much more of a mess can Congress make of it? Stay tuned. Congress is moving on, leaving their bad past legislation to continue to drag down our potential and misallocate our resources.


William Dunkelberg is an Economic Strategist, Boenning & Scattergood and Chief Economist, National Federation of Independent Business.